CHAPTER 4
COMPREHENSIVE PERFORMANCE REVIEWS

10.    Production Management of Telecom Factories at Kolkata, Bhilai and Richhai

All the three telecom factories, Kolkata, Bhilai and Richhai surrendered funds under Capital grant during 1996-2001. The savings by Telecom Factory Kolkata ranged between 7 and 16 per cent while in respect of Bhilai Factory it ranged between 14 and 45 per cent. The maximum saving under the grant by Telecom Factory Richhai was 92 per cent during 1999-2000.

(Paragraph 10.5)

Telecom Factory Kolkata failed to avail of cash discount of Rs 10.58 lakh in procurement of raw materials.

(Paragraph 10.5.2)

Test check of production statement disclosed that shortfall in production targets ranged from 7 to 100 per cent. No production was made in respect of certain items like Coin Box Telephones, repair of C-DoT cards, E-10-B exchange cards, tube C-8 etc.

(Paragraph 10.6.1)

Galvanizing Plant at Telecom Factory Richhai was underutilised ranging from 34 to 41 per cent. The shortfall in production was Rs 41.08 crore during 1996-2001.

(Paragraph 10.6.2)

The per unit cost of in house production by Telecom Factory Kolkata of items like CD cabinets, self supporting dropwire, stock of sorts etc., exceeded the open market rate, resulting in extra expenditure of Rs 12.42 crore during 1996-2000. Despite this, the factory authorities continued to produce these items without taking any remedial measures to control the cost.

(Paragraph 10.6.3)

Quality Assurance Wing rejected the finished products of channel brackets, support brackets etc. due to use of defective/sub-standard raw materials. The cost of finished products rejected was Rs 2.39 crore.

(Paragraph 10.6.4)

Telecom Factories Kolkata, Bhilai and Richhai grossly under utilised the machine hours available; the underutilisation ranged between 31 and 56 per cent of machines hours available due to break down of machine, want of operators, want of raw materials etc.

(Paragraph 10.6.5)

1765 work orders were not completed at the end of March 2001 by Telecom Factory Kolkata, Richhai and Bhilai, The work orders, were pending for one to ten years. Of the 1765 incomplete work orders, 1671 work orders pertained to Telecom Factory Kolkata alone. The total value of incomplete work orders was Rs 14.15 crore.

(Paragraph 10.6.6)

The cost of galvanisation in Telecom Factory Bhilai was very high as compared to Telecom Factory Richhai. This resulted in extra expenditure of Rs 9.89 crore.

(Paragraph 10.8)

Telecom Factory Kolkata incurred an avoidable expenditure of Rs 34.21 lakh in transportation of semi finished materials, which required galvanisation, from Telecom Factory Kolkata to Telecom Factory Gopalpur and back.

(Paragraph 10.9.1)

Railway siding constructed at a cost of Rs 1.81 crore was grossly under utilised due to less handling of raw materials, transportation of raw materials through road etc.

(Paragraph 10.9.2)

Department of Telecom Services (DTS), now Bharat Sanchar Nigam Limited (BSNL), maintains seven telecom factories producing line stores items for utilisation in the telecommunications network. Out of these, telecom factory at Kolkata is 145 years old, setup in 1855, while the other two factories at Bhilai and Richhai, were setup in 1976 and 1984 respectively. Telecom Factory, Kolkata manufactures 11 major items such as cable termination boxes, distribution point boxes, self supporting drop wires, channel iron of sorts, stock of sorts etc. while the factory at Bhilai produces mainly tower materials such as microwave towers and mast towers. Various types of Hamilton tubes are produced in Telecom Factory Richhai. These factories function on the principle that the complete outlay both in terms of cash and stores is recovered by out turn represented by the value of articles manufactured.

The details of capital and personnel employed in these factories at the end of March 2001 and value of production during 2000-01 were as under.

Out of seven telecom factories, Audit reviewed the activities of two telecom factories Jabalpur and Mumbai and included its findings in the Report of the Comptroller and Auditor General of India for the year ended March 2000 (No 6 of 2001). Audit now conducted a review of telecom factories at Kolkata, Bhilai and Richhai during May/July 2001 covering the period from 1996-2001 to assess the performance of the factories with specific emphasis on their production management and other allied areas.

The overall control of the factories is vested in the Board of Management for Telecom Factories which functions as sub-board under the Telecom Commission (Now Bharat Sanchar Nigam Limited - BSNL). Each Telecom Factory is headed by a Chief General Manager (CGM). He is assisted by a Deputy General Manager (DGM) and Director (Finance and Accounts).

All the Telecom Factories surrendered capital grant during 1996-2001

The annual budget and expenditure for the last five years in the three factories are indicated in Appendix XII. It was observed that all the three factories surrendered capital grant year after year during 1996-2001. The savings in Kolkata factory ranged between 7 and 16 per cent except in 1997-98 when it exceeded the grant by 18 per cent. The savings in Telecom factory Bhilai varied from 14 per cent to 45 per cent while in Richhai factory it ranged between 22 per cent and 92 per cent. The reasons for such huge variation at Bhilai and Richhai were not available/not furnished. Surrendering 92 per cent of funds indicated defective preparation of budget and the factory made only nominal production.

Orders for manufacture of articles in the factories are received from the General Manager Telecom Stores Kolkata centrally who collects the requirements of the department for the manufacture of different articles and places orders on the factories through forecast of demands. In respect of Microwave towers, the Telecom Commission places orders centrally. On the basis of production planning of the factories, the Stores Purchase Committee (SPC) assesses the requirement of different raw materials and components and float tenders for procurement from both private suppliers as well as Public Sector Undertakings. Materials procured by the factories during 1998-2000 were as under:

(Rs in crore)

Test check of the relevant records relating to the procurement process revealed that the Telecom Factory, Kolkata failed to procure material/component economically in the following case.

Telecom Factory, Kolkata procured steel and iron materials from M/s Steel Authority of India Limited (SAIL) on a regular basis for production of various types of stores and equipment in the factory. SPC recommendation stipulated that 98 per cent of advance payment made to SAIL against the ordered value would earn a cash discount at 1.25 per cent on the amount advanced. Scrutiny by Audit of records of Telecom Factory Kolkata disclosed that during December 1999-January 2001 materials costing Rs 8.46 crore were procured from M/s SAIL for which post facto approvals were given by SPC from time to time without cash discount.

As a result Telecom Factory, Kolkata failed to avail of cash discount of Rs 10.58 lakh (1.25 per cent of Rs 8.46 crore).

CGM Telecom Factory, Kolkata stated that cash discount was available only in select cases of Cold Rolled Stainless Sheet (M/s SAIL). No cash discount was given by SAIL for other steel items from SAIL. The reply is not tenable as the SPC minute 240.10 mentioned about cash discount on stainless steel sheets from SAIL also.

Erstwhile DoT - now Bharat Sanchar Nigam Limited (BSNL), approved the production programme for each telecom factory taking into consideration the infrastructure available in each factory and actual requirements of various circles.

Scrutiny of production statements during 1996-2001 of the telecom factories at Kolkata, Bhilai and Richhai revealed heavy shortfall in production as compared to targets in respect of a number of items. The short fall ranged upto 100 per cent as shown in Appendix XIII indicating that no production was made in respect of certain items like Coin Box Telephone, repair of E-10-B exchange cards, Tube C8, C-DoT cards etc.

