Story Of The Week

Economic Hardships: Fodder Scam and its Impact

“Power tends to corrupt, and absolute power corrupts absolutely”

– Lord Acton

Economy of Scams in India

Indian Economy, post the liberalization period, has witnessed various scams like Harshad Mehta Scam(1992), Fodder Scam(1996), UTI Scam(2001), Satyam Scandal, 2G scam and list goes endless. These scams affect the economy at large over and above the loss of millions of rupees. The scale of these scams and the way in which these have been executed are a serious concern to the Government and to the people as well.

Approximately 73 lakh crore rupees have been lost due to the economic scams since 1992. These scams have affected all the sectors of the economy.

Financial market regulation is one of the constant challenge faced by the government. The government established the Securities and Exchange Board of India in 1992 to protect the interests of investors in securities and to regulate the securities market. SEBI has been on its toes since then because of the ever-changing nature of these scams and it has also become necessary to diversify the powers of SEBI. The government passed the Securities Law (Amendment) Bill, 2014 to empower the SEBI and to protect the interests of investors in a better way.

These scams have an effect on the economy of the nation as a whole and also in a globalized world where all the countries are related by trade and other means these scams can damage the world economy at large.

About the case

The Fodder Scam relates to the large-scale misuse of government funds, done by producing fake bills to substantiate payments that were never made. The scam’s notorious name etymologizes from its roots in the Animal and Husbandry department of Bihar government and the fraudulent transactions were made in the name of procuring cattle feed over a period of over two decades, under successive regimes.

After the 1985 incident, the case resurfaced in a big way for the first time in 1996 when the state finance secretary VS Dubey started looking into the matter and ordered inspections across all districts.Animal Husbandry Department (AHD) at Chaibasa was raided by officials to uncover a stash of documents showing illegal withdrawals from the state treasury. But before this, subsequent raids on various AHD officials were already being conducted, quietly and away from media glare, adding straw by straw to a mound that went on to be known as the fodder scam.

Multiple I-T raids in the year 1993 had revealed that around 80 AHD officers and suppliers had accumulated wealth worth Rs 25 crore but “surprisingly”, before any action could be taken, the I-T officer leading the raids to uncover the scam was transferred putting the case on the backburner. Prior to this, in February 1992, an AHD official had been found with of over Rs One crore in cash at Ranchi airport.

In 1994 various cases of fraudulent transactions related to AHD was brought to light. The Vigilance Department noticed withdrawal of some 50 lakh rupees with false bills by the regional AHD director at Dumka. However, the assembly’s Public Accounts Committee (PAC) chairman Jagdish Sharma, a supporter of former Bihar chief minister Jagannath Mishra, also an accused in the case, intervened claiming that the PAC was already investigating such matters and the Vigilance Department should not proceed further. The matter was dropped.

Now the case spans across 64 cases and over 56 accused, including top bureaucrats at the time, politicians and government employees.

Lalu Yadav’s Role in the Scam

The issue resurfaced when a PIL was filed in Patna High court by BJP state chief Sushil Modi in 1997. The investigation was taken over by CBI and since then started Lalu Yadav long history with CBI.

“A large amount of money was withdrawn from the government’s treasury. In short, it was a loot of government’s money by the government officials backed by the political leadership. About Rs 950 crore was looted by government officials in ten years. It was a huge thing for all of us at that point of time,” Rakesh Asthana, the famed CBI’s superintendent of police who uncovered the scam and formally started prosecution against a sitting chief minister.

In 1997, CBI initiated criminal proceedings against Chief Minister of Bihar and asked the then Governor of Bihar to take necessary actions to initiate the process. Amid growing public pressure, Lalu was left with no choice but to step down, but not before outsmarting his opponents by installing his wife Rabri Devi as the chief minister.

Rabri Devi, Wife of Lalu Prasad Yadav was surprisingly made the Bihar chief minister, till date, quoted as one of the most clever political manoeuvres.Also when fraudulent cases against Rabri Devi began to surface his son was made the Chief Minister of Bihar.

Currently, there are 64 cases arising from the scam, Lalu Prasad Yadav has been named as accused in six cases and he has already been convicted in one of the cases involving the fraudulent withdrawal of Rs 37.70 crore from Chaibasa treasury, which now falls in Jharkhand between period 1 April 1994 to 31 January 1995’.

Other cases pending against him include misuse of money in treasuries of Chaibasa, Doranda in Ranchi involving Rs 139.39 crore, Dumka (Rs 3.31 crore) and Patna.

The flow of events has been celebrations for some while some were not so glad. While Nitish Kumar’s government faced quick opposition from Congress, BJP was in a sense of innate jubilation. Union Minister JP Nadda was quoted saying, “It has been proved that Lalu indulged in corruption and the decision has been given by the court. How does BJP figure in it? It is the alliance between Congress and Lalu’s party when all such actions have taken place. Over three years after it was ousted from power, we still see one case after another coming out and courts are indicting and convicting them. So, this itself speaks of the deeds done by them.”

These political times have become extremely interesting, with justice quashing upon those who tried to escape it through immoral means. Let’s wait for the quantum of the subsequent events to take place post-Lalu’s conviction and observe RJD’s next step.

The way forward

More than the laws and government reforms it is the enforcement agencies that should keep bars on the benefits arising out of such crimes by the offenders or scam. Further, the scope of bails provided to the offenders of scams should be tightened up by the State authorities. Along with this, fast and speedy decisions regarding the trials of economic offenders must be ensured by the judiciary. With respect to the other countries, the Indian reforms are much soft. Side by side, all the private or public agencies such as income tax department, customs offices, police departments, SEBI, etc. should work in a coordination to quickly get rid of these economic crimes.


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