The Punjab Department of Cooperation has initiated disciplinary proceedings against seven senior officials and transferred another following an investigation into an alleged fertiliser diversion and tax fraud network involving state cooperative institutions and private suppliers.
The action follows directions issued by Chief Minister Bhagwant Singh Mann after authorities uncovered suspected procurement irregularities during inspections at cooperative cattle feed plants. Investigators are examining whether subsidised agricultural urea intended for farmers was diverted for industrial use while false invoices were allegedly used to claim ineligible Goods and Services Tax (GST) credits.
Audit Examines Alleged Urea Diversion Scheme
According to the state government, the investigation began after surprise inspections and laboratory testing at cattle feed manufacturing facilities operated by cooperative organisations, including Markfed and Milkfed.
Officials said industrial cattle feed production is required to use technical-grade urea purchased at market rates. Investigators allege that certain private suppliers from New Delhi and Sonipat, Haryana, supplied subsidised agricultural-grade neem-coated urea instead.
During inspections, authorities reported the following recoveries:
- 1,340 bags allegedly mislabelled as technical-grade urea at Milkfed's Khanna cattle feed plant.
- 1,740 bags of subsidised agricultural-grade neem-coated urea recovered at the Milkfed facility in Batala.
- 300 bags allegedly mixed with industrial consignments at the Markfed plant in Kapurthala.
Laboratory analysis is reported to have confirmed differences between the supplied material and the product specifications required for industrial procurement.
Seven Officials Face Departmental Action
Following the preliminary findings, the Department of Cooperation initiated disciplinary proceedings against several officials associated with procurement and quality control.
At Milkfed's Khanna unit, departmental action has reportedly been initiated against:
- The General Manager.
- The Manager (Animal Husbandry and Quality Control).
- The Deputy Manager (Purchases and Stores).
- A Senior Assistant involved in procurement operations.
At Markfed, authorities have issued:
- A show-cause notice to the Chief Manager.
- Major penalty charge sheets against the General Manager.
- Proceedings against the Senior Accounts Officer holding charge of the Deputy Chief Accounts Officer's responsibilities.
- Action against the Senior Assistant functioning as Commercial Manager.
The Commercial Manager has also been transferred pending further proceedings, according to officials.
GST Investigation Extends Beyond Punjab
The investigation has now expanded into an alleged interstate tax evasion case.
According to the Punjab government, private suppliers—including M/s Manisha Trading Company, New Delhi, and M/s AM Chemical, Sonipat—are being examined for allegedly issuing false invoices and claiming wrongful Input Tax Credit (ITC).
Authorities have referred the matter to the Principal Commissioners of the Central Goods and Services Tax (CGST) in New Delhi and Panchkula for further examination of financial transactions and tax records.
The allegations are under investigation, and no findings of guilt have yet been established by a court.
Government Announces Procurement Reforms
To strengthen procurement oversight, the Punjab government has announced structural reforms in the cooperative supply chain.
According to the government:
- Markfed will function as the sole nodal agency for procuring technical-grade urea for cooperative institutions.
- Future procurement will be undertaken directly from authorised Government of India public-sector manufacturers.
- Police have been authorised to register criminal cases against the private suppliers named during the investigation, where warranted by evidence.
Authorities said the reforms are intended to improve transparency, reduce opportunities for procurement manipulation and strengthen oversight of subsidised agricultural inputs.
Shunyatax Global Insight
Diversion of subsidised agricultural inputs not only impacts government welfare programmes but can also create wider financial and tax compliance risks through fraudulent invoicing and misuse of GST credits. Digital supply-chain tracking, end-to-end inventory monitoring, laboratory verification and stronger procurement controls are increasingly becoming essential safeguards against large-scale diversion of subsidised commodities.
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