CGM Telecom Factory, Kolkata attributed the shortfall in achieving the targets to non-manufacture of Discrete Wire Connector (DWC) and Coin Box Telephone (CBT) as the in-house cost of DWC was higher than outside purchases and there were changes in the technical specifications of CBT. CGM Telecom Factory, Bhilai stated that there was no shortfall as the target of production was the weight of the despatched tower material. The despatch weight of tower included fabricated weight, zinc weight which were required for galvanisation, nuts, bolts and accessories which were supplied alongwith towers. CGM Telecom Factory, Richhai attributed the shortfall to stoppage of incentive working by the workmen. The reply of CGM Telecom Factory Bhilai is not acceptable because the production targets are fixed with reference to manufacturing process of the factory and not the nuts, bolts and accessories which are procured from outside sources and supplied. The replies of Telecom Factory Kolkata and Richhai are not tenable since the targets were fixed keeping in view of these constraints and as such the magnitude of shortfall does not get justified by the reasons given. This led to uneconomical cost of production at these factories as brought out in the sub-para below:

Scrutiny of galvanising statement of Telecom factory Richhai during 1996-2001 revealed shortfall in capacity utilisation ranging from 34 to 41 per cent valued at Rs 41.08 crore as shown below:

As the full capacity of the plant was not utilised, the galvanising cost per square metre increased from Rs 70.96 to Rs 97.35 per sq. m., thus increasing the cost of production of the articles.

CGM Telecom Factory Richhai while accepting the shortfall in targets stated that the supplier of the plant backed out after supplying the equipment and the plant was installed departmentally. The supplier did not demonstrate the full capacity of 26000 MT. CGM added that due to power failure, absenteeism and repair/replacement of kettle further reduced the optimum utilisation of the capacity.

Departmental rules prescribed that the factory authorities should compare the cost of production with the rate of such or similar articles available in the open market. If the cost of the departmental manufacture was higher than the market rates, then the factory authorities ought to investigate the matter and take necessary remedial action to correct the distortion.

Cost of factory manufactured items exceeded market rates resulting in excess expenditure of Rs 12.42 crore

Scrutiny by Audit of four items viz., CD cabinets of sorts, self supporting drop wires, stock of sorts, Cast Iron brackets 4 W of sorts, produced by the Telecom Factory Kolkata disclosed that the in-house production cost exceeded open market rates by 20 per cent to 330 per cent with a financial impact of additional expenditure of Rs 12.42 crore during 1996-2000. Despite this, the factory continued to produce these items without taking any remedial measures to control the cost of production.

CGM Telecom Factory Kolkata while admitting the facts stated that the rates of the items were higher than market rates since it was a Government factory and was committed to pay the labour; as such their rates comprising of material and direct labour only should be compared with the available market rates. The reply is not tenable because as per codal provisions, the factory should compare the cost of production with the prevailing open market rate.

In telecom factories the articles produced on the basis of requisitions were challaned to the consignee at the predetermined rate which was called “estimated cost”. On completion of the work if the cost of production was less than the challaning rate, it was a gain on estimate. The accounting procedure prescribed that the gain so calculated would be transferred to the working expenses (other charges, stores) of the Telecom Department by contra credit to the manufacturing account. As a result, the working expenses of the department get reduced to the extent of gain. During 1996-2001 the CGMs TF, Kolkata and Richhai (Jabalpur) transferred Rs 42.34 crore to their working expenses as a gain thereby reducing their expenses. Such action had an undesirable implication for the capital assets of the department as the assets got over capitalized to that extent. Similarly, in respect of CGM Telecom Factory, Richhai (Jabalpur) during the year 1996-97 a sum of Rs 1.27 crore was shown as loss on estimate thereby indicating that the cost of production was more than the challaned value. Here the asset was under capitalised.

Improper inspection of raw materials resulted in loss of Rs 2.39 crore

All the raw materials required for production are inspected/tested by the in-house inspection wing before acceptance of the same by factory stores. However, it was noticed that Quality Assurance wing rejected the finished products of channel bracket, Iron 4 W, support bracket with Y Stalk and back UA-I due to defective and sub-standard raw materials. All these items manufactured from Tele channel, MS Rod etc., were not inspected properly by the inspection wing and this resulted in loss of Rs 2.39 crore to the organisation.

CGM Telecom Factory Kolkata stated that the items which were not passed by Quality Assurance were reworked and deficiencies rectified and were again offered for inspection and were subsequently passed. The reply is not tenable as in the instant case, the finished products were rejected due to defective and sub standard raw materials which failed to meet technical parameters leaving no scope for reworking and resubmission to Quality Assurance.

Gross under utilisation of capacity ranging between 56 and 31 per cent by telecom factories

Scrutiny of records revealed that during 1996-2001 machine hours available at Telecom Factories Kolkata, Bhilai and Richhai were grossly underutilised, the under utilisation ranging up to 56 per cent, 31 per cent and 40 per cent respectively of installed capacity.

CGM Telecom Factory Richhai stated that utilisation of machine was affected by power failure, absenteeism and break down of machines. His counterpart at Bhilai stated that the underutilsation percentage was equal to general provision of 25-30 per cent for preventive maintenance, break down maintenance, power failure etc. and as such the machines were well utilised. The reply of the CGM Telecom Factory Bhilai is not convincing because keeping 25-30 per cent of machine hours for preventive maintenance tantamounts to keeping almost one third of machine hours i.e. one shift every day for such purposes only.

The position of number of work orders issued, executed and remaining incomplete during the last five years is given in Appendix XIV.

Work orders valuing Rs 14.15 crore were remaining incomplete

It was observed that in Telecom Factory Kolkata 1671 work orders remained incomplete at the end of March 2001 while Telecom Factory Bhilai had 84. Out of 1671 incomplete work orders at Kolkata Telecom Factory 703 work orders were outstanding for 5 to 10 years. The remaining work orders including those at Bhilai and Richhai were outstanding for one to five years. The total value of work orders remaining incomplete was Rs 14.15 crore.

Pendency in work orders in such large numbers inevitably increased the actual cost of production. It also indicated inadequate monitoring and control by factory management. There was every chance that the articles produced would add to the inventory of slow moving/non moving stores of the factories due to technological changes and that the original consignee may not accept the same. CGM Telecom Factory Kolkata, Bhilai and Richhai while admitting the fact stated that the attempts were being made to close the work orders.

The year wise position of sanctioned strength and men in position during 1996-2001 in the three Telecom factories under review is given in Appendix XV.

The men in position of Telecom Factory Kolkata during the last five years declined from 1666 to 1224 ie a decline by 27 per cent while in Telecom factory Bhilai and Richhai there was a marginal decline by four per cent and three per cent respectively.

The position of direct and indirect labour wages during 1996-2001 in the three factories is given in Appendix XVI.

The expenditure on direct and indirect labour is charged to production. The direct labour is identifiable with a particular job or product or process while expenditure on indirect labour cannot be directly allocated to any particular production work order.

The ratio of indirect to direct labour ranged between 119 and 251 per cent, 134 and 222 per cent and 159 and 296 per cent in respect of Telecom Factories Kolkata (up to 2000) Bhilai (up to September 2000) and Richhai during 1996-2001 respectively.

The spurt in indirect labour increased the quantum of overhead charges which formed part of the cost of the article produced while the increase in direct labour was directly proportional to increase in number of items produced. The factory authorities should bring down the level of indirect labour cost to make the article produced cost effective.

Admitting the high ratio of indirect labour to direct labour. CGM Telecom Factory Kolkata and Richhai stated that effort would be made to bring down the same. CGM Telecom Factory Bhilai stated that it was unavoidable as more indirect labour was required for heavy material handling.

High cost of galvanising by Telecom Factory Bhilai resulted in extra expenditure of Rs 9.89 crore

A comparative study of galvanising records of the Telecom Factories at Richhai and Bhilai revealed that during 1996-2000 the cost of galvanising per sqm. at Telecom Factory Bhilai ranged between Rs 346 and Rs 410 while in Telecom Factory Richhai it ranged between Rs 71 and Rs 97. The low cost of galvanising at Richhai was attributable to modern technology used for galvanising, lesser overhead cost and low consumption of zinc, smoother galvanised surface at Richhai etc. as compared to Bhilai Telecom Factory. Thus, Telecom Factory, Bhilai incurred extra expenditure of Rs 9.89 crore as detailed in Appendix-XVII.

Audit had been objecting regularly to the high cost/rate of galvanisation at Telecom Factory, Bhilai. The CGM, TF Wright Town, Jabalpur closed down the galvanising shop (work) at Telecom Factory, Bhilai in July 2000 and at present this work was being got done in the Telecom Factory, Richhai.

