The Rural Enterprise Development Corporation Limited (REDCL) could be used as a political tool by the government and political parties, opposition leader Pema Gyamtsho (PhD) said in the joint sitting of the Parliament yesterday.

During the deliberation on a performance audit report on the erstwhile Business Opportunity and Information Centre (BOiC), Pema Gyamtsho said it was not the government’s job to provide loans to people. Such a practice, he said, would have negative impact on the economy and democracy.

“Loans from BOiC or REDCL would be used as a political tool. That won’t benefit our democracy,” he said.

Pema Gyamtsho said that while the interest rate on REDCL loans today was four percent, there is a possibility that future governments would offer interest-free loans for electoral gains. “Some parties might even promise to waive off all the loans. The government has already set a precedent,” he said.

The opposition leader urged the government to leave the responsibility to provide loans with banks. He said there was no need for the government to establish a separate institution like REDCL as the Bhutan Development Bank Limited is mandated to provide loans to farmers.

“The government could reduce interest rates and even provide subsidies to financial institutions like Bhutan Development Bank to meet the credit needs of the rural population, if need be,” he said.

He also cautioned that the use of external funds to fulfill the government’s pledges would affect the country’s sovereignty.

BOiC was established as part of the government’s Economic Stimulus Plan (ESP) with a grant of Nu 5 billion from the Government of India. BOiC now REDCL provides loans at an interest rate of four percent without mortgage.

The opposition leader mocked the government for its stand on the audit findings on BOiC.  In a performance audit carried out earlier this year, the Royal Audit Authority (RAA) pointed out several shortcomings such as high rate of non-performing loans and delay in disbursement of funds.

He cited ear-tagging of cows procured through REDCL funding as one of the control mechanisms identified to ensure proper use of fund and better monitoring. During a physical verification by RAA, it was found that this mechanism was ineffective.

“If tagging cows is a mechanism to prevent misuse of funds, I wonder what other new ideas the government is coming up with,” he said with a giggle.

Education minister Norbu Wangchuk said the government had foreseen such issues in a dream.

However, the opposition leader said, “What the government saw was not a dream, but reality. The government boasts about many projects being implemented with REDCL loans. But even the purchase of a cow is counted as a project. If a farmer plants potatoes, that’s counted as another project.”

The opposition leader also said that there was perception among many people that loans were approved based on party affiliations.

Drametse-Ngtsghang MP Ugyen Wangdi said the parliament should fix accountability for violation of law establishment of BOiC. Panbang MP Dorji Wangdi said the government violated the Constitution and other relevant laws while establishing BOiC. Salaries of the BOiC staff, he said, were paid from an external source.

The audit report states that the basic pay scale of the CEO was higher than that of  heads of all agencies, some of which were larger and well-established entities such as BoB and BPC. Similarly, the executives of the BOiC are also seen to draw a higher minimum basic pay over executives of all other agencies taken up for the study.

Citing the audit findings, Dorji Wangdi said that a total of Nu 66 million was spent on salaries for the staff during the first three years of its establishment. The CEO was paid Nu 130,500 a month, which he said was more than that of a cabinet minister.

However, foreign minister Damcho Dorji said that since REDCL has been established under the Companies Act of Bhutan, all legal questions have been resolved.

While some MPs said lengthy procedures delayed release of loans, the foreign minister said that it was necessary to scrutinise the proposals to minimise non-performing loans. “There would be no basis for REDCL to take defaulters to court if we release the loans in hurry,” he said.

He said that the establishment of BOiC and REDCL was necessary since no financial institutions would be ready to provide loans without mortgage at the rate of four percent. “While non-performing loans are natural, we are trying and reducing them,” he said.

As was suggested by the Opposition earlier, the foreign minister said that the government formed a committee to see a possibility merging BOiC with BDBL. However, he said the committee found that the objectives of BDBL and BOiC varied and that the cost would be the same even if they were merged or operated separately.

“We felt that it was the responsibility of the government to come up with a separate loan scheme for the poor,” he said.

The foreign minister also denied discrimination of applicants along party lines. “We have to trust the employees of REDCL.”

He challenged the opposition members to carry out an audit to see whether the supporters of the ruling party have benefited from BOiC loans. “As long as it benefits the people and the country, the government will be happy,” he said.

Economic affairs minister Lekey Dorji said that projects with support from REDCL and BOiC are being implemented in all 205 gewogs.

Most of the beneficiaries, he said, are in dzongkhags like Bumthang and Mongar. He said that a total of Nu 5.8 million non-performing loans are from Bumthang alone.

National Council member from Lhuentse, Tempa Dorji, said that parliament had to prescribe a turn around time for processing and sanction of REDCL loans. Council member from Dagana, Sonam Dorji said that the REDCL should be closed altogether. “The BOiC or REDCL has failed to meet the expectation of the people,” he said.

MB Subba