DH Exclusive | Stink in Karnataka's state-run godowns: Commodities go missing

A multi-crore scam involving misappropriation of large quantities of agricultural commodities stored in godowns run by the Karnataka State Warehousing Corporation (KSWC) has been unearthed.

This was revealed in two confidential letters written to the state government by Kochi-based private sector lender Federal Bank, which DH has accessed.

The bank had granted 28 loans against the pledge of agricultural commodities stored in godowns in Chintamani (Chikkaballapur) and Kampli (Ballari). The original warehouse receipts issued by the KSWC were deposited with the bank.

When borrowers defaulted on repayment and the bank initiated recovery steps, it was found that the pledged commodities were gone. Plus, there was “no cooperation” from the godown authorities.

The bank had granted 14 loans against commodities stored in the Chintamani godown. Of them, commodities pledged for 12 loans were missing. Of the two other loans, one had 2,195 bags of 50 kg black gram against 2,600 bags pledged, and another had the required 2,400 bags, but with “abnormal” shortage in weight.

“When the available goods were inspected by our branch manager in the presence of bidders and the godown manager, it was found that the quality had deteriorated to such an extent that it was not fit for human consumption,” the bank said, raising serious doubts on the hygiene standards at the godowns.

The bank suspects that the pledged commodities for 14 loans in the Kampli godown were released without its consent.

“On further inquiry, we hear that similar modus operandi is being adopted by some borrowers in collusion with some KSWC officials to defraud other banks also in various places in Karnataka,” according to letters written in January and February this year by Federal Bank vice-president Rajanarayanan N and deputy vice-president John Louis to the State Level Bankers’ Committee (SLBC). The matter came up for discussion at the SLBC meeting held recently.

The Federal Bank has estimated a loss of over Rs 7.40 crore because of the “fraud”. The KSWC itself has pegged the misappropriation to be over Rs 25 crore at the Chintamani godown alone.

“I’m aware of this and three FIRs have been registered already,” KSWC chairperson U B Banakar told DH. “It’s shocking that the godown managers we have aren’t even qualified. And our system is such that if a manager says there are 1,000 kg, it’s accepted even if that’s not the exact quantity stored,” he explained.

There are at least 314 godowns in the state, including private ones, that are used to store foodgrains and other commodities. “It will take years for us to check all godowns and cull out information on who has pledged what to borrow loans,” Banakar said.

“Right before the coronavirus crisis, I had written to the cooperation minister on the need to fix this. Now, we can get to it only after the crisis ends. It has to be fixed; the trust in our godowns will diminish otherwise,” he said.