CGM Telecom Factory Bhilai stated that the comparison with Telecom Factory Richhai was not correct as the product mix and technology adopted at two factories were different. Further the productivity at Telecom Factory Richhai was much more than Telecom Factory Bhilai due to mechanisation, temperature control etc. The fact, however, remained that the galvanising unit at Bhilai was closed in July 2000 due to uneconomic manufacturing.

A project for shifting of line construction branch of Telecom Factory, Kolkata to a new site at Gopalpur, Kolkata was sanctioned by DoT in 1989. Till date no physical shifting had taken place. Instead, a new galvanising plant was installed at Gopalpur factory in 1995. As a result all the black material (a semi-finished material which required galvanisation) was being brought from Telecom Factory, Kolkata to Telecom Factory, Gopalpur (8 km distance) for galvanizing and some items were being brought back regularly to Kolkata Factory for further finishing. Such to and fro movement of stores resulted in avoidable expenditure of Rs 34.21 lakh on transportation during the last five years.

CGM Telecom Factory Kolkata while admitting that transportation was being paid for goods taken from Telecom Factory Alipore to Telecom Factory Gopalpur stated that the manufacturing operation could not be shifted due to severe resistance from Unions and manpower working in the line store branch.

Railway siding at Telecom Factory, Richhai was under utilised

A project for railway siding at Telecom factory, Richhai was sanctioned at an estimated cost of Rs 1.02 crore in February 1982. The siding was commissioned in February 1988 at a revised cost of Rs 1.81 crore including the cost of railway platform at the site with the installed capacity to handle 20,800 tons of material per annum. Besides the capital cost, the factory authorities pay maintenance charges to the Central Railway authorities for carrying out maintenance of the siding.

The average quantity of material handled through the railway siding was only 5790 MT i.e (27.84 per cent) per year from 1988-89 to 1995-96 and 5043 MT (24.25 per cent) per year from 1996-97 to 1998-99 of its installed capacity. During 1999-2001 the siding could not be utilised at all by Telecom Factory, Richhai.

CGM Telecom Factory Richhai stated that when the Railway siding was set up, raw material Hot Rolled Mild Steel (HRMS) was available in coil form only and its bulk transportation was on regular basis through railway wagons. However, since 1998-99 cut-to-size HRMS sheet had become available and these sheets were being supplied by M/s SAIL, Jabalpur on regular basis. Hence, siding was not being used for the last two years. The matter regarding closure of Railway siding was under correspondence with Railway authorities.

One of the most widely followed measures for evaluating inventory performance in any organisation is to determine the “Inventory turnover Ratio” i.e. the annual consumption with reference to average inventory held in the system. High ratio indicates the efficiency of the management in respect of inventory control. Low turn over ratio indicates the slow movement of the inventory, which may lead to blocking of capital.

The data with regard to the inventory held by the factories under review is given in Appendix-XVIII.

Inventory turnover ranged between 24 and 306 days in three telecom factories

The inventory turnover period of Telecom factory, Kolkata varied from 24 to 72 days. In respect of Telecom factory, Bhilai the inventory turnover period increased from 170 days in 1996-97 to 306 days in 1999-2000, whereas in Telecom factory, Richhai the inventory turnover period ranged between 141 and 242 days. As against normal requirement of raw material for a maximum period of six month’s consumption, any excess stock holding was not justified considering the avoidable blockage of fund involved.

CGM Telecom Factory Bhilai stated that efforts were normally made to get material from main producers like SAIL, IISCO and HZL which normally did not accept small quantities. Dialogue was being made with those producers to accept orders of small quantities to reduce inventory in future. His counterpart at Richhai stated that with the monopoly of SAIL being over since 1999-2000, the inventory during 1999-2001 was lower as compared to 1997-99.

Telecom factories at Kolkata, Richhai and Bhilai were fraught with problems of high cost of production, under utilisation of capacity and inadequate quality control. Moreover, with the installation of state of art telephone exchanges and use of external plant with latest technology and procurement of stores from private suppliers etc. the demand for the items being produced by these factories were diminishing day by day, rendering the operation of these factories uneconomical. Ministry may have to consider gainful productive utilisation of existing facilities and manpower in these factories and also examine the alternatives of phasing them out to reduce loss to the department due to persistent under utilisation.

The matter was referred to the Ministry in October 2001; their reply was awaited as of December 2001.

11.    Management of Telecom Stores

The Department did not follow the practice of ABC classification of stores, as a regular measure for scientifically determining the minimum and maximum stock levels of various kinds of stores according to their cost significance.

(Paragraph 11.8.1)

Progressive Stock Taking (PST) and Independent Stock Verification (ISV) required to be done for all items every year were not conducted by many units. Discrepancy statements were not prepared in some cases. Cases of non-regularization of discrepancy statements have been lying outstanding from 1978-79.

(Paragraph 11.8.2)

Effective steps were not taken for disposal of obsolete and unserviceable stores. Stores valuing Rs 25.41 crore were lying in various store depots for several years awaiting disposal. Delay in disposal of these stores is fraught with the risk of theft, pilferage and loss through deterioration etc., apart from the avoidable cost incurred on store keeping charges.

(Paragraph 11.8.3)

There was accumulation of non-moving/slow-moving stores, resulting in blocking up of capital and the risk of their becoming eventually unserviceable/obsolete.

(Paragraph 11.8.4)

Issue of stores from Controller of Telecom Stores (CTS) was very slow with reference to average monthly stock holding.

(Paragraph 11.8.5)

Stores-in-transit valuing Rs 27.41 crore had not been adjusted for periods as far back as 1975-76, giving rise to reasonable apprehension of misappropriation, permanent loss, or pilferage of stores, not to mention fraud.

(Paragraph 11.9)

The advances paid to suppliers, etc., upto March 2000 but remaining unadjusted up to March 2001 stood at Rs 357.65 crore.

(Paragraph 11.10.1)

In some CsTS arrears at the end of March 2001 in effecting recovery of stores sold to other government departments stood at Rs 29.44 crore, many of them dating back from 1992-93 onwards.

(Paragraph 11.10.2)

The theft of stores involving Rs 73.22 lakh in CTS remained unsettled. The earliest case dated back to 1975-76.

(Paragraph 11.10.3)

The department did not take any satisfactory steps for settlement of outstanding amount of Rs 12.01 crore under the head ‘Stores Recoverable’ arising from thefts/damages/loss in transit and occurring up to March 2001 in respect of five wholesale depots.

(Paragraph 11.11)

Department of Telecommunications (DoT) now Bharat Sanchar Nigam Limited (BSNL), procures and issues large amount of stores for maintenance, replacement and reconstruction of existing assets and creation of new assets in its growing network. DoT/BSNL maintains five wholesale store depots, one each at Chennai, Jabalpur, Kolkata, Mumbai and New Delhi, each under the charge of a Controller of Telecom Stores (CTS) who functions under the administrative control of the Chief General Manager, Telecom Stores (CGMTS), Kolkata. In addition, DoT/BSNL maintains several store depots at the headquarters of circle offices spread over the country.

The Chief General Manager, Telecom Stores (CGMTS), Kolkata is responsible for procuring, stocking and issue of stores to the field units. Following the decentralisation of various items of power plants, drop wire, iron wire, telephone poles etc. to the territorial circles in August 1996 and January 1999, the CGMTS Kolkata has been left with a reduced load of procurement, stocking and issue of stores.

The review was conducted between May and July 2001 at the offices of all the five Controllers of Telecom Stores for the period 1996-2001 covering all the major areas of their functioning viz., procurement, storage and issue of stores. The objectives were:

• to study the impact of decentralisation of procurement of stores on the workload of CGMTS.
• to examine the efficiency and adequacy of the system governing purchase, receipt, issue, custody and disposal of stores.

The Chief General Manager, Telecom Stores, Kolkata is the Chief Executive of the stores organization and is under the direct administrative control of the Director, Planning and New Services at the Corporate office of the Bharat Sanchar Nigam Limited, New Delhi. He is responsible for receipt, issue and stocking of stores at the five wholesale depots in addition to maintaining other store depots at various circle headquarters.

