CHAPTER 6
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| Sl. No. | Number of exchanges | Period to which bills relate | Amount due | Period during which bills issued | Amount billed |
| 1 | 1 | 1.5.1999 to 31.10.2000 | 0.01 | Bills not issued up to July 2001 | - |
| 2 | 16 | 1.8.1999 to 31.10.2000 | 1.10 | November 2000 to March 2001 | 1.10 |
| 3 | 15 | 1.4.2000 to 31.8.2000 | 3.33 | October 2000 to November 2000 | 3.33 |
| Total | 32 | 4.44 | 4.43 |
When this was pointed out by Audit, the Accounts Officer TRA branch issued bills in respect of 31 exchanges for Rs. 4.43 crore during October 2000 to March 2001, although these actually related to the period August 1999 to October 2000. bi-monthly billing of the remaining exchange (Nawadip Exchange) for the period 1 May 1999 to 31 October 2000 was yet to be done as of December 2001.
The GMTD, Dhanbad in his reply in November 2000, while confirming facts and figures, stated that the delay was due to non-receipt of advice notes, daily work report, meter reading from exchange in due time and interruption in package etc. He added that billing work in respect of the exchanges, which could not be taken up till then, was also in progress.
Inordinate delay in the issue of bi-monthly bills, a routine function of the department, highlighted inadequacies in the billing system such as non-receipt of advice notes and meter reading from exchanges in due time etc., as stated by the GMTD in his reply.
The matter was referred to the Ministry in September 2001; their reply was awaited (December 2001).
6.1.2 Unauthorised procurement of equipment/stores
Chief General Manager Telecom West Bengal circle and two heads of Secondary Switching Areas (SSAs) under Andhra Pradesh circle unauthorisedly procured various items of stores valuing Rs. 2 crore in violation of departmental instructions for procurement of centralised/ decentralised items of stores and also in excess of the financial powers delegated to them.
The items of stores of the telecom department are categorised into stocked items and non-stocked items. Stocked items were being supplied by the Stores Organisation. Any urgent requirement of stocked items was met through local procurement within the delegated financial powers.
Non-stocked items are of three categories (i) items for centralised procurement by Department of Telecommunications (DoT), (ii) items for decentralised procurement by Heads of circles and (iii) other items not falling under the above two categories being procured by SSAs. DoT issued instructions in March 1990 not to carry out any civil/electrical works by TDEs/TDMs/GMs.
Under the system of decentralised procurement, DoT authorised the heads of circles to make procurement of decentralised items of equipment and stores themselves in consultation with the Internal Financial Advisors. These powers were not to be re-delegated by the heads of circles to lower formations.
Comments were made in the Reports of the Comptroller and Auditor General of India No.7 of 1996 and No.6 of 1997, 2000 and 2001 regarding unauthorised procurement of equipment/stores by lower formations although they were not authorised to do so. The Ministry had also issued instructions to all the heads of circles in January 1993/September 1996 to avoid recurrence of such lapses in future. Despite issue of these instructions it was noticed that Chief General Manager (Telecom) West Bengal circle, Kolkata and two SSAs of Andhra Pradesh circle unauthorisedly procured centralised and decentralised items of stores worth Rs. 2 crore for the period from October 2000 to March 2001 as detailed below:
| Sl. No. | Name of circle/SSA | Period | Particulars of equipment and stores | Cost | Remarks |
| West Bengal Circle | |||||
| 1 | CGMT West Bengal Kolkata | March 2001 | PIJF cables | 1.62 | Centralised item. Procured without authorisation of vendor/ rate. |
| Andhra Pradesh Circle | |||||
| 2 | TDM Mahaboob-nagar | October 2000 to March 2001 | Fax machines, line cards | 0.27 | Only CGMT AP circle was authorised to purchase these decentralised items. |
| 3 | TDM Sangareddy | October 2000 to February 2001 | Connectors, CT boxes | 0.11 | |
| Total | 2.00 | ||||
The matter was referred to the Ministry in October 2001; their reply was awaited (December 2001).
6.1.3 Continuance of telephone facilities despite non-payment of dues
Continuance of telephone facilities inspite of default of payment of bills resulted in accumulation of dues of Rs. 1.98 crore.
Departmental rules provide that a telephone bill is payable by the due date failing which the telephone connection is liable to be disconnected.
Scrutiny of records of four SSAs in Gujarat, Rajasthan and Uttar Pradesh (East) Telecom circles revealed that BSNL continued to allow telephone facilities to subscribers during the period between October 2000 and March 2001 despite non-payment of bills by the due date. This resulted in accumulation of arrears of Rs. 1.98 crore.
When this was pointed out by Audit, the Management under Gujarat Telecommunications Circle stated that out of Rs. 1.53 crore, an amount of Rs. 51.25 lakh was recovered from the STD/PCO holders under GMT Ahmedabad during March to August 2001. Management under the other circles stated that efforts were on to disconnect the facilities.
