CHAPTER 1
DEPARTMENT OF ATOMIC ENERGY

Electronics Corporation of India Limited

The Company failed to plan and execute an order with the extended delivery period resulting in a loss of Rs.2.59 crore.

Department of Telecommunications (DoT), New Delhi placed (February 1995) an order on Electronics Corporation of India Limited (Company) for supply of 1618 Optical Fibre Line Terminating Equipment and Digital MUX (Multiplexer) Systems. The order details were as given below:

The cost of all these and certain additional items came to Rs.6.90 crore. The order, inter alia, stipulated the delivery period of 8 months from the date of issue of order i.e. by October 1995.

As can be seen from the Table that the Company could produce only a fraction of the ordered quantity in case of the 2/8 Mb MUX systems and supplied them during September 1996 and January 1997. Against 8/34 Mb MUX systems, it supplied 100 systems procured from an approved vendor of DoT in September 1996. The Company could not supply DDF equipment as the product was not in its manufacturing line but quoted for bid compliance. DoT short-closed the order in April, 1998 and encashed the Bank Guarantee of Rs.26 lakh as the Company could not supply the entire quantity of 2/8 Mb MUX and 8/34 Mb MUX systems even after several delivery extensions.

Of the bills raised by the Company for Rs.54 lakh, DoT settled bills to the extent of Rs.44 lakh after deducting Rs.10 lakh towards liquidated damages. The Company suffered a loss of Rs.46 lakh (Factory cost Rs.90 lakh less realised cost Rs.44 lakh) on production/ procurement and supply of 2/8 and 8/34 Mb MUX systems. Consequent upon the short closure of the order, raw materials and work-in-progress (WIP) valued at Rs.1.87 crore became infructuous and were derated to Re.1 during the year 1997-98. Thus, the Company suffered a total loss of Rs.2.59 crore (encashed bank guarantee: Rs.26 lakh plus loss on part supply: Rs. 46 lakh plus deration of WIP: Rs. 1.87 crore) in the part execution of the above order with a cash loss of Rs.1.71 crore.

The Ministry stated (July 2001) that:

1. the Company sought necessary extensions from time to time and that the delays were mainly on account of delayed approvals from Telecom Engineering Centre (TEC) for its product; and
2. the balance 378 Nos. of 8/34 Mb MUX systems could not be supplied by M/s. Shyam Telecom due to their inability to supply within the scheduled delivery period.

The reply of the Ministry is not tenable in view of the following reasons:

1. The Company did not seek extensions at any time specifically on account of delays in getting TEC approval for its products. Even after TEC approval for 2/8 Mb MUX systems (June 1995) and 8/34 Mb MUX systems (January 1996) the Company continued to seek extension of delivery till March 1998. Further though advance order was received by the Company wherein tight time schedule was indicated for factory evaluation, the Company did not plan properly to obtain TEC’s approval within the scheduled time.
2. The delay in supply was mainly on account of Company’s inability to take up manufacture of the balance quantity of 2/8 Mb MUX systems even after several extensions. This resulted in non-supply of balance of 8/34Mb MUX systems since both 2/8 Mb MUX systems and 8/34 MUX systems needed to be despatched together.

Thus failure of the Company to plan and execute an order even within the extended delivery period resulted in a total loss of Rs.2.59 crore with cash loss of Rs.1.71 crore.