A review of budget allotment, expenditure and excess/saving to final grant in respect of all the five Controllers of Telecom Stores (CsTS) revealed that CsTS Kolkata, Mumbai and Jabalpur consistently incurred excess expenditure over and above the final grant, the excess ranging up to 81 per cent. On the other hand, CTS Delhi did not utilise the final grant fully in two out of the five years as indicated below:

With the decentralisation of procurement of stores, the manpower held by these offices expectedly showed a declining trend during the period of review. However, the same was not in tune with the reduction in value of stores held during 1996-2001 as indicated below:

(Rs in crore)

The process of planning, determination of requirement, tendering and procurement of stores and equipment for Department of Telecommunications was done mainly at the level of DoT and CGMTS, Kolkata. All major procurements of switching and transmission systems such as telephone exchanges, cables, telephone equipment etc. were made by DoT/BSNL through open tendering system. The CGMTS, Kolkata was responsible for procuring line stores, power plants, drop wire, galvanised iron wire, telephone poles, jointing kits, sockets etc., for all the telecom circles in the country. On decentralisation of the procurement activities, the heads of the territorial circles have been delegated powers to procure specified items of stores at their level, thereby reducing the procurement activities of the CGMTS.

Procurement was generally made through Public Sector Undertakings (PSUs), telecom factories (TFs), other Government departments and private parties as per prescribed procedures. The following table details the share of sources of procurement made from three major sources for the review period

(Rs in crore)

The above table indicates that the percentage of procurement from private suppliers had come down from 76 per cent in 1996-97 to 16 per cent in 2000-01 while for Public Sector Undertakings (PSUs) it increased from 7 per cent in 1996-97 to 66 per cent in 2000-01. The percentage procurement from telecom factories for the last five years remained more or less the same. This was because of DoT’s policy decision from time to time to reserve more items for Telecom factories and PSUs and discourage procurement from private suppliers.

For efficient control over inventory, materials are divided into three categories based on the issue rates as detailed below:

1. Rs 10,000 and above - A class
2. Less than Rs 10,000 - B class
3. Less than Rs 3000 - C class

DoT fixed the optimum inventory level of stock and issue items of A and B class of stores in April 1993 as one third of the total yearly requirement for the purpose of inventory control. The minimum level of inventory required to be maintained at the depot was left to the discretion of the field units.

The number of cases of excess holding of stores (excluding obsolete/ unserviceable stores) by the CsTS Jabalpur, Kolkata and Mumbai with reference to norms of 1993 are given in table 11.8.1.

CTS Kolkata, Mumbai Jabalpur held excess stock of stores worth Rs 15.23 crore

At CTS, Kolkata 120 items of “A” and “B” class exceeded the prescribed limit as on 31 March 2001 and the total value of excess holding was Rs 7.76 crore while 56 items of “A” and “B” class exceeded the prescribed limit in CTS, Mumbai as on 31 March 2001 and the total value of such excess holding was Rs 6.22 crore.

AT CTS Jabalpur 59 items of ‘A’ and ‘B’ class exceeded the prescribed limit as on 31 March 2001 and the total value of excess holding was Rs 1.25 crore.

CTS New Delhi stated that no such classification and fixing of maximum and minimum levels of inventory were maintained at their end. CTS, Chennai stated that the same was not applicable for their wholesale depot. While non-prescription of minimum and maximum levels of inventory was likely to result in poor inventory control at CsTS Chennai and Delhi, excess stock levels maintained by their counterparts at Jabalpur, Kolkata and Mumbai led to blocking of material not actively required, with a consequent burden on the exchequer.

Progressive Stock Taking (PST) and Independent Stock Verification (ISV) of the stores, including unserviceable stores, at regular intervals is intended to secure efficiency in store keeping and to detect shortages or pilferage of the stocked material.

A system of continuous stock taking by an independent stock verifier working under the orders of Chief Accounts Officer in the office of the CGMTS, Kolkata is carried out so as to obtain complete verification at least once in a year of each item of stores in all the depots. This independent verification is in addition to the periodical counts made by the store keeper.

Audit observed at CTS, Mumbai that despite verification being almost cent per cent, 170 items were lying unvalued and unadjusted ever since 1978-79.

Inadequate stock verification and progressive stock taking not conducted for many items

At CTS, Kolkata the extent of ISV ranged from 50 to 93 per cent while that of PST ranged from 59 to 97 per cent during the period under review. Discrepancy statements were not prepared although the stock adjustment was done in the ledger. Some 166 items lying in stock could not be verified for PST as they were very old and no bin cards were available for them. It was observed that the following reasons hindered the process of ISV:

• improper keeping of stores.
• cash items and stocked items not kept in a segregated manner.
• non-conduction of PST.
• poor maintenance of ledger/Bin cards.
• valuable items kept in open air.

At CTS, Kolkata the extent of ISV ranged from 50 to 93 per cent while that of PST ranged from 59 to 97 per cent during the period under review. Discrepancy statements were not prepared although the stock adjustment was done in the ledger. Some 166 items lying in stock could not be verified for PST as they were very old and no bin cards were available for them The ISV report of 2000-01 for CTS, Chennai revealed an excess of 33 store items and a deficit of 20 other store items.

In view of the large volume of stores handled by various wholesale depots in the country, it was pointed out in paragraph no. 16.7.3 of the Report of the Comptroller and Auditor General of India for the year ended 31 March 1999 (No. 6 of 2000) that there was an immediate need to computerise the maintenance of store accounts in the store depots for proper monitoring and accounting of receipt and issue of stores and to avoid pilferage of items. This had not been complied with by any of the store depots so far (July 2001).

One of the aims of inventory control and management is to spot out and segregate items of unserviceable and obsolete stores and take prompt action to minimise their level of accumulation by their timely disposal. Such timely action reduces their maintenance cost and holding cost and prevents further fall in their scrap value owing to depreciation deterioration or damage.

Obsolete/ unserviceable stores valuing Rs 25.41 crore were lying in five wholesale depots

Examination of records in five CTSs disclosed that obsolete/ unserviceable stores valuing Rs 25.41 crore were lying in the five wholesale depots at end of April 2001 and the heads of store depots did not take necessary action for their disposal. The CTS wise position of non-disposal of unserviceable/obsolete stores is given below :

The CGM Telecom Stores Kolkata took up the matter with BSNL Board in May 2001 for obtaining sanction to dispose of unserviceable/obsolete stores.

Storage of unserviceable/obsolete stores in the stock-yard leads to avoidable cost in respect of storage, watch and ward and loss in value due to damage and deterioration.

The slow-moving and non-moving items of serviceable stores are required to be identified during the stock taking by each store depot and a list of such items is required to be circulated to other store depots to ensure their utilisation elsewhere.

Stores worth Rs 4.33 crore were non-moving/slow moving

In CTS Mumbai, Switch Board Cards (SBCs) of different sorts valuing Rs 3.67 crore received from Telecom Factory, Mumbai were lying idle from 1997-98 onwards. These stores have since been declared unserviceable and sanction for their disposal was being obtained. Further scrutiny of the records revealed that 3.01 lakh SBCs valuing Rs 2.39 crore received from CGM, Telecom Stores, Kolkata between 1992-93 and 1994-95 without proper requisition were awaiting disposal.

Similarly, Electronic Trunk Relay Plates (ETRP) valuing Rs 1.56 crore received from Telecom Factory, Mumbai in June 1995 were lying idle in the retail depot of CTS, Mumbai for the last six years. But no action was taken for their disposal resulting in blockage of capital of Rs 1.56 crore. Further examination revealed that 8168 numbers of other items of stores were lying in stock at various circles since 1995-96. The accumulated value of these stores was Rs 4.33 crore (inclusive of value of stores at CTS, Mumbai).

