CAG Audit Uncovers Widespread DMF Spending Violations in Odisha Education

30 Sep 2026, 06:14 by Vinay Kakkad · KalingaTV

Statutory trusts established to rebuild communities bearing the brunt of mineral extraction have instead been used to underwrite elite overseas master’s degrees, fund commercial entrance coaching with negligible returns, and shoulder routine departmental expenses.

The latest Performance Audit by the Comptroller and Auditor General of India (CAG) on the implementation of the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) and District Mineral Foundations (DMFs) in Odisha documents widespread non-compliance in the education sector. Across multiple mining districts, trust administrations bypassed governing boards and statutory frameworks to finance activities explicitly excluded under both national PMKKKY guidelines and the Odisha District Mineral Foundation Rules, 2015.

Under Rule 10(A)(iv) of the state regulations, education outlays are strictly restricted to grassroots public assets—such as school buildings, laboratories, libraries, student hostels, and teacher recruitment. The audit reveals that these public resources were redirected into unauthorized personal sponsorships, private test prep, and large-scale furniture contracts that yielded uninstalled, deteriorating stock.

Elite Foreign Degrees and Unused Balances

In Keonjhar, the district administration approved a proposal from the Principal of the Government College of Engineering (GCE) to underwrite the overseas education of five students selected for a Master of Professional Engineering (Mining) program at Curtin University in Australia. On August 12, 2023, the Keonjhar DMF sanctioned Rs 6.06 crore to cover foreign course fees, living allowances, and health insurance.

The audit established that the sanction bypassed mandatory approvals from both the DMF Board of Trustees (BoT) and the Executive Committee (EC). Funds were disbursed two days later, on August 14, 2023.

By December 2024, only Rs 2.57 crore of the allocation had been utilized. Rather than reverting the surplus, the remaining Rs 3.49 crore was transferred into four term deposit accounts held by the engineering college. Auditors noted that parking these funds outside the trust for 19 months resulted in an estimated revenue loss of Rs 37.91 lakh in interest. The national auditor rejected the state’s defense that the grants empowered local youth under Sustainable Development Goals, emphasizing that individual overseas study violates statutory guidelines and diverts capital away from broad educational infrastructure in mining corridors.

Private Medical Coachings

In Jajpur, the DMF trust channeled Rs 4.30 crore into private test-preparation centers to coach students for national medical entrance exams:

Center for Educational and Social Development–Pathsala (CESDP): An August 2018 agreement funded residential coaching for 30 students at Rs 2.50 lakh each, costing Rs 70.76 lakh.
Aakash Institute, Bhubaneswar: 40 candidates were sponsored during 2019–20.
Career Point, Jajpur Road: 367 candidates were funded between 2022 and 2024 at a cost of Rs 3.59 crore.

The results showed severe operational and demographic failures. Out of 437 candidates trained over these cycles, only six secured admission to medical colleges—an outcome the CAG characterized as miniscule relative to the public outlay. Furthermore, during the 2018–19 cycle, not a single student was selected from Sukinda or Danagadi, the two blocks directly and indirectly affected by mining operations.

The state government argued the program was initiated at the behest of a state power transmission public sector unit. Auditors dismissed this justification, noting that non-mining PSUs have no mandate over DMF resources and should finance corporate social responsibility initiatives through their own corporate budgets.

Budgetary Substitution: Uniforms and Textbooks

The audit also flagged a growing tendency by district administrations to substitute regular state budgetary responsibilities with DMF capital.

In May 2020, the Collector and Managing Trustee of Keonjhar approved an initiative to distribute free textbooks and uniforms to Class IX and X students. Between January 2021 and January 2025, the Keonjhar DMF sanctioned Rs 14.83 crore for the scheme, releasing Rs 10.32 crore to the District Education Officer (DEO).

The CAG pointed out that under Section 2(2)(a) of PMKKKY and Rule 11(A)(3) of the state rules, DMF funds may only supplement existing state or central schemes, not absorb their entire financial burden. Routine curriculum supplies, the audit held, must be funded directly through the state’s primary budget.

Rs 129.89 Crore Furniture Drive: Idle Classrooms and Locked Hostels

The most significant financial diversion uncovered in the sector involved school furnishings. A total of Rs 129.89 crore was spent across three districts under the state government’s “5T High Schools Transformation” initiative:

Keonjhar: Rs 100.51 crore accounted for out of Rs 138.77 crore released.
Jajpur: Rs 17.03 crore for 19,810 dual desks, tables, and almirahs.
Mayurbhanj: Rs 12.35 crore for 14,644 dual desks and benches.

The procurement process was handled via the Odisha Small Industries Corporation (OSIC) and Roads & Buildings divisions. In Keonjhar, the DEO disbursed Rs 138.77 crore, leaving an unspent balance of Rs 38.26 crore unaccounted for in utilization records as of late 2023.

Joint Physical Verifications (JPV) conducted by audit teams in April 2025 revealed severe implementation disconnects. At three separate Odisha Adarsha Vidyalaya (OAV) sites in Keonjhar—Telkoi, Lahanda, and Talachampei—furniture supplied as far back as April 2023 remained stacked in unopened classrooms, unused and decaying. The newly constructed hostel complexes remained locked because the Rural Works Divisions had not handed them over to education authorities, and no staff had been sanctioned to operate them.

The auditor concluded that using mineral funds for school furniture violated PMKKKY norms, and warned that allowing newly purchased equipment to sit idle in locked buildings guarantees rapid depreciation and waste of public capital meant for displaced communities.