Why doesn’t the Army speak up?

It’s about time the armed forces told us how the huge profits their canteens generate are utilised, reports Brijesh Pandey

Are the canteens used by millions of defence personnel and their families the Army’s private ventures? Do the hundreds of crores of profit these unit-run canteens (URCs) generate belong to the Army – to be used as it wishes – or should these be audited like other government ventures?

The answer to an RTI filed in the office of the Controller of Defence Accounts on July 14 last year to find out how these crores are utilised, is shocking. It said: “The profits earned by URC by selling goods to customers are not added/ transferred to CSD (Canteen Stores Department), as they are run by regiments/units and are not susceptible to audit by this office.” In sum, this means they cannot be treated as an instrumentality of the state, and thus do not come under the purview of the RTI Act.  

TEHELKA has access to the minutes of the Army Commanders Conference held last April, where the matter came up after the RTI was filed. ‘URCs are purely private ventures and are not funded by the Consolidated Fund of India. Thus URCs do not fall under the purview of the RTI Act and representation,’ it was stated.   

The Army Head and the Comptroller and Auditor General (CAG) declined comment, which is unfortunate to say the least. For their silence, coming so soon after the alleged involvement of some of the Army top brass in various scams became known, can only dent the image of the armed forces still further.

The CSD, created by the government in 1948, was meant to act as a wholesale depot and purchase goods directly from manufacturers. These CSDs supply goods to nearly 3,600 retail outlets, known as Unit Run Canteens (URCs), and charge a profit of 2 to 10 percent. According to official records the turnover of the CSD, as on March 31, 2009, was Rs 7,225 crore – and the profit generated Rs 300 crore.

The CAG audits this account and the Army deposits 50 percent of the CSD’s profits to the Consolidated Fund of India. Out of the remaining half, 25 percent goes to the CSD and the rest stays with the armed forces for funding welfare activities. But strangely the money, which is auditable when it is with the CSD, becomes Non-Public Fund the moment it lands up at the armed forces headquarters. So no one outside the Army really knows how this 25 percent of the Rs 300 crore is spent.

The bigger booty of course lies with the URCs which, with a turnover of Rs 7,600 crore and profits of Rs 350 crore, are termed as the Army’s private enterprise. And there is no why or how about it either, because the Army says it is “not answerable to any one on private business”.

This conduct of the armed forces thus raises several uncomfortable questions:   

1. Since the CSD is a government entity, how can the URC, its operational arm catering only to defence personnel, be treated as a private entity? Consider also the fact that almost everywhere it is located inside the Army establishment and manned by defence personnel.

2. Why don’t the armed forces want to reveal what they have done with the profits earned by the URCs year after year?

3. How and where do the unit commanders spend these hundreds of crores?

4. Why are the URC accounts not being audited by either the CAG or the office of the Controller of Defence Audit, the internal audit mechanism of the armed forces?