On March 28th, 2020, India's Prime Minister Narendra Modi announced the creation of a separate fund to deal with the COVID-19 situation in the country- the PM-CARES fund or the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund. It is unclear why a separate fund was required when the country already has the Prime Minister's National Relief Fund (PMNRF) in place to deal with such circumstances. The predicament with this new fund is this- it entirely lacks transparency.
Despite widespread demands to bring the PM-CARES fund under the Right to Information (RTI) Act and allow the Comptroller and Auditor General (CAG) of India to audit the fund, the Modi Government is adamant on not allowing it. Activists and civil society groups question why the government is shying away from bringing transparency into the usage of this fund. There seems to be no reason to deny this- the fund was set-up by a central government order, is governed by a trust headed by the Prime Minister, is eligible for Corporate Social Responsibility (CSR) funds from corporations, eligible for 100% tax rebates, exempted from Foreign Contribution Regulation Act (FCRA) norms and has collected tremendous amounts of donations from government bodies and PSUs. The entire government machinery was put to use to mobilise donations for this opaque fund. Modi had personally, on March 30th, told 130 Indian heads of missions abroad to give this fund wide publicity in order to receive foreign donations. In any functional democracy, these would serve as enough grounds to declare the PM-CARES fund a public authority under the RTI Act.
The PM-CARES was created for the following reasons-
"1. To undertake and support relief or assistance of any kind relating to a public health emergency or any other kind of emergency, calamity or distress, either man-made or natural, including the creation or up-gradation of healthcare or pharmaceutical facilities, other necessary infrastructure, funding relevant research or any other type of support.
2. To render financial assistance, provide grants of payments of money or take such other steps as may be deemed necessary by the Board of Trustees to the affected population.
3. To undertake any other activity, which is not inconsistent with the above objects."
Following the announcement of this fund on March 28, donations poured in from all quarters- including public and private entities. Within four days, it had collected 3076 crores. As per an IndiaSpend report of May 20, the fund had received approximately Rs 9677 crores (1.27 Billion Dollars) in donations according to publicly available data on that date. An additional Rs 2098 crore was also pledged by that date. This excludes many donations which have not been publicised by the government or private players. It is not unreasonable to assume that the corpus in the fund would only have increased in the following months. The outgoing fund or the expenditure, however, has not been at the same rate. Six months in, merely Rs 3100 crores from the fund were allocated for the care of migrant labourers (Rs 1000 crore), 50,000 made-in India ventilators (Rs 2000 crore) and vaccine development (100 crores). Even this has not been controversy-free. According to a recent RTI-based report in the Huffington Post, Rs 373 crores were provided to a Chennai-based medical technology company called Trivitron Healthcare from the PM CARES fund, to build 10,000 ventilators, even though this company has never made ventilators before.
PM-CARES funds accumulate but Modi govt on a borrowing spree
On April 22, the Modi government had announced a Rs 15,000 crore special package called- ''India COVID-19 Emergency Response and Health System Preparedness Package". The main objective of this package was to "include mounting emergency response to slow and limit COVID-19 in India through the development of diagnostics and COV1D-dedicated treatment facilities, centralized procurement of essential medical equipment and drugs required for treatment of infected patients, strengthen and build resilient National and State health systems to support prevention and preparedness for future disease outbreaks, setting up of laboratories and bolster surveillance activities, biosecurity preparedness, pandemic research and proactively engage communities and conduct risk communication activities", very similar to the vaguely worded objectives of the PM-CARES fund.
What the Government has concealed is the fact that this Rs 15,000 crore was taken as a loan from three international banks on a long term basis. Replying to an RTI filed by this author on behalf of The Logical Indian, S. Nayak, Deputy Secretary in the Ministry of Health & Family Welfare has furnished the details of the loan taken from the International Bank for Reconstruction and Development (IBRD), the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).
Rs 15000 Crore package on loan
The first loan agreement was signed on April 03, almost 7 days after the PM-CARES fund was set up, with the IBRD for 1000 million USD (Rs 7500 crore). The rate of interest incurred each year would be around 1%, to be re-paid along with the principal amount in equal installments over 13 years starting 2025.
The second loan agreement was signed on April 28 with the Asian Development Bank (ADB) for $500 million (Rs 3750 crore) with a rate of interest at 1-2%, to be repaid in 7 years starting October 2023.
A separate review of the ADB loan agreement by this author reveals that the Government had borrowed another $1 billion (Rs 7500 crores) at the same interest rate to be repaid within 2 years from the same year.
Additionally, on June 15, the Government of India reached out to the ADB seeking an added 3 million dollars (around Rs 22 crores) to strengthen the Point of Entry system as India opens its gates to domestic and international travelers. A sum that could have easily been covered by the PM-CARES fund was sought as a loan, putting an additional strain on the public exchequer and the rupee.
A third and final loan of $500 million (Rs 3750 crores) was taken on May 08 from the AIIB. The loan agreement is not in the public domain but the rate of interest would be around 1.25%.
Why are the loans so problematic?
Jayati Ghosh, a noted UNDP award winning development economist and the chairperson of the Centre for Economic Studies and Planning at the Jawaharlal Nehru University, New Delhi, was surprised when told about this package being financed through loans. "There was absolutely no need for that (taking loans) because the spending will be within India and is unlikely to have much forex requirement", she said while talking to this author. "The real problem is not the interest rate but currency risk. The rupee is likely to depreciate further, and repayment will be in dollars. This will significantly add to repayment costs. What is so shocking is that this was so unnecessary" she warned.
When asked whether the loan amounts could have been covered by the PM-CARES fund, she said- "Of course PM-CARES money could have been used but this amount could easily have been funded by the central government directly", while justifying her point saying "it (the package) is less than 1/10th of the amount given away as tax concessions to corporates in the previous financial year, which the government did without blinking an eyelid!".
Even as corona cases refuse to slow down and states cry for funds, the Modi government had fast-tracked the Central Vista redevelopment project which will cost 20,000 crore to the exchequer. The opposition had urged the government to put this project on hold and use the funds for handling the on-going pandemic. In a similar development, Modi will soon fly in a VVIP aircraft named Air India One, as the aircraft is set to land in Delhi by early next week. The government has ordered two highly customised wide-bodied Boeing 777-300, costing Rs 8,458 crore to the public exchequer.
Merely Rs 4256 crore from the package released to states, Maharashtra received maximum amount of Rs 393 crore
Answering to the Parliament in the recently concluded tumultuous monsoon session, the centre notified that only Rs 4256 crores has been released to states from the special corona package, with the maximum amount of Rs 393 crores going to Maharashtra, followed by Uttar Pradesh (Rs 334 crores) and Kerala (Rs 309 crores). Maharashtra did not receive any money in the second installment. States have not received there GST dues yet and have been demanding funds for many months. This fund crunch is severely affecting the fight against corona.
So now the most significant question here is this- if the Modi government is heavily relying on loans from international banks, which experts believe is absolutely unnecessary and a burden on public exchequer, even for Rs 22 crores, announced in the form of special packages, then what is the PM-CARES fund being used for?
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