The Hindu : National : Loans for non-housing projects under fire

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Sunday, May 29, 2005

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Loans for non-housing projects under fire

J. Venkatesan

Central Vigilance Commission pulls up HUDCO; Rs. 14,500-crore scam highlighted in PIL filed in Supreme Court

NEW DELHI: The Central Vigilance Commission, which inquired into the Rs. 14,500-crore loan scam in the Housing and Urban Development Corporation during the Vajpayee regime, has pulled up HUDCO for providing a large portion of its finance for irrigation and power projects and not for housing.

The CVC inquired into the scam highlighted in a public interest litigation petition filed by the Centre for Public Interest Litigation in the Supreme Court. The court issued notice to the Centre and others in January last and in the meanwhile the CVC submitted its report to the Government. As no action was taken on the CVC report, the court sought the Government's response. The Centre recently submitted to the court both the CVC and action-taken reports.

`Arbitrary use of power'

The petitioner-organisation alleged mala fide and arbitrary use of power and sanctioning of loans to the tune of Rs. 14,500 crores, release of Rs. 8,500 crores in subscriptions in privately-placed debentures of Rs. 1,250 crores and writing off of Rs. 550 crores in 2002-2003, resulting in grave loss to the exchequer.The CVC said HUDCO's main activity was to provide long-term finance for construction of houses for residential purposes or undertake housing and urban development programmes.

"A major part of the advances seems to be going for projects not directly connected with housing or urban development. In its response to the report, HUDCO said: "The HUDCO Board is the final authority in all matters relating to grant of loans. It has framed certain guidelines which are executive in nature. In appropriate cases, the board has also the power to depart from those guidelines. In its action-taken report, the Government agreed with HUDCO and said the corporation had to be flexible while competing with financial institutions to retain its market.

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