The matter was referred to the Ministry in September 2001; their reply was awaited (December 2001).
6.1.4 Failure to demand and collect rent of Rs.1.71 crore
Failure of BSNL to demand and collect rent for various telecom facilities led to non/short recovery of revenue of Rs. 1.71 crore.
Test check in audit revealed non/ short realisation of rent of Rs. 1.71 crore for the period October 2000 to September 2007 for various telecom facilities in 12 cases in seven telecom circles. These were mainly due to failure to issue bills, recover advance rental, fix rent and guarantee charges as per rules, bill inter-connection charges, non-revision of bi-monthly rent on redefining of short distance charging area (SDCA) and upgradation of exchanges, charging of rent on capital cost basis instead of flat rate basis, non-recovery of minimum usage charges, etc.
After this was pointed out by Audit, the Management under Gujarat Telecommunications Circle recovered the entire amount of Rs.3.81 lakh from the subscribers under its jurisdiction as on August 2000. Further, as reported by the Ministry in December 2001, Rs. 1.71 lakh and Rs. 40.90 lakh were recovered from the subscribers by the Management under Andhra Pradesh and Madhya Pradesh Telecommunications Circles, respectively. In respect of other circles the recoveries were yet to be reported.
6.1.5 Loss of potential revenue due to non-commissioning of project
6.1.5.1 Under Chief General Manager Telecom Project, West Zone
Change of specification by the Department of Telecommunications without informing the circle concerned led to non-commissioning of the project of digital microwave system for want of procurement of additional equipment. This led to loss of potential revenue of Rs. 86 lakh for the period from October 2000 to March 2001.
Chief General Manager Telecom Project, West Zone sanctioned a project in November 1991 for installation of 6 Giga Hertz (GHz) 140 Mega bits (Mbs) digital Microwave system between Kolhapur and Belgaum at an estimated cost of Rs. 4.53 crore. The project was to be completed within two years subject to completion of civil work and receipt of equipment and allied stores. On its completion it would earn a revenue of Rs.1.73 crore per annum.
Examination of records of Director (Telecom Projects) by Audit in February and April 2001 revealed that on the basis of a purchase order of January 1996, placed by the DoT, M/s. Indian Telephone Industries supplied main equipment of 6 GHz 140 Mbs microwave system (1+1) and radio equipment in May 1996 and June 1998 respectively. The system, as per original survey report, was to work in non-cross polarisation interference cancellor (non-XPIC) environment, i.e. one polarisation only to be used to carry traffic and accordingly, space diversity in some of the hops (viz., particular segments between two microwave terminals) was provided for as per the existing guidelines. But, the supplied equipment with XPIC facility could use both polarisations to carry telephone traffic, which needed provision of additional space diversity in hops by providing additional space diversity equipment. Accordingly, the guidelines for installation/commissioning needed a revision in regard to the provision of additional space diversity equipment, but this was not brought to the notice of the field units by DoT. As a result, the equipment, though installed in October 1998, could not be commissioned up to April 2001 for want of additional space diversity equipment. However, in April 2001, the proposal for supply of space diversity equipment for commissioning of above system was taken up by the Deputy General Manager Project Western region with higher authorities, which would obviously delay the commissioning of this project further.
Thus, the delay in commissioning not only led to blocking of funds for over three years with loss of interest on the blocked amount but also loss of potential revenue of Rs.86 lakh as per projection made in the project estimate during the period October 2000 to March 2001.
The matter was referred to the Ministry in July 2001; their reply was awaited (December 2001).
6.1.5.2 Under Chief General Manager Telecom Project, East Zone
Owing to procurement of disputed land by the Telecom District Engineer Darbhanga under the Chief General Manager Project (CGMP) East Zone 7 Giga Hertz 34 Mega bits per second digital microwave system between Sitamarhi and Madhubani could not be commissioned. Non-commissioning of the project led to loss of potential revenue of Rs. 10.24 lakh for the period from October 2000 to April 2001.
The Chief General Manager Project, East Zone Kolkata sanctioned a project estimate in August 1995 for the installation of 7 Giga Hertz (GHz) 34 Mega bits per second (Mbps) digital Microwave system between Sitamarhi and Madhubani at an estimated cost of Rs.4.48 crore. This project, to be completed within three years, was expected to earn a net profit of Rs. 17.55 lakh per annum.
As per projection made in the project estimate, this project was to be completed by August 1998, but due to dispute in the title of the land/building, this project was yet to be taken up for installation and commissioning as of April 2001. In fact Audit noticed that failure of TDE (now, GMT) Darbhanga in getting the clear title to the land/building or getting the same registered in the name of the department even after more than eight years of its allotment by the District Magistrate Madhubani, led to non-commissioning of the project. This led to a loss of potential revenue of Rs. 10.24 lakh for the period between October 2000 and April 2001 on the basis of the projections made in the said project estimate.
The Divisional Engineer Telecom Microwave project while confirming the facts stated in March 2001 that the issue of resumption of work was to be decided by the higher authorities.