One of the most widely followed methods for evaluating inventory performance is to determine the “Inventory Turnover Ratio” i.e. ratio of the yearly issue to the average holding of stock per month. Another measure is the ‘Inventory Turnover Period’ which indicates the number of days it will take to consume the average monthly holding of stock.

Analysis of inventory held by the depots revealed that the inventory turnover period was high as given in the Appendix XIX. As indicated therein, CTS Kolkata had stock for 599 to 1816 days against the average months stock holding and its cost ranged from Rs 14.23 crore to Rs 23.70 crore.

CTS Mumbai held stock sufficient for 8690 days against average a month consumption

At CTS, Mumbai 472 to 8690 days were required to consume the average monthly holding of stock and the cost ranged between Rs 9.42 crore and 13.87 crore between 1996-2001 which indicated a very slow rate of issue. The Inventory Turnover Period of 8690 days implied that consumption of the average monthly stock would take nearly 24 years! It was also noticed in CTS Mumbai that there was minus issue of stores in the year 1997-98. On being pointed out by Audit the Controller of Telecom Stores Mumbai failed to explain the position.

The trend of inventory turnover period indicates that days required for consumption of the average monthly stock holding in CTS, Chennai increased from 53 days in 1996-97 to 426 days in 2000-01. Thus management of issue of stores deteriorated as compared to earlier years.

At CTS New Delhi the monthly average stock of stores was Rs 10.06 crore in 1996-97 and average issue was Rs 2.56 crore. The period of consumption therefore, was 120 days. This increased to 4679 days during 2000-01. This happened because while the average monthly holding of stock decreased slowly to 6.82 crore in 2000-01 the average monthly issue reduced drastically to a meagre 0.04 crore. As a result the performance of issue of stores became very poor.

Rs 27.41 crore was outstanding under stores-in-transit

The outstanding amount under the head Stores-in-Transit represents the value of unacknowledged stores transferred by wholesale store depots to other units/ store depots etc. Non-adjustment of Stores-in-Transit for a long period may raise a reasonable ground for suspicion of their possible misappropriation leading to ultimate loss to the department. The following table reveals the amount of outstanding under stores-in-transit at the end of June 2001. The amount under stores-in-transit was outstanding from 1975-76 onwards. The following table reveals the amount of outstanding under stores-in-transit as on 30 June 2001.

The outstanding minus balances indicate that either responding debits have not been accounted for or excess credits have been taken into account. An amount of Rs 27.41 crore under stores-in-transit shows lack of proper pursuance of the cases by the concerned Controllers of Telecom Stores. Rules require that such cases should be investigated and the outstanding amount adjusted without delay.

In accordance with the standard terms of procurement, 95 per cent value of the stores is paid as advance to the suppliers on proof of despatch of materials and the balance five per cent is released on receipt of stores as per terms of the contracts. The advance payment so made is kept under suspense head till the contractors fulfill the contractual obligation in completing the required supply. It was noticed that a total amount of Rs 357.65 crore disbursed to the contractors as advance payment had not been adjusted as on 31 March 2000.

Firm wise outstanding amount of Advance Payment to Contractors (APC) was as under:

The amount of Rs 264.07 crore outstanding from ITI included the amounts outstanding for the last 34 years pending adjustment. Similarly, outstanding advances of Rs 93.58 crore in respect of HCL, HTL and private firms included amounts lying unadjusted for the last 27 years. Advances remaining outstanding for such long periods indicated that the Executive had not addressed the problem with adequate seriousness.

Against sales made by the wholesale depots Rs 29.44 crore remained unrealised as on 31 March 2001 as shown in table 11.10.2 below.

Stores worth Rs 29.44 crore sold to other departments was not realised

Details of cases under this category are given below:

In 42 cases stores valuing Rs 73.22 lakh were lost/stolen by theft

The amount involved in loss/theft of stores pertaining to the CTS, Kolkata alone was Rs 66.23 lakh involving 32 cases. In 30 of these cases, the theft took place in 1975-76 i.e. 25 years back and involved Rs 62.18 lakh. In all such cases, the department failed to take appropriate action for adjusting the amount involved either by obtaining sanction for write-off from the competent authority or in any other manner. One significant omission in all such cases was that the department did not report the cases of loss/theft to the Audit although so required according to codal provisions.

Out of the three unsettled theft cases of Rs 3.27 lakh pertaining to CTS Mumbai, one case involving Rs 2.98 lakh occurred in the year 1992-93. Two cases out of three have been reported to audit.

There were four unsettled theft cases involving Rs 2.88 lakh pertaining to CTS, Jabalpur, one of which involving Rs 2.15 lakh, occurred in 1979-80 some 21 years back. In four cases involving Rs 84,402 in respect of CTS Chennai, although the police authorities closed the cases as undetectable, the write off sanction was awaited from the competent authority (July 2001).

Debits raised by Chief General Manager Telecom Stores, Calcutta are classified under final head of account by the concerned telecom district in a format known as ‘store account current’. Debits, which are not supported by vouchers or do not pertain to the district or where certain information/documents are awaited, are not classified under the final head and are kept under suspense. This suspense is cleared on receipt of wanting information/documents. Valued store vouchers as accounted for in the ‘store account current’ are received back in accounts branch after verification and certification of receipt of stores by field units to ensure correctness of debits accepted by the district.

Audit observed that in Durg telecom district in Madhya Pradesh circle, debits for stores supplied during the period 1991 to 1997 amounting to Rs 96.44 lakh were accepted and accounted for in ‘store account current’, without verifying receipt of stores.

On this being pointed out by Audit General Manager Telecom District Durg in February 1999 confirmed non receipt of stores worth Rs 40.52 lakh by the district; confirmation of remaining stores was awaited. It was stated that reports were being called for from concerned field units.

The term “Stores recoverable” includes:

• stores lost in transit while being transferred from one Store Depot to another.
• stores lost in transit while being transferred from Store Depots to Lines and offices.
• stores lost after issue to the works dump but before actual use on works.
• Loss in Store Depots and Workshops due to theft.

A sum of Rs 12.01 crore lying under ‘stores recoverable’ remained unadjusted.

As per the table below a sum of Rs 12.01 crore in respect of five wholesale depots was lying unadjusted as on 31 March 2001. It was the duty of the departmental authorities to make expeditious investigation into cases of stores lost in transit and try to recover the amount from the parties responsible for this. Action should have been taken to eliminate outstanding balances under “Stores Recoverable” by obtaining sanction for write-off, from the competent authority if all possible attempts to recover the amounts from the concerned parties failed.

No substantive and visible action had so far been taken by the Executive to reduce the outstanding (July 2001)

The offices of the Controllers of Telecom Stores were fraught with problems of poor inventory management, inadequate internal controls in maintaining store records and under-utilisation of stores. Moreover there was a huge amount of advances paid to the contractors which was not adjusted; also no action was taken to investigate the theft cases in time. The size of the manpower also required examination with reference to stores handled. The Ministry may have to examine the areas of stores recoverable, stores verification and stores in transit wherein huge amounts were outstanding and immediate prompt action was called for.

The matter was referred to the Ministry in October 2001; their reply was awaited as of December 2001.

12.    Working of the Telecom Civil Divisions

Physical/financial targets were not fixed which resulted in non-monitoring of physical and financial performance of the Civil divisions.

(Paragraph 12.6)

Premature creation of four additional Telecom Civil circles in violation of the prescribed norms resulted in avoidable expenditure of Rs 2.41 crore.

(Paragraph 12.8.2)

Despite existence of a planning and Architectural wing, the department assigned the architectural work of a building to consultants; the construction has not been taken up even after 14 years of initiating the formalities.

(Paragraph 12.8.3.3)

In violation of the financial norms 57 works in six circles were awarded without calling for tenders.

(Paragraph 12.8.5)

The work of construction of 242 quarters at Kalibari, New Delhi could not be taken up due to department’s failure to protect the property against encroachment which resulted in avoidable expenditure of Rs 5.83 crore for relocation of Jhopri dwellers and removal of malba from site.

