At least Rs 3.45 crore of Indian taxpayers’ money unduly went to a private company based in the United Kingdom as the Ministry of External Affairs (MEA) adopted an “erroneous method” to work out the hike in the charges to be paid to the company for collecting visa applications and delivering visas on behalf of High Commission of India in London and consulates in Birmingham and Edinburgh. 

The Comptroller and Auditor General (CAG) found that the M/s VF Services (UK) Limited had got an undue financial benefit of £455,688.31 (or at least Rs 3.45 crore as per the October 2011 exchange rates) between October 2011 and December 2012 as the MEA wrongly calculated enhancement of the service charge paid to the company.

The CAG, in a recent report, noted that the agreement that High Commission of India in London and the Consulates of India in Birmingham and Edinburgh had inked with VF Services (UK) Limited on January 24, 2008 provided for changes in the service charge payable to the company only in case of changes in the rates of local taxes or value added tax (VAT).

Indian missions in the UK struck the deal with VF Services (UK) Limited to outsource to the company the task of collection of visa applications and delivery of the visas.

The service provider in July 2010 requested the Mission for an increase in service charge from £ 6.90 per applicant to £ 8.80, citing inflation, depreciation of the UK currency against the Indian rupee, drop in the number of applicants and increase in rates and taxes.

The MEA agreed to revise the service charge due to increase in local taxes by 12 per cent and stated that the service charge could be enhanced by that percentage.

The CAG, however, noted that the MEA wrongly applied the rate of increase of 12 per cent in property taxes to the entire service charge instead of restricting it to the percentage of property tax in the service charge. “Thus,” the CAG stated in its report, “the enhancement of service charge to £7.70 per applicant from September 12, 2011 resulted in undue benefit of Rs 3.45 crore.”

The VF Services (UK) Limited processed 4,98,333 visa applications in 2010 and collected £3,438,498 at the rate of £ 6.90 per application. The scrutiny by the CAG revealed that the company paid £127,230.40 and £139,969.20 as property tax in 2010 and 2011 respectively.

“Thus the increased outgo on property tax in absolute terms was £12,739. In percentage terms, the property tax increased from 3.70 per cent in 2010 to 4.07 per cent in 2011 of the total amount of service charge collected in 2010. Therefore, the increase in the property tax was only 0.37 per cent of the existing charge levied by the service provider,” noted the CAG.