The Ministry in their reply in November 2001 stated inter alia that an UHF system was working in the concerned region since 1994 and in addition to that, the OFC system was commissioned in May 2001. The Ministry added that the proposed 7 GHz digital microwave system was planned as an alternative route to the said OFC system and thus, as the region was always under connectivity of UHF system, apprehension of revenue loss was not true. The reply is not convincing because the OFC system was commissioned only in May 2001 and the proposed microwave system was to be operational by August 1998, thereby earning a net profit of Rs. 17.55 lakh per annum as per project estimate.
Thus, owing to delay in commissioning of the proposed project as well as owing to delayed addition of the OFC system, the company suffered a loss of potential revenue of Rs. 10.24 lakh for the period from October 2000 to April 2001.
6.1.6 Loss of potential revenue due to system and route failure
Chief General Manager (CGM), Northern Telecom Region (NTR) New Delhi failed to provide alternate route and real time route management system resulting in loss of potential revenue of Rs. 91.92 lakh.
The Northern Telecom Region (NTR) with headquarters at New Delhi is responsible for the operation and maintenance of the long distance network consisting of digital transmission system. It is the primary responsibility of NTR to maintain the long distance network in case of failure and to optimise its usage at all times.
Scrutiny by Audit of the records of Chief General Manager (CGM), NTR, New Delhi in June 2001 as well as information collected from Deputy General Manager (DGM), Trunk Auto Exchange (TAX) revealed that routing and change in routing of communications were managed by the NTR Management manually. There was no dynamic or alternate route for communication channels either in case of failure or for the purpose of optimisation. There were 2303 cases of system and route failure of incoming and outgoing circuits in respect of Delhi zone during 2000-2001, which reflected adversely on the quality of service provided to the users. Out of these 2303 cases, in respect of 40 cases on Delhi-Mumbai, Delhi-Kolkata and Delhi-Chennai routes, there was a loss of potential revenue of Rs. 91.92 lakh in the month of March 2001 alone, which could have been avoided by provision of an alternate route as well as real time route management system by the Management.
The matter was referred to the Ministry in November 2001; their reply was awaited (December 2001).
6.1.7 Failure to realise Rs. 81.31 lakh due to non-receipt of advice notes
BSNL failed to realise Rs. 81.31 lakh due to non-receipt of completed advice notes in Telephone Revenue Accounting (TRA) branch.
Operating branch of the telephone district is required to send completed advice notes to TRA branch within a week after providing telecommunication facilities to enable them to post the details in Subscriber Record Cards (SRCs) and issue bills to the subscribers. TRA branch is required to obtain a list of non-directory items from the operating branch in April each year and check it with SRCs to ensure that the rent in respect of all the telecommunication facilities had been recovered.
Cases of delayed billing/non-billing due to non-receipt of advice notes by TRA branch were commented in the Reports of the Comptroller and Auditor General of India-Union Government (Post and Telecommunications) in the past. Despite the department’s assurance that no telephone facility would be released without issuing the advice notes, the deficiency persisted. Test check by Audit revealed non/short billing of Rs. 81.31 lakh during October 2000 to February 2001 in four telecommunications circles involving five cases.
The matter was referred to the Management of the concerned circles and only in respect of General Manager, Telecom District, Vellore the entire amount of Rs. 3.14 lakh was recovered in February 2001. In other cases, the Management, while confirming the facts and figures, stated that the bills were issued for the entire amount in respect of the cases pointed out by Audit. The recovery details in respect of the circles were awaited as of December 2001.
The matter was referred to the Ministry in September 2001; their reply was awaited (December 2001).
6.1.8 Idling of high density polyethylene pipes
Failure of the General Manager Telecom Kota in Rajasthan circle to co-relate the activity of laying of high density polyethylene pipes for pulling of Optical Fibre Cable with its procurement led to idling of these pipes worth Rs. 61.55 lakh.
In order to connect various telephone exchanges with reliable media, the General Manager Telecom (GMT) Kota under Rajasthan circle sanctioned 13 project estimates between June 1998 and February 2000 for laying of Optical Fibre Cable (OFC) in various sections/routes falling in the areas under his jurisdiction. In December 1999, the GMT awarded the work of trenching and laying of high density polyethylene (HDPE) pipes to various contractors, in order to pull OFC through these HDPE pipes. But in the absence of procurement of OFC, the laid HDPE pipes remained idle and would get choked by the time OFC would be made available and pulled into these pipes. This in turn would also involve huge expenditure on their clearance.
Audit further noticed that these works remained under execution even after BSNL commenced its operation with effect from 1 October 2000. During this period between October 2000 and May 2001, an expenditure of Rs.88.80 lakh was incurred on laying/procurement of HDPE pipes. Out of this, BSNL allocated an expenditure of Rs.27.25 lakh to the DoT, apparently being the cost of HDPE pipes procured earlier by the above GMT, leaving Rs. 61.55 lakh as idle expenditure under BSNL accounts.