(Paragraph 12.8.6.1)

There was a blocking of Rs 79.81 lakh as road restoration charges amounting to Rs 47.41 lakh paid to Kolkata Municipal authorities were neither adjusted nor got refunded on cancellation of work.

(Paragraph 12.8.6.2)

An amount of Rs 1.06 crore against Earnest Money Deposit (EMD) and Security Deposit (SD) relating to 2328 cases was lying with the department without being transferred to lapsed deposit and Rs 35 lakh in 49 works were refunded after delays ranging from six months to one year.

(Paragraph 12.9.2)

Non recovery of excess cost on account of rescinded work from the defaulting contractors amounting to Rs 32.77 lakh and further loss of Rs 12.51 lakh towards cost of materials lying with the defaulting contractors was noticed in three circles.

(Paragraph 12.10.1.1)

Cement and steel worth Rs 61.01 lakh issued to the contractors in excess of requirement resulting in non-recovery of Rs 9.26 lakh from the contractors.

(Paragraph 12.10.1.3)

Delay in execution of 285 works resulted in payment towards escalation in rates amounting to Rs 3.78 crore. In addition there was a potential revenue loss of Rs 103 crore due to delay in completion and handing over telephone exchange buildings in respect of 21 works in two circles.

(Paragraph 12.10.2.1)

Rs 8.26 crore on account of deposit works had not been recovered.

(Paragraph 12.12)

Arbitration awards in favour of contractors due to departmental failure resulted in avoidable payment of Rs 5.44 crore towards compensation.

(Paragraph 12.13)

The Civil wing in Posts and Telegraphs (P and T) department was established in July 1963 with a view to ensure better co-ordination and speedy execution of works. The P and T Department was bifurcated into two departments viz., Department of Posts and Department of Telecommunications (DoT) with effect from 1 January 1986. The P and T Civil wing was also bifurcated from the same date and the Telecom Civil Wing came into existence for carrying out the civil works of the DoT.

The Telecom Civil Wing is responsible for construction of new buildings, maintenance of existing buildings, construction of cable ducts and civil works for transmission towers. Apart from the above, it also carries out works for outside agencies such as MTNL, VSNL etc., as deposit work.

An All India review on the Working of Telecom Civil Wings in 19 Telecom Circles viz., Andhra Pradesh, Assam, NE Circle, Bihar, Chennai Telephones, Delhi, Gujarat, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (East), Uttar Pradesh (West), and West Bengal, was conducted by Audit in May - July 2001 covering the period 1996-2001. The study covered 62 civil divisions which was approximately 50 per cent of the total Civil Divisions functioning under the Circles.

The Civil Wing consists of distinct units namely Architectural unit, Planning unit and Civil construction unit. All the three units work under the direction and control of the Senior Deputy Director General (Building Works) (Sr.DDG-BW), Delhi who is the head of Civil Wing and also Technical Advisor to the Telecom Commission.

Civil Wing in each Circle is headed by a Chief Engineer (CE) who is assisted by Superintending Engineer (SE) and a Superintending Surveyor of Works (SSW) who in turn supervise the execution of Civil Works by Executive Engineers (EE) and Surveyor of Works (SWs) respectively. While the administrative control of the Civil Wing of the circle is entrusted to the Chief General Managers, Telecom of the respective circles, the technical control rests with the Senior DDG (BW), Delhi.

The work of a Civil Division spans a wide spectrum of activity and covers the following aspects:

• Land acquisition
• Approval from Local Government/bodies on building plans
• Administrative Approval and Expenditure Sanction
• Preparation of preliminary estimates and issue of Notice inviting tenders (NIT)

2.    Finalisation of tenders

3.    Execution of works

• Monitoring of progress
• Cost/time overrun
• Extension of time

4.    Completion and utilisation of works

5.    Deposit Works

6.    Arbitration

No annual physical and financial targets fixed

Scrutiny of records of Civil divisions showed that no annual physical and financial targets were fixed division wise or circle wise. The works were carried out as per the priority and requirements of the concerned Telecom units. Hence, optimum utilisation of manpower and other infrastructure facilities could also not be ensured. This indicated lack of adequate monitoring over financial and physical performances in the organisation.

Funds for capital works and maintenance works were allotted to Secondary Switching Areas (SSAs) and works were undertaken by Civil divisions based on Administrative Approval and Expenditure sanction (AA and ES) given by the respective SSAs. Control and monitoring over allotted funds are exercised by heads of circles.

In order to examine the proper utilisation of allotment of funds, the position of allotment of funds and actual expenditure received from DoT relating to Civil wing is indicated in table 12.7 below.

Under utilisation of funds resulted in savings of Rs 1589 crore under capital and maintenance

It was noticed that utilisation varied between 45 and 78 per cent of the allotment in each year in respect of capital expenditure and between 24 and 41 per cent in respect of maintenance work. As a result Rs 1589 Crore (Capital Rs 1262 crore Maintenance Rs 327 crore) were surrendered from allotted funds during 1995-2000 as shown in table below:

(Rs in crore)

Excess expenditure on working expenses amounting to Rs 29.91 crore during 1995-2000 on capital works

Departmental rules provide that cost of establishment over cost of works (overhead percentage) on Capital and Maintenance works should be 12 per cent and 23.75 per cent respectively. Examination of figures made available to audit by the Directorate (Civil Wing) revealed that the percentage of establishment over the cost of works under Capital works exceeded the prescribed percentage by 4 to 12 per cent. This resulted in excess expenditure on working expenses amounting to Rs 29.91 crore during 1995-2000. This indicated that the establishment for capital works was oversized and non-completion of works even after availability of funds as depicted in the table below:

(Rs in Crore)

Note :    Figures of allotment and actual expenditure under capital and maintenance works shown above.

Ad-hoc physical norms were adopted in August 1987 for purposes of establishment of the Civil Engineering arm of Civil Wing. According to these norms an independent civil circle together with a Planning section was justified, if the number of divisions was three or more, subject to the condition that the total number of civil circles should not exceed ¼ of the number of divisions.

Creation of civil circles in contravention of norms resulted in avoidable payment of Rs 2.41 crore

However, during examination of the records of three telecom circles and one metro district it was noticed that contrary to the norms fixed, the department had created four telecom civil circles prematurely, which led to an avoidable payment of Rs 2.41 crore as detailed in Table 12.8.2 given below towards pay of the staff of these offices alone. In reply, it was stated that the creation of Circles and Divisions was decided by DoT Hqrs based on functional requirements.

In July 1997 DoT circulated instructions regarding preparation of building plans. According to these instructions inter alia, the departmental architect, while preparing a building plan should keep in mind the local bye-laws and should keep in touch with the local authorities. He should provide all relevant documents such as ownership certificates, revenue plans of the plots etc., required to be submitted to the local authorities alongwith building plans for getting approval well in advance so that delay due to non production of such documents can be avoided. During examination of the records of civil divisions Audit noticed cases of idle investment on incomplete structure, delay in getting the approval of local bodies etc. as detailed below:

12.8.3.1    Idle investment on incomplete structure

General Manager Telecom (GMT) Madurai accorded AA and ES for construction of 12 type II staff quarters at the telephone exchange site in Theni in May 1997, at an estimated cost of Rs 39.95 lakh. In December 1997 the Executive Engineer (EE) Civil Division, Madurai awarded the contract for the work at a tendered cost of Rs 35.82 lakh. As per the agreement, the work was to commence by January 1998 and to be completed by January 1999.

Infructuous expenditure of Rs 13 lakh on incomplete structure

In March 1999, however, the work was stopped abruptly and the contract cancelled due to the objection of the Municipal Commissioner, Theni Municipality. It turned out that construction at that site was not permitted since laying of a 60 feet road construction was in the offing and the executive was also aware of this. By this time the work had reached lintel/first floor level at an expenditure of Rs 13 lakh. In fact five years earlier, during January 1994 also, the work of construction of compound wall at the site was objected to by the Municipal Commissioner, Theni on the same grounds.

Had EE, Civil Division Madurai ensured that the work commenced only after proper Municipal approval, the infructuous expenditure of Rs 13 lakh on the incomplete structure could have been avoided.

