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Jan 08, 2012 at 10:13am IST

Army-CAG dispute puts CSD canteens on stake

New Delhi: To find out India's largest retail outlet, you should check out the Ministry of Defence in Delhi's South Block, where the humbly named Canteen Services Department or CSD is headquartered. The CSD is a wholesale agent, which buys directly from manufacturers and selling to 4000 Unit Run Canteens of the armed forces all over India.

According to RTI documents accessed by CNN-IBN, the Unit Run Canteens have run up profits of at least Rs 300 crore on a turnover of Rs 8000 crore in the last decade.

Now the official government auditor, the Comptroller and Auditor General (CAG), wants to audit the accounts of the canteens.

The CAG says the canteens use government infrastructure, sell items at prices fixed by the Defence Ministry and are run by government personnel. Therefore the canteens are a government department.

But in a detailed note to CNN-IBN, high level army sources, dealing with this issue, said URCs are beyond the purview of the CAG.

The armed forces said Unit Run Canteens (URCs) are private ventures of the armed forces, which are wholly funded by individual regiments with officer and jawan contributing. The canteens buy items of daily use from CSD by advance cheque and sell the items to armed forces personnel wherever posted and the profits fund welfare programmes for armed forces personnel.

The Supreme Court in a judgment in April 2009 ruled that URCs are private ventures. But a cabinet note of August 1976 described the profits generated by canteens as non public funds and therefore outside government accounts. It said no money from the Consolidated Fund of India was going to the URCs.

But the CAG is standing firm, saying that money from the Consolidated Fund of India goes to the URCs. Senior army officers, however, say this money is a commercial loan not a grant. Last year around Rs 200 crore was paid back to the Consolidated Fund.

The armed forces are now reportedly considering a range of options including shutting down the URCs altogether and creating and funding their own NGO for the purpose. It would offer the same services as the URCs minus of course the headache.