On this being pointed out, the Ministry stated in December 2001 that it was the general practice to procure HDPE pipes and commence trenching and laying of HDPE pipes so that cable could be pulled through these pipes quickly. The Ministry further added that the pipes remained unutilised due to non-supply of OFC, though the Management tried their best to procure the same during 2000-2001.
The above reply indicates the acceptance of Audit objection that owing to absence of procurement of OFC, the laid HDPE pipes worth Rs. 61.55 lakh remained idle.
6.1.9 Non-realisation of Rs.38.29 lakh on account of penal interest on belated payment of bills
Failure of BSNL to realise penal interest from parties on belated payment of dues for the charges for Satellite Services resulted in non-recovery of Rs.38.29 lakh.
As per the decision of the DoT in regard to unified procedures and charges for Satellite Services, penal interest of 18 per cent is to be charged on the amount due, if the same is not received within the due date.
Scrutiny of the records of Director (Traffic), Office of Chief General Manager (Maintenance), Northern Telecom Region (NTR), New Delhi in June 2000 by Audit revealed that the executive failed to realise penal interest from the parties on account of belated payment of dues for the Satellite charges, resulting in non-recovery of penal interest of Rs.38.29 lakh for the period after 1 October 2000.
On this being pointed out, the BSNL Management, while confirming the facts and figures, stated that an amount of Rs.4.71 lakh was recovered in May 2001 and bills for the balance amount were issued. Recovery particulars of the same were awaited as of December 2001.
The matter was referred to the Ministry in November 2001; their reply was awaited (December 2001).
6.1.10 Non-recovery of licence fee for interconnectivity of network
GMTD Kota failed to recover the licence fee of Rs. 9.93 lakh from M/s Kappa Infotech in respect of inter-connectivity of Network for data transmission with Network of M/s. Satyam Infoway Limited.
Department of Telecommunications in September 1999 permitted interconnectivity of Network for data transmission with a stipulation that in addition to the leased line rental, licence fee of Rs. 15 lakh per connection per annum will be levied. The licence fee element was subsequently revised downward to Rs. 4 lakh, effective from April 2001.
In August 2000, Audit observed that considering the demand placed by M/s. Kappa Infotech Private Limited, Kota in June 1999 and the payment of one year advance rental of Rs 1.20 lakh by the party, the service for inter-connectivity through a 64 kbps leased data circuit with another private Network was commissioned in September, 1999 by the General Manager Telecom Division (GMTD) Kota under Rajasthan Telecom Circle. But a further scrutiny in June 2001 revealed that after commissioning of the service, Chief Accounts Officer (CAO), TRA branch of GMTD, Kota failed to issue one year advance licence fee bills as due from the subscriber and even for the subsequent periods from September 2000 onwards, no such bills were issued. This resulted in non-billing of Rs.9.93 lakh (i.e. Rs. 9.46 lakh towards licence fee and Rs. 0.47 lakh towards service tax) for the period from October 2000 to September 2001.
When this was pointed out initially in August 2000, GMTD Kota issued a demand note in the same month against the amount due for the period up to September 2000, while the amount for Rs. 9.93 lakh as due for the subsequent period remained unadjusted by the BSNL Management under the said circle.
The matter was referred to the Ministry in August 2001; their reply was awaited (December 2001).
6.2.1 Loss due to withdrawal of claim and blocking of funds
As per directions of the Department of Telecommunications the Company raised a claim of Rs. 6.22 crore against MTNL for refund of liquidated damages. On refusal to entertain the claim, the Company subsequently withdrew it without the concurrence of Telecom Commission/DoT resulting in a loss of Rs.6.22 crore. Besides, despite a commitment by MTNL to waive LD, failure of the Company to furnish case by case justification for its waiver resulted in blocking up of funds of Rs. 15.89 crore since May 1998.
The Committee on Public Undertakings (COPU) in their 10th report (1997) on ITI Limited (Company) recommended refund of liquidated damages (LD) recovered by the Department of Telecommunications (DoT) from the Company as DoT was not paying anything to the Company for delayed payments.
Consequently, the decision of the Telecom Commission to waive LD recovered from the Company as a one-time measure was communicated (March 1997) by DoT to all the heads of Telecom circles and Mahanagar Telephone Nigam Limited (MTNL). DoT refunded the entire amount of LD recovered from the Company amounting to Rs.112.90 crore.
Similarly on account of LD recovered by MTNL, the Company raised bills for Rs. 22.11 crore on MTNL during March to May 1997 to get refund of the same. MTNL agreed (May 1998) to refund LD of Rs.15.89 crore only in respect of recoveries against purchase orders issued under price/purchase preference on submission of full justification on case by case basis. Due to Company’s failure to furnish case by case justification to the MTNL, Rs. 15.89 crore had not been refunded by the MTNL so far (June 2001). The balance LD was in respect of purchase orders other than those placed under price/purchase preference and amounted to Rs.6.22 crore. The Company, without referring the matter to the Telecom Commission/DoT and without specific approval of the Board of Directors, withdrew (June 1998) its claim of Rs.6.22 crore.