12.8.3.2    Delay/non-utilisation of cable duct

Idle investment on 12 way cable duct from Vyttila Junction to Power House Junction amounting to Rs 24.19 lakh

An estimate for construction of 12 way cable duct from Vyttila Junction to Power House Junction in Ernakulam SSA was sanctioned in September 1997, the work was awarded on 14.1.1998 and completed on 5.12.1998. Total expenditure incurred was Rs 24.19 lakh. The cable duct, however, could not be utilised so far (July 2001) in the absence of cable supporting frame. The AGM (Cable Planning) of Ernakulam SSA reiterated this fact and requested for a revised estimate in August 1999 and January 2000. As no action was taken by the Telecom Civil Division, the work had not started even now (July 2001). The division stated that revised estimate was under preparation and balance work would be executed on receipt of Administrative Approval and Expenditure Sanction (AA and ES). Thus cable duct constructed in December 1998 at a cost of Rs 24.19 lakh could not be put to use so far due to lack of co-ordination between the various arms of DoT; the likelihood of immediate utilisation was also remote.

12.8.3.3     Delay in getting the approval of local bodies

Telecom Civil Division, New Delhi decided to take up the construction of the Central Telegraph Office (CTO) building at Janpath, New Delhi in 1985. Audit noticed that in spite of the availability of a planning and architectural wing in the department, DoT decided in May 1985 to take on a consultancy with Telecommunications Consultants India Ltd (TCIL) and entrusted to them the responsibility of planning, preparation of architectural drawings and obtaining approval of the concerned local bodies to the drawings. The department agreed to pay TCIL Rs 10.68 lakh of which Rs 4.27 lakh (40 per cent) were paid up to October 1999. The construction of the buildings was still not completed (December 2001).

The preliminary drawings were ready in November 1987 and the AA and ES for Rs 7.74 crore was accorded in March 1989. The departmental rules required that Telecom Wing officers should ensure that the plot was free from legal encumbrances and encroachment and that no sewage line was passing through the plot, shifting of which may cause additional expenditure to the department. Despite this codal provision, the department incurred an expenditure of Rs 40.20 lakh during 1991-93 on re-location charges for eviction of encroachment at the site for the construction. The project could still not be taken up for want of municipal approval.

In the meanwhile, the scope of work was changed and the estimate was revised to Rs 17.76 crore in February 1995. Subsequently TCIL revised the drawings again, after interaction with the local bodies, and the estimate was further revised to Rs 19.47 crore in January 1996. After municipal approval was received through TCIL in August 1997, the scope of work was changed once again and revised AA and ES for Rs 24.41 crore was accorded in June 1999. Subsequently the department took a decision in December 2000 to also house BSNL Headquarters at the CTO cum Administrative building.

Construction of CTO building was not taken up after delay of 14 years which resulted in cost overrun by Rs 16.67 crore.

Department in their reply stated in June 2000 that the main reason for delay in sanctioning the project was delay in receipt of municipal approval of drawings through TCIL. The reply is not acceptable as the scope of building and drawings was changed from time to time and decision to house BSNL Headquarters at CTO cum administrative buildings was also one of the reasons for the delay in execution of work. Thus, due to lack of co-ordination between different wings of the department, including the civil wing, with TCIL, the project was badly delayed for execution by 14 years and the total cost increased by Rs 16.67 crore (from Rs 7.74 crore in 1987 to Rs 24.41 crore in 1999).

12.8.3.4    Lack of planning

In July 1995, GMT Nagercoil sent to Sr. Architect Chennai a proposal for preparation of preliminary drawings for construction of a ground plus six strorey administrative building cum Departmental Telegraph Office (DTO) building on the site where DTO was functioning. The intention was to accommodate DTO and all administrative offices under one roof. Though administrative approval for the demolition of rear portion of the DTO building had been conveyed in 1994, municipal drawings for the above work were issued by Chief Architect only in 1998 and building permit could not be obtained till date (July 2001) due to some deviations from the stipulations of building act. However, the old building was demolished in December 2000 and the DTO shifted to a temporary structure constructed at an estimated cost of Rs 7.68 lakh.

Defective planning at various stages resulted in avoidable expenditure of Rs 7.68 lakh

Due to defective planning at various stages viz., issuing the drawings not in conformity with the Municipal Act, demolition of old building before getting approval for the new building, although the old building had not outlived the expected life and delay in getting municipal approval by GMT, Nagercoil, there was an avoidable capital expenditure of Rs 7.68 lakh towards construction of temporary structure for housing DTO and revenue expenditure of Rs 6500/- pm for housing SDOT office from December 2000, besides loss in savings to the tune of Rs 50000/- pm (approx.) towards rent for telecom offices housed in various rented buildings in Nagercoil.

12.8.4.1    Execution of work without sanction

Execution of 12 works costing Rs 15.64 lakh without AA and ES sanction by competent authority

The authority granted by a sanction to an estimate is limited to the precise objects which the estimate was intended to provide. Any anticipated or actual savings on a sanctioned estimate for a specific project therefore should not, without special authority, be applied to carry out additional work not contemplated in the original project. EE, Telecom Civil Division (TCD), Sambalpur executed 12 independent works costing Rs 15.64 lakh without having AA and ES from the competent authority on the plea that the expenditure would be met from the savings of the main project; this was not in order.

Powers have been delegated to accord administrative approval to projects costing upto Rs 5 crore to CGM/GM for technical buildings and upto Rs 2 crore to CGM and Rs 1 crore to GM for non-technical buildings. CE, Civil wing is authorized to accept tender and award work for projects costing Rs 1.25 crore (Rs 2.5 crore from April 1999).

Splitting up work of similar nature in different estimates to avoid sanction of higher authorities

It was noticed during review, however, that the authorities split up nine works in six circles into 57 estimates, as shown in Appendix-XX, to avoid the sanction of higher authorities who alone were competent to sanction the composite item. Also, preparation of estimates and accord of AA and ES were not planned with reference to requirements. A few instances of such cases are cited below:

1. A project for construction of telecom staff quarters at I.S. Sadan, Hyderabad, in Andhra Pradesh circle, with an estimated cost of Rs 5.15 crore, was split up into 15 estimates which were then sanctioned during 1997-98 by General Manager Telecom District (GMTD) Hyderabad, instead of being put up to Telecom Commission.
2. A project estimate for Rs 2.74 crore for the construction of staff quarters at Banjara hills of Hyderabad under Andhra Pradesh circle was split up into seven estimates which were sanctioned by GMTD Hyderabad during 1998-99, instead of being put up to Telecom Commission.
3. In Tamil Nadu circle a project for the construction of administrative building including internal and external services at Tirunelveli with estimated cost of Rs 83.71 lakh was split up into 23 estimates which were sanctioned during 1996-97 by GMTD Tirunelveli/Executive Engineer Civil (TCD) for Rs 1.02 crore, instead of being put up to CE/CGM.

The above instances are illustrative and indicated that the works were split up with an intention to avoid sanction of higher competent authorities; this was against the financial discipline of the department. Moreover, by violation of the financial powers delegated by DoT from time to time, the department lost the benefit of competitive rates.

Whenever sites are to be selected for any departmental purpose, there should be careful consideration of all the aspects by not only the telecom officers but also by the Architects and Civil Engineers. To ensure proper consideration of all relevant aspects, a detailed proforma for certifying the suitability of a site was drawn up by Director General, Posts and Telecommunications, Delhi and circulated in April 1978 alongwith detailed instructions. The detailed scrutiny of the records of civil divisions revealed the following irregularities.

12.8.6.1    Avoidable expenditure due to non-availability of clear site

Due to non availability of clear site department had incurred Rs 5.83 crore for relocation of Jhopri Dwellers

The work of construction of 242 quarters out of the 270 quarters planned in Phase II of the project at Kalibari, New Delhi could not be taken up by DoT as the land in question was under unauthorized encroachment by Jhuggi dwellers and Telecom Department spent Rs 5.83 crore in October 1997 and January 1999 for relocation of Jhopri dwellers and removal of malba from site. Had necessary protection of property against encroachment been arranged by the department, payment towards compensation could have been avoided and construction completed as per schedule.

