Comptroller and Auditor General of India CAG

An Inter-Ministerial Committee (IMC) was constituted in 1992 to act as single window clearance for proposals for setting up of Inland Container Depots (ICDs), Container Freight Stations (CFSs) and Air Freight Stations (AFSs). Ministry of Commerce and Industry guidelines, 1992 prescribe the requirements for setting up of the ICDs and CFSs. Audit observed that two sets of guidelines were available on the Department of Commerce (DoC) website and none of them mentioned the notification or memorandum through which these were formalized. DoC stated that the guidelines were revised in September 2017 but the earlier guidelines were inadvertently not removed from its website. DoC further stated that there was no requirement of separate notification as these have been framed under the IMC’s terms of reference. However, without reference to any formal notification of guidelines, Audit could not establish which of the two guidelines were formalized and the date from which revised guidelines came into effect.

Audit concluded that the existing guidelines lay down a checklist of steps to be followed while granting approvals that are more procedural in nature, and there is no policy document or framework laying down principles and objectives which would help the IMC members to evaluate the proposals.

Further, no role and responsibilities have been defined for the IMC or its constituent ministries beyond the approval process leaving the sector unregulated.

asic data relevant to setting up and operation of ICDs and CFSs, such as their number, location, operational status (i.e. functioning or closed), installed capacity, performance in terms of operating capacity, etc. was not available with the DoC which was the nodal Ministry under which the IMC was functioning.

On Audit’s request for comprehensive data on number of ICDs established before and after the creation of IMC, DoC provided a list of ICDs and CFSs that had become functional after the creation of IMC in 1992 and stated that they did not have data prior to that year. The Central Board of Excise and Customs (CBEC), now the CBIC#, did not furnish any data to Audit. Audit therefore approached local Customs formations for details of ICDs and CFSs functioning under their respective jurisdiction and found several discrepancies between data maintained by DoC of functional ICDs/CFSs and that collected through local Commissionerates. Audit noticed at least 27 instances of incorrect reporting and non-updating of status during test check of records.

Audit concluded that there is lack of a single reliable source of data on the number of functional/operational/ closed ICDs/CFSs.

New ICDs and CFSs were approved by the IMC without assessing the capacity created and utilized. Audit found that nearly forty per cent of ICDs and CFSs test checked were operating at less than half of their installed capacity and another one third were operating between 50-70 per cent of their capacity. In five CFSs attached to Kolkata port, although the capacity utilisation was only 74 per cent of their combined cargo handling capacity, a new CFS was granted permission to start operations. Audit observed that immediately after the new CFS became operational, volumes handled by one of the existing CFSs dropped drastically in nearly the same proportion as the volumes handled by the new CFS went up. In JNPT Mumbai, in 2012, capacity utilisation in 13 out of 27 CFSs attached to the port was reported in the range of 60-65 per cent, while that in 16 out of 29 CFSs in Chennai port was about 56 per cent. The IMC approved ten new CFSs in Maharashtra and twelve new ICDs in Tamil Nadu, including six in Chennai during 2012-17.

Audit concluded that there is a proliferation of ICDs and CFSs in certain regions and in and around major port areas of the country and one of the main reasons for under utilisation of capacity created is setting up of multiple ICDs/CFSs in close vicinity to each other. It has also resulted in overstretching of the resources of the Customs department.

From the data on undisposed containers collected by Audit from 85 ICDs/CFSs test checked, it was seen that as on 31 March 2017, 7877 containers occupying total storage area of 1.17 lakh square metres was pending for disposal. Out of these, 3397 containers (57 per cent) were pending disposal for more than 3 years. Analysis of uncleared cargo revealed that pendency was mainly due to delays in issue of no objection certificates by Customs, delay in clearance certificates from participating agencies like plant quarantine and pollution control agencies, delay in implementing orders for destruction of cargo and delay in re- export of containers.

Among the undisposed containers, Audit found 469 containers of hazardous waste like metal scrap, municipal waste, used tyres and used war material, 262 containers of perishable goods like food items and 86 containers of teak /timber logs.

Audit found in test checked 85 ICDs and CFSs, as on 31 March 2017, that there were 469 containers of hazardous waste lying undisposed from periods ranging from one to seventeen years. These included live bombs, war material scrap in three ICDs in Rajasthan, 92 containers of used tyres, metal scrap and hazardous chemicals in one CFS under Mumbai Customs Zone II, 15 containers of hazardous cargo in ICD Tughlakabad and 50 containers of mixed waste in ICD Moradabad.

Through detailed analysis of some sample cases, Audit found that the modus operandi for import of hazardous waste included import of cargo without mandatory documentation, import of municipal waste through high sea sales and imports of municipal waste by misdeclaring the cargo.

Apart from the fact that these imports were made possible due to laxity in implementing the laid down procedures, Audit also noticed absence of clear procedures for re-export of containers with hazardous waste that resulted in such containers lying undisposed.