The Ministry stated (November 2000) that the action to withdraw the claim of Rs.6.22 crore was taken on conservative basis in the annual accounts as approved by the Board of Directors to expedite the process of payment of Rs.15.89 crore and it was felt premature to take up the matter with the Telecom Commission.
The reply of the Ministry is not tenable, as withdrawal of this claim had not expedited refund of Rs.15.89 crore. Moreover taking up the issue with the Telecom Commission could not be considered premature for pursuance as no discrimination was contemplated in the orders of DoT with regard to orders under price/purchase preference or otherwise. Therefore, withdrawal of claim of Rs. 6.22 crore without taking up the matter with the Telecom Commission / DoT was imprudent.
Thus, withdrawal of claim for refund of LD without the concurrence of Telecom Commission/DoT resulted in a loss of Rs.6.22.crore to the Company. Besides, failure of the Company to provide case by case justification resulted in non-refund of LD charges to the tune of Rs. 15.89 crore since May 1998.
6.2.2 Blocking up of funds
ITI Limited imported (September 1997) equipment for manufacture of Transportable Satellite Terminals (TSTs) much before the receipt of bulk production clearance from the Ministry of Defence. This resulted in blocking of funds of Rs.2.48 crore. Moreover, sale proceeds of Rs.4.49 crore for supply of 3 TSTs had also not been received from MOD since April 2000. Due to delay in supply of 3 TSTs, the Company had also made itself liable for liquidated damages of Rs.29.23 lakh.
ITI Limited (Company) signed a contract with Ministry of Defence (MOD) on 20 March 1995 for supply of 12 Transportable Satellite Terminals (TSTs) valued at Rs.17.01 crore. 3 TSTs under Phase-I were to be delivered by December 1995 and 9 TSTs under Phase-II within six months from the date of awarding bulk production clearance by the MOD. The Company even before signing the contract with MOD placed (October 1994) a letter of intent (LOI) for import of 12 sets of Digital Single Channel Per Carrier (equipment) on M/s. Comsat RSI, USA (foreign supplier), signed an agreement with the foreign supplier in January 1995 and followed by a purchase order on 22 March 1995 at a total cost of Rs.3.30 crore.
The foreign supplier supplied the equipment valuing Rs.3.47 crore (which included exchange fluctuation of Rs.17 lakh) in November 1995 and September 1997 under Phase I and Phase II respectively. The Company could supply 3 TSTs only in April 2000 after a lapse of more than 4 years incurring liability towards liquidated damages of Rs.29.23 lakh. The claim of Rs.4.49 crore towards supply of 3 TSTs was yet to be realised by the Company (August 2001).
The Ministry attributed (August 2001) the delay in supply of 3 TSTs to frequent changes in the bill of materials as these were developed for the first time. The reply is not tenable as the Management should have taken due allowance for changes in the bill of materials before agreeing to the delivery schedule, as they were aware that TSTs were being developed for the first time. The Ministry further stated that anticipating large requirement from MOD, to avail 6 per cent discount offered by the foreign supplier and due to confirmed order from MOD import order for equipment for 12 TSTs was placed by the Company.
The reply is also not tenable, as the LOI on the foreign supplier was placed in October 1994 even before getting the order from the MOD. The Ministry’s reasoning that the Management anticipated large requirement from MOD proved to be far-fetched as the bulk production clearance from the MOD for 9 TSTs was yet to be received (August 2001). The decision of the Management to import equipment for 12 TSTs just to avail of the discount was, therefore, injudicious.
Thus, imprudent decision coupled with lack of planning and co-ordination resulted in blocking of funds of Rs.2.48 crore in importing the equipment. Moreover, sale proceeds for supply of 3 TSTs had also not been received from MOD since April 2000 resulting in further blocking of funds of Rs.4.49 crore. Due to delay in supply of 3 TSTs the Company had also made itself liable for liquidated damages of Rs.29.23 lakh.
6.3.1 Unfruitful investment on acquisition of flats for use as staff quarters
Unrealistic assessment of demand for staff quarters by the Company rendered the expenditure of Rs. 3.50 crore incurred on acquisition of 96 flats unfruitful. This resulted in avoidable expenditure of Rs. 1.50 crore on their maintenance and security besides causing a loss of Rs.1. 45 crore towards payment of HRA and Licence fee foregone.
Mahanagar Telephone Nigam Limited (MTNL) purchased (August 1996) 176 A-D type flats in Kalamboli area of Navi Mumbai from City & Industrial Development Corporation of Maharashtra Limited (CIDCO) to provide residential accommodation to the staff and officers. Of these 176 flats, 96 flats are of ‘D’ type which costs Rs. 3.50 crore. These flats were meant to be allotted to officers of supervisory level.
It was observed that all 96 flats remained unoccupied since their purchase due to lack of demand from the officers eligible for allotment. Efforts made to allot these flats to the cadre one step below the eligible cadre did not prove successful. The lack of demand for these flats was due to the fact that these were located in an area not well connected by road/rail. The CIDCO rejected the Company’s request for exchange of 96 flats at Kalamboli area with flats in popular locations of Navi Mumbai.
During the period between January 1998 and March 2001, the MTNL had spent Rs.1.50 crore towards maintenance and security of the vacant flats. On this being pointed out in Audit, the MTNL in April 2001 allotted all the 96 flats to the staff irrespective of their eligibility.
In response, the Management stated (May 2001) that the quarters were purchased in Kalamboli area of Navi Mumbai which was then a prospective place for development, but it did not develop as anticipated leading to non-occupation of the quarters.
The Management’s argument is not convincing because:
Thus, owing to unrealistic assessment of demand for quarters, the investment of Rs.3.50 crore made on the 96 flats remained unfruitful for about 5 years, besides causing avoidable loss of Rs. 1.45 crore towards payment of house rent allowance and foregone recovery of licence fee (upto March 2001). Further the expenditure of Rs. 1.50 crore so far incurred on maintenance and security was also largely avoidable.
The matter was referred to the Ministry in June 2001; their reply was awaited (October 2001).
6.3.2 Infructuous expenditure on lease rent
MTNL acquired two plots of land on lease for construction of telephone exchanges, but they remained unutilised for the last 9 to 13 years as there were no firm plans for their construction. With the result the expenditure of Rs. 1.06 crore so far incurred on lease rent was rendered infructuous.
Mahanagar Telephone Nigam Limited, (MTNL) Mumbai took two plots of land on lease basis for construction of telephone exchanges. The details of lease are given below:
| Location of the plot | Month/year of possession | Area | Name of lessor | Period of lease (years) | Rate of lease rent per square meter |
| (i) Port Trust Area, New Mumbai | September 1988 | 5000 square meter | JN Port Trust (JNPT) Authority | NA | Rs. 30 .25 (Rs.5 upto March 2000) per month. |
| (ii) Dronagiri, Raigada District | October 1992 | 6000 squaremeter | City & Industrial Development Corporation Ltd. (CIDCO) | 60 | Annual lease premium Rs.12.67 and annual lease rent of Rs.100 |
Scrutiny of records of MTNL by Audit during the period between May 1999 and May 2001 revealed that it had not been able to put to use the above plots of land acquired on lease. This was due to the fact that the areas covered by JNPT and Dronagiri were already being served by a 3000 line capacity Sheva Telephone Exchange without any waiting list as of April 2001. Further the MTNL had also sanctioned (April 2001) expansion of the existing telephone exchange at a capital expenditure of Rs.2.41 crore putting a question mark on future utilisation of the plots acquired on lease. It was also observed that the MTNL acquired the plot from JNPT without finalising terms and conditions of lease so far. The utilisation of the plot for construction of exchange was also doubtful as the same is lying in a marshy area.
Thus, the two plots of land acquired on lease were lying unutilised for the last 9 to 13 years rendering the expenditure of Rs. 1.06 crore so far incurred on lease rent for the period from September 1988 to June 2001 infructuous.
In reply the Management stated (May 2001) that the plots were acquired to cater to the telecommunication needs arising anytime during a future span of 15 to 20 years. The Management further stated that the plots were located in prime locations where clearing houses, business and administrative offices were likely to come up and the construction of two different exchanges at two distinct nodal points could fetch enough revenue in future and the building plans were under preparation.
The reply is not tenable because:
However, the fact remains that these plots are lying unutilised for the last 9 to 13 years which is indicative of inadequate planning of requirement at the time of acquiring these plots.
The matter was referred to the Ministry in August 2001; their reply was awaited (October 2001).
6.3.3 Loss of revenue due to fraudulent use of telephone
Lack of effective monitoring of the opening of telephone connections under the category meant for Members of Parliament led to deriving an undue benefit of Rs. 89.55 lakh by an unscrupulous subscriber.
Telephone connections in respect of Members of Parliament (MP) are opened on the basis of written requests received at the office of the Liaison Officer Phones (LOP) of MTNL through the Lok Sabha or Rajya Sabha Secretariat as the case may be, along with the original letter of the Honourable Member of Parliament. The exchange concerned is advised by the LOP to open a new MP connection (category No.7) with or without STD facility. The billing is done by the LOP on the basis of opening meter reading and thereafter monthly meter readings received from the exchange. Further the LOP creates master data in their computer system and the electronic back up of the same is sent to Accounts Officer, Customer Service Management System (CSMS). Bills to MPs are issued separately by LOP taking into consideration the total calls of the phone of their constituency and the phone at Delhi.
