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Liquor controversy swirls around Nitish Kumar

June 11, 2010 12:59 IST
Paranjoy Guha Thakurta and Shubhomoy Sikdar report on how Nitish Kumar's political opponents allege that the Bihar chief minister is involved in a controversy that may tarnish his clean reputation.

Elections to the Bihar legislative assembly are scheduled for October-November and twice-elected Chief Minister Nitish Kumar's political opponents are trying to tarnish his reputation by highlighting the circumstances that led to the sacking of his Excise Minister Jamshed Ashraf in February.

Ashraf has alleged that the state government is neck-deep in a scandal involving evasion of taxes on liquor that has led to revenue losses worth Rs 500 crore (Rs 5 billion), a charge the chief minister denies.

A criminal case was registered on June 5 by Nonu Singh, a resident of Belhari village in Gaya district, in the court of the chief judicial magistrate in Patna against Nitish Kumar, Deputy Chief Minister Sushil Modi, five senior bureaucrats and others in the alleged excise scam.

It has been claimed that particular distilleries were favoured by the government in a manner that caused revenue losses to the exchequer. Among the witnesses that have been sought to be summoned in the case is Ashraf.

Nitish Kumar has countered his former minister's allegations by describing them as 'unfortunate, undignified, malicious and unbecoming of a minister'. The chief minister has argued that he breached the oath of secrecy he had sworn to uphold when he assumed office as a minister. Moreover, Nitish Kumar counter-alleged that Ashraf stalled 'progressive measures' aimed at curbing illegal sales of liquor in Bihar.

The former excise minister, however, stands by his allegations that the so-called scam was masterminded by a coterie of officials who are being protected by the chief minister and that he (Ashraf) was removed from his post because he exposed their acts of corruption. Some of these officials, he alleges, are extremely influential and work in Nitish Kumar's secretariat.

The chief minister, in turn, claims the allegations are baseless, that no one can influence him and further, that he cannot be bribed or bought.

In late June, the high court in Patna will hear a public interest petition claiming that the chief minister and a group of senior bureaucrats were involved in the liquor scam.

Though the court had earlier rejected two PIL petitions on the subject on the ground that substantial evidence had not been provided and that the allegations were based on media reports, the court has observed that the third petition, moved by Ajit Sarthi, a social activist, was prima facie maintainable.

Hearing on the petition will take place once the court resumes on June 21 after its summer vacation.

In his petition, Sarthi has sought an inquiry by the Central Bureau of Investigation. Earlier, in March, he had lodged a first information report with the CBI's Anti-Corruption Bureau in Patna. The ACB referred the 67-page complaint to the state government's director general (vigilance).

Speaking over the telephone from Kolkata, Sarthi alleged that the scam has been going on for a decade. He said he has met the CBI director in this connection. He claims that the inquiry conducted by the chief secretary at the chief minister's behest violates the provisions of the excise law of the state which empowers only a member of the board of revenue as the competent authority to conduct such an investigation.

The main allegations of the complainant are that there were irregularities in the notice inviting tender (NIT) for the manufacture and supply of country liquor by the BSBCL as a result of which the bidding process was manipulated resulting in revenue losses.

Losses were also a consequence of the exports of molasses outside Bihar, the manner in which prices of foreign liquor were fixed by the BSBCL and by passing on overhead expenses to consumers, it is further alleged.

Ashraf wrote various letters to the Bihar chief secretary from September 2009 onwards informing him about alleged malpractices in his department. In one letter, he claimed that certain conditions that were included in the NIT to prevent granting of 'exclusive privileges' to particular distilleries for the manufacture and supply of country liquor for the period 2009 to 2012 were waived.

When one of the distilleries (Umeri Distillery Pvt Ltd) filed a writ petition in the high court against enforcement of a condition in the tender documents, the state government did not file an affidavit contesting it. This, according to Sarthi's complaint, indicated a nexus between the distillery and government officials.