In Madhya Pradesh Circle award of work without ensuring the availability of clear site not only led to incurring of expenditure of Rs 16.53 lakh on preparation of site free from legal encumbrances and encroachment but also another Rs 34.19 lakh towards payment of escalation for extension of time.

12.8.6.2    Avoidable expenditure of Rs 8.43 lakh and blocking of capital of Rs 79.81 lakh on cancellation of works

While there was delay in award of work on the one hand, it was noticed on the other hand that awarded works were cancelled. Test check revealed that at Bhopal (M.P Circle) two project works were cancelled due to non-availability of site and non-availability of requisitioning authority’s decision for cancellation. In Kolkata Telephone District, non-receipt of permission of local authorities for road cutting led to cancellation of seven works.

Wasteful expenditure of Rs 10.65 lakh on cancelled works

Such cancellations lead to expenditure without execution, as in Kolkata, where contractors of five out of seven cancelled works went in for arbitration and the department had to compensate by paying Rs 8.43 lakh in two cases. In one case Rs 2.22 lakh was deposited in the High Court and in yet another case award of Rs 2.28 lakh with 18 per cent interest was challenged in the High Court. This expenditure of Rs 10.65 lakh could have been avoided if the requisite formalities had been observed before award of work.

Blocking of Rs 79.81 lakh on road restoration charges and interest on cancellation works

Added to these, there was a blocking of Rs 79.81 lakh as road restoration charges amounting to Rs 47.41 lakh paid to Kolkata Municipality during December 1994 to November 1996 were neither adjusted nor got refunded on cancellation of the work. As such the deposited amount together with interest totaling to Rs 79.81 lakh remained to be recovered. It was stated by Executive Engineer, Civil Division, Kolkata that attempts were made to collect the amount. No money, however was, recovered/adjusted till date (July 2001).

12.8.6.3    Improper selection of site for staff quarters

Idle investment of Rs 18.98 lakh on construction of quarters in a predominantly industrial area remained unoccupied

Selection of site for the construction plays a vital role to ensure, intended utilisation of the building. Six Type III staff quarters at Telephone Exchange plot at Paneksara, Surat in Gujarat circle completed at a cost of Rs 18.98 lakh and handed over to Telecom authorities in April 2000 remained unoccupied as of July 2001. The allottees were not moving to the quarters because the quarters had been constructed in a predominantly industrial area with heavy pollution. Improper selection of the site, therefore, resulted in idle investment of Rs 18.98 lakh on the quarters.

The Construction unit was responsible for award of contracts for works and getting them executed through the contractors. This wing was also responsible for supervision and efficient execution and management of works. On test check of records of Civil Divisions, short comings were noticed relating to non-adherence of prescribed time limit, acceptance of tender at different rates for the same nature of work, award of work without call of tenders etc. as mentioned below.

Award of tender at different rates on similar works resulted in extra expenditure of Rs 36.52 lakh in construction of cable duct and staff quarters

Departmental rules stipulate that award of work should not be based merely on the lowest tender but reasonability and prevailing market rates at which works could be got done should also be considered.

However, in Andhra Pradesh circle, works on construction of cable ducts were awarded at different rates on the same date i.e. 28.10.99 at Hyderabad which resulted in extra expenditure of Rs 22.97 lakh. Similarly, work relating to construction of staff quarters with the same design and specifications were awarded at different rates during the same period at same station (Hyderabad). This had resulted in extra expenditure of Rs 13.55 lakh.

When this was pointed out, the department replied that the rates awarded were within permissible variation under rules.

The reply is not satisfactory because in these cases works were awarded at the same time and at the same place, leading to an avoidable expenditure of Rs 36.52 lakh.

Earnest money deposit (EMD) received from the tenderers except the lowest tenderer are to be refunded within 15 days of acceptance of the tender and security deposit (SD) of successful tenderer should also be refunded immediately after the expiry of maintenance period as stipulated in the agreement. The balance in the above deposit accounts which were unclaimed for more than three complete years are to be credited to Government account as lapsed deposit.

2328 cases of unclaimed EMD and SD amounting to Rs 1.06 crore lying without transferring to lapsed deposit

Audit examination of deposit registers revealed that amounts were neither refunded within the prescribed period nor treated as lapsed deposits. While an amount of Rs 1.06 crore relating to 2328 cases towards EMD and SD was lying with the department, without transfer to lapsed deposit, a sum of Rs 35 lakh in respect of 49 works was refunded after delays ranging from six months to one year as shown in Appendix-XXI.

Cement and steel are major items which are stipulated for issue in most of the contracts in the department. Stores issued to contractors under terms of the contract are intended for the exclusive use and consumption on the work for which they are issued. There is inherent risk of their pilferage and misuse if such stores are issued in bulk to the contractors much in advance of their actual requirement. It is essential that issues to contractors should be regulated and restricted to actual requirements. Detailed instructions were issued in this regard by the department in December 1984. The following shortcomings were noticed during the examination of records of civil divisions.

12.10.1.1    Non recovery of excess cost on account of rescinded work

Non-recovery of Rs 32.77 lakh from defaulting contractors on account of rescinded works in three circles

Departmental rules envisage that if an agreement is rescinded, the balance work should be got executed at the risk and cost of the rescinded agency. Audit noticed instances of non-recovery of the cost from the defaulting contractors amounting to Rs 32.77 lakh as indicated in table 12.10.1.1.

12.10.1.2    Non recovery of cost of material lying with defaulting contractor

An Amount of Rs 12.51 lakh towards cost of materials lying with the contractors was not recovered on rescinding the work in respect of works executed in three circles.

12.10.1.3    Excess issue of materials to contractors

Materials issued to contractors in excess of requirement valuing Rs 61.01 lakh. Out of which Rs 9.26 lakh yet to be recovered in one case

Contract agreement provides for issue of steel and cement for the work by the department at the prescribed rate. Issue of materials to contractors should be regulated and monitored with reference to the time schedule as well as the physical progress. Any excess issue of materials amounts to allowing unintended benefit to the contractor. As per codal provisions any unutilized materials should be returned by the contractor within 30 days of completion of work failing which recovery at double the rate of issue should be made. During the examination of the records of civil divisions in five circles, it was noticed that on 61 works, 486.100 MT of cement and 306.204 MT of steel were issued in excess of the requirement to the tune of Rs 61.01 lakh as shown in the table below:

12.10.2.1    Delay in completion of works and its financial implications

Escalation charges amounting to Rs 3.78 crore in respect of 285 works

At the time of issuing notice inviting tender (NIT) for a particular work, time for completion of the work is fixed after taking into account the magnitude and urgency of the work. Time is deemed to be the essence of the contract, and the work should be implemented with all diligence throughout the stipulated period of the contract. However, it was noticed in audit that in a majority of works, there was abnormal delay in completion of work due to reasons attributable to the department. Consequently, the contractor had been allowed extension of time as also the benefit of escalation in the rates for the authorized extension periods of the contract. In respect of 285 works shown in Appendix XXII escalation charges amounting to Rs 3.78 crore were paid by civil divisions in 13 Circles. Due to non-completion of works as per original schedule, the constructed buildings could not be handed over to the user unit of the department in time. For instance, the work of construction of staff quarters at Anna Nagar, Chennai was delayed by 650 days and escalation charges of Rs 29.98 lakh were paid. An amount of Rs 11.67 lakh was paid in respect of two works i.e., construction of staff quarters at Deulgaonraja and Telephone Exchange building at Sindhakhadaja under Maharashtra circle due to departmental delay of more than 500 days. In Bihar circle, TE Building at Pataliputra was constructed after a delay of 1106 days (over three years) involving escalation payment of Rs 17.30 lakh.

Department made avoidable payment of HRA and losing licence fee Rs 1.92 crore due to delay in handing over of quarters