Scandal at NFML: Ministers allegedly involved in Rs300b fertiliser fraud

Over half of the subsidised fertiliser was misappropriated and sold off at black market rates.

ISLAMABAD:

A powerful group comprising federal ministers, elected officials, and senior civil servants allegedly embezzled Rs300 billion through the illegal dumping, smuggling, and black-marketing of fertiliser imported by the government, according to an official inquiry report.

Detailed background interviews of informed government officials conducted by the Express Investigation Cell revealed both the scale of the fraud as well as the manner in which it was conducted.

Among the officials implicated in the alleged scam are former Industries Minister Mian Manzoor Wattoo, his predecessor Mir Hazar Khan Bijarani, Senator Ismail Baleedi from Balochistan, as well as a shockingly large number of senior officials from the industries minister, the state-owned Trading Corporation of Pakistan (TCP), and the National Fertilizer Marketing Ltd (NFML). Many of the officials named in the report are still serving within the government.

If the details portrayed in the inquiry report are accurate, the scam was remarkably elaborate and relied on the cooperation of officials who knew exactly how the complex logistical operation of the government’s import and distribution of fertiliser works.

Given Pakistan’s chronic shortage of urea, the government imports the fertiliser every year. TCP is charged with importing the fertiliser and then passing it off to NFML, which distributes it locally. The government subsidises the urea by making the NFML sell it at far below global import rates, importing it at around Rs2,550 per 50-kilogramme bag and selling it for Rs1,050 per bag.

While NFML has its own distribution network, much of the actual sales of fertiliser are done through thousands of authorised dealers, who are required to sell the fertiliser at prescribed rates. Yet it appears that between 2009 and 2011, this elaborate nationwide network effectively ceased to deliver subsidised urea to Pakistani farmers, forcing them to pay global market rates, while still leaving the taxpayer with the bill for subsidising the fertiliser.

“Over 50% of the imported urea (500,000 tons) simply did not reach its destination,” says the report.

The group allegedly behind the scam went to quite some trouble to hide their tracks. The report states that they created almost 600 fake dealers and agencies which were then given authorisation to distribute subsidised fertiliser through the connivance of corrupt officials both at the industries ministry as well as TCP and NFML. Around 30 officials were allegedly inducted into NFML specifically to facilitate corrupt transactions, the report alleges.

Mobile units were set up throughout the country to give the appearance of a legitimate, government-sponsored operation to distribute urea. But the report claims that it was all an elaborate ruse.

Once the fake dealers were able to procure the cheap fertiliser, they dumped it into storage sites across the country and waited for the resultant artificial shortage of urea to drive up local prices, forcing farmers to pay up to double what should have been the subsidised price. Prices shot up from Rs1,050 (the mandated price) to Rs1,800 in 2009 and Rs2,000 in 2010. The entire network of corrupt officials allegedly pocketed the difference, which amounts to a whopping Rs300 billion.

“A survey of the outlets was conducted which made the stunning disclosure that on the direction of powerful politicians, NFML set up hundreds of fake dealers/agencies to dump and sell imported urea, at black market rates,” reads the report.

The investigation further makes it clear that the fraud had help from people in positions of authority, who designed policy to facilitate the scam. “There is undeniable evidence that dumping of urea has taken place. There is also evidence that decisions were made that could lead to further dumping through establishment of mobile and temporary fertiliser stores.”

As one reads through the report, the allegations continue to get more damning. “The NMFL management has knowledge of urea dumping and smuggling between the summer of 2009 and December 2010, but did not carry out any disciplinary action against any contactor or dealer,” it reads in one place.

The inquiry report itself is remarkably impressive, naming nearly every single official involved, as well as the names and details of every one of the fake agencies and dealerships. It points out that Wattoo’s home district of Okara has a disproportionately high number of the dubious entities.

A letter sent by NFML, dated June 25 of this year, requests action from the National Accountability Bureau (NAB) against the allegedly corrupt officials, but so far no action appears to have been taken.

Indeed, far from any action being taken on the basis of the inquiry’s recommendation, the inquiry committee’s members – Chaudhry Sharif, Faiz Ali Bukhari, Muhammad Akbar and Amin Mukhtar Gondal – have allegedly faced retribution from the officials involved in the scam. Sharif was reportedly sacked from the NFML for his role in the inquiry.

Most of those named in the report deny any wrongdoing. Kashmir Affairs Minister Mian Manzoor Wattoo denies having any involvement in the fake agencies scandal. “Farmers still remember my tenure when urea was available at Rs750 a bag. Nobody can point fingers at me for the fertilizer import and delivery [scam].”

Wattoo’s personal secretary claims that his name was included in the report on account of bias by the investigators. Mir Hazar Khan Bijarani was not available for comment, despite several attempts to reach him by telephone and text message.

Senator Ismail Baleedi was perhaps most upfront about his involvement, admitting that he had written a letter to the NFML management requesting that the distribution contract for his district be given to Humsafar Transport Company. “Being a senator and public representative I asked the NFML management, in writing, to give the urea transportation contract to Humsafar Transport Company on merit. I think by doing so I did nothing wrong,” he said.

Industries Secretary Aziz A Bilour declined to comment on the matter. Agha Nadeem, an additional secretary at the ministry, was asked by Bilour to comment on the matter. At first Nadeem was reticent to discuss the subject before finally saying: “It is the NFML board which decides each and every issue of the organisation and it should be approached for further queries or comments.”

When asked to comment, NFML Managing Director Tariq Shafi said: “I am not aware of the inquiry committee report and therefore cannot say anything on authority. However, I think it is an issue which occurred before my taking charge at NFML.”

Published in The Express Tribune, December 29^th, 2011.