In the past, in Bihar, liquor used to be sold through private firms acting as wholesalers who were chosen by the state government's excise department and granted license/permits. After March 2006, this system was discontinued with the establishment of the BSBCL.

This state government company was originally supposed to be under the financial supervision of a member of the board of revenue. But this rule was altered and powers to approve transactions were vested with the board of directors of BSBCL. Sarthi has alleged that this violated the provisions of the Companies Act, 1956.

Thereafter, the Bihar government company started selling molasses (the main ingredient used to produce rectified spirit) to buyers outside the state. In 2008-2009, an estimated six lakh (600,000) tonnes of molasses were exported that could have been used in the manufacture of 144 lakh (144,000,000) bulk litres of spirits that would have fetched the state government an estimated revenue of Rs 4.5 crore (Rs 45 million).

What happened that year was that after selling molasses to buyers outside Bihar, the state ended up importing or buying molasses from sellers in neighbouring Uttar Pradesh. Not only was expenditure incurred on such purchase, value-added tax had to be paid for use of warehousing facilities in UP.

Ashraf questioned the state government's alcohol policy in a letter to the chief minister on January 14, 2010. He alleged in the letter that senior officers in Nitish Kumar's secretariat were illegal beneficiaries of the new liquor policy that was resulting in losses for the state government.

He claimed that by manipulating the bidding process, certain distillers had caused a revenue loss of Rs 1,500 crore (Rs 15 billion). He further alleged that there were irregularities in the manner in which the BSBCL was bottling alcohol and placing holograms on bottles. Moreover, officials had favoured a particular distiller by forcing another to shut his plant.

Ashraf's letter also contends that expenditure items under overheads were included in the minimum ex-distillery price of liquor which was against the terms and conditions specified in the tender documents. The expenses were passed on to consumers and the former minister's 'verbal complaints' were ignored, it is alleged.

In his second letter to Nitish Kumar dated February 2, Ashraf claimed that no action had been taken on the basis of his complaints. After portions of this letter appeared in the Patna edition of the Dainik Jagran newspaper ten days later, the chief minister responded to Ashraf categorically dismissing all allegations.

Nitish Kumar attached a 13-page report of inquiry that had been conducted by the principal secretary which claimed that Ashraf had given his consent to the changes that had been made in the state government's liquor policy and that excise revenue had accordingly jumped from Rs 320 crore (Rs 3.2 billion) in 2005-06 to Rs 750 crore (Rs 7.5 billion) three years later.

Whereas the principal secretary's report gave a clean chit to the chief minister and denied all allegations of irregularities, it did not explain why the chief secretary had not responded to the letter sent by the former excise minister.

When contacted in Patna, Ashraf alleged during a telephone conversation that certain corrupt officials had undermined his authority as excise minister and conspired to create differences between him and the chief minister that culminated in his removal from office.

He said he had not leaked his letter to the press and alleged that this was the handiwork of a senior bureaucrat in the chief minister's office.

As for the chief minister's letter to Ashraf denying his allegations, although it was marked confidential, its contents were promptly leaked to journalists. Nitish Kumar also castigated Ashraf for granting an interview to a newspaper while he was supposed to be undergoing medical treatment in Chennai.

He wrote: 'The charges have only hurt the dignity of the government and maligned it. How did the confidential letter reach the media? You (meaning Ashraf) have also criticised your department and the chief minister in a press interview... All important policy decisions were taken only after seeking your sanction on files.'

The chief minister asked Ashraf to resign for allegedly breaching the office of oath and secrecy and rubbished his claims that officials in the chief minister's secretariat were involved in the alleged scam. Nitish Kumar has repeated time and again: 'My political career has remained clean and will remain clean.'

Time will tell whether courts of law will take cognisance of the allegations against the topmost political authority in the state. More importantly, with elections on the horizon, the crucial question is whether the allegations would adversely impact Nitish Kumar's image as a chief minister who is supposed to have delivered 'development' to the people of Bihar.

Paranjoy Guha Thakurta and Shubhomoy Sikdar