Check of records of Office of the General Manager, South-I Exchange of MTNL, Delhi by Audit in February 2000 revealed that a permanent telephone connection was allotted to a subscriber in July 1990 by converting an existing temporary connection and the same was kept under Category No.7, meant for MPs. In June 1997 the billing authority of the Exchange detected that the said telephone was wrongly categorised under category No.7 to take advantage of non-billing in such cases by the exchange concerned. An enquiry into the matter revealed that the said subscriber converted his temporary telephone connection into a permanent one by changing the number twice- first time with a different number than that of his temporary connection and second time with the initial number that existed in respect of his temporary connection. The phone was finally disconnected in September 1997. The LOP denied that it had neither authorised the opening of said telephone connection under category No.7 nor billed for the said connection.
The matter was referred to Vigilance Branch of MTNL in October 1997 but it failed to fix responsibility for feeding incorrect data into computer due to lack of documentary evidence. On its recommendation, 22 bills were issued against the subscriber for Rs.89.55 lakh for the period from July 1990 to September 1997. However, the amount could not be recovered so far as the whereabouts of the subscriber were not known.
The Ministry while accepting the facts and figures stated (February 2001) that the particulars of the staff who were deputed to feed the data into the computer were not available due to non-availability of records of distribution of work. It was further stated that the matter was referred to the Central Bureau of Investigation (CBI) and on receipt of their findings responsibility for the loss would be fixed.
Thus, due to lack of effective monitoring while opening a new telephone connection or changing the existing telephone number under the category meant for MPs and feeding the billing data, the Company suffered the loss of revenue of Rs. 89.55 lakh.
6.3.4 Loss due to delay in disconnection of Data Circuits
MTNL suffered a loss of revenue of Rs. 83.94 lakh due to delay of over two years in disconnecting the use of Long Distance Data Circuits by India Meteorological Department and raising demand for rental in time till the date of disconnection.
Long Distance Data Circuits (LDDC) are used for speedy and accurate data transmission. The MTNL leased out five LDDCs to India Meteorological Department (IMD) (from New Delhi to Calcutta-II, Hyderabad, Jaipur, Nagpur and Patna) between April 1984 to April 1985 on payment of rentals at rates prescribed. In March 1995, the IMD requested the MTNL to disconnect these five LDDCs with effect from 1 June 1995. However, MTNL's records revealed that one circuit from New Delhi to Calcutta-II continued to be in use with IMD upto March 1997. The former finally disconnected the circuits in August 1997 after a lapse of over two years.
Scrutiny of records by Audit revealed that while the commercial department of the MTNL failed to disconnect the LDDCs as requested by IMD, the billing department also did not charge rentals after May 1995. MTNL ultimately raised a demand for Rs.83.94 lakh against IMD in October 1997 towards use of Data Circuits for the period from June 1995 to August 1997. IMD declined to pay this sum on the grounds that they had requested for closure of the LDDC well in time and it was MTNL which had defaulted in taking action as per their request.
The Ministry, while agreeing with the Audit observation, indicated (November 2000) that there was delay on the part of the MTNL in processing the request of IMD owing to weaknesses in the system operating during that period. It was further stated that the MTNL was being advised to investigate the case thoroughly to pin point the reasons and take remedial action.
Thus, the MTNL suffered the loss of revenue of Rs. 83.94 lakh due to inept handling of the IMD's request for closure of the Data Circuits and subsequent delay in raising demand towards rental for their use.
6.4.1 Loss of revenue due to belated raising of bills on subscribers
VSNL failed to prefer claims on the International Maritime Satellite Organisation subscribers within the stipulated period resulting in rejection of its claims to the tune of Rs.10.06 crore and the recovery of which was doubtful as the whereabouts of subscribers were not known.
Videsh Sanchar Nigam Limited (VSNL) commenced International Maritime Satellite Organisation (INMARSAT) services in June 1992 through their Land Earth Station located at Arvi. The Land Earth Station Operators (LESOs) provide maritime communication services to ships/ship owners. According to the INMARSAT code of business practice, the LESOs are responsible to bill the subscribers within 30 days of the month in which the traffic passed and to see that the bills are despatched by methods which aim to ensure delivery within 5 days. The LESOs are required to forward the bills to the designated Accounting Authorities (AAs) who in turn arrange collection of the bills from the INMARSAT subscribers for eventual remittance to VSNL's account. The International Telecommunication Union (ITU) time scale associated with despatch and payment of maritime bills provides a maximum of 15 months' period for presentation of bills by the LESOs from the month of passing of the traffic. The AAs are, however, not liable to accept the claims from LESOs, if these are more than 15 months old after month of traffic.
Scrutiny of records of VSNL during October and November 1999 revealed that there were delays in raising bills on different AAs within the stipulated time schedule for the years 1992-93 to 1997-98 with the result AAs rejected bills to the tune of Rs.10.06 crore on the ground that the subscribers who availed the services were no longer under their accounting responsibility. Audit observed that this situation had arisen mainly due to the failure to update the database incorporating the change of accounting authorities/ownership of ships and raising the bills within the stipulated period. Since whereabouts of the subscribers were not known, the chance of recovery of dues is remote. Out of the total outstanding dues of Rs.10.06 crore, an amount of Rs.1.42 crore was written off to accounts in October 1999.
The Ministry while accepting the facts of the case stated (November 2000) that the dues were accumulated largely during the initial years on account of characteristic and complicated billing procedure which was beyond the control of VSNL. It was further stated that there were vigorous and continuous efforts from VSNL to recover the dues as much as possible by appointing a collection agent.
The reply about accumulation of dues largely in the initial years is not convincing as these claims were rejected for six years viz. 1992-93 to 1997-98. Considering the characteristic and complicated nature of billing procedure, VSNL should have taken action to develop an effective system with appropriate controls, so as to maintain an accurate database of accounting authorities/ship owners. Failure on this count resulted in accumulation and subsequent rejection of claims to the tune of Rs.10.06 crore. Though VSNL appointed a debt collection agent in January 2001, no recovery had been reported so far (May 2001).
6.4.2 Avoidable payment of interest
The Company could not make the payment of its additional share of investment to INTELSAT Organisation on due date due to delay in according administrative approval by Ministry which resulted in avoidable payment of penal interest of Rs.1.55 crore.
International Telecommunication Satellite (INTELSAT) Organisation, a Co-operative body established in 1964 by a group of countries, provides space segments through satellite system to its signatories and investing entities in these countries, mainly for telecommunication services around the world. Videsh Sanchar Nigam Limited (VSNL) is the designated signatory in INTELSAT Organisation on behalf of Government of India.
INTELSAT operating agreement provides that each signatory shall make contribution to the capital requirements of INTELSAT. Each signatory shall have an investment share equal to its percentage of utilisation of INTELSAT space segments, which is re-determined annually on the first day of March of each year. During the annual determination process of investment share, signatories are given the option to request for increase or decrease in their investment share. Failure to deposit/pay the increased investment share by first day of March for each year attracts penal interest as decided by the INTELSAT from time to time. As the payment of investment share involves outflow of foreign currency, approval of Administrative Ministry concerned is necessary.
Scrutiny of records of VSNL, Mumbai in November 2000 revealed that VSNL failed to place funds towards its increased share of investment with the INTELSAT by first day of March for the years 1996, 1997 and 2000. With the result, it had to pay penal interest aggregating Rs. 1.55 crore. Audit noticed that after initiation of action by VSNL it had taken the Ministry between 7 and 25 weeks to accord approval.
In reply, the Management stated (February 2001) that subsequent to Board's approval, VSNL approached the Ministry/Department of Telecommunications for approval for payment of its increased share of investment but the latter could not accord their approval within the stipulated time resulting in the payment of interest. However, the fact remains that the payment of interest of Rs. 1.55 crore could have been avoided had the Ministry accorded the administrative approval without any delay facilitating release of increased investment share in foreign currency on due date to INTELSAT Organisation.
The matter was referred to the Ministry in August 2001; their reply was awaited (October 2001).
6.4.3 Non-deduction of income tax at source on allowances paid to employees
Owing to non-compliance with the provisions of Income Tax Act, 1961 for deduction of tax at source on conveyance and medical allowance paid to employees, the Company had borne a tax liability of Rs. 1.35 crore for the years 1992-93 to 1998-99 on behalf of employees.
According to Section 192(1) of Income Tax Act, 1961 (Act) any person responsible for paying any income chargeable under the head "salaries" shall, at the time of payment deduct income tax on the amount payable, computed on the basis of the rates in force for the financial year in which the payment is made. Further, Section 200 of Act casts a duty on the employer to pay within the prescribed time the sum so deducted to the credit of the Government or as the Board directs.
Income Tax department (ITD) in November 1999 conducted a survey of the tax deducted at source by the Videsh Sanchar Nigam Limited (VSNL) Delhi branch. After considering the submissions made by VSNL, the ITD found short deduction of tax to the tune of Rs.87 lakh at source for the financial years 1992-93 to 1998-99 from the salary income of the employees. The short deduction of tax was due to incorrect exclusion of conveyance and medical reimbursement given to the employees from the taxable income computation. Due to non-deposit of this tax within the prescribed period, the ITD also levied interest to the tune of Rs.48 lakh. In compliance with the demand from ITD, VSNL Company in March 2000 deposited the short deducted tax of Rs.1.35 crore.
VSNL treated the entire amount of Rs. 1.35 crore paid by way of tax and interest thereon as an item of expense and charged of the same to Profit and Loss account of 1999-2000. Though the employees of VSNL were responsible for payment .of tax on allowances paid to them, VSNL did not make any effort to recover the same from them.
Thus, the failure to deduct the tax at source on the conveyance and medical reimbursement paid to employees and its non-recovery after payment to ITD, the VSNL was put to an avoidable financial loss of Rs. 1.35 crore. No responsibility was fixed for the loss which was due to non-compliance with the provisions of the Act.
The matter was referred to the Ministry in August 2001; their reply was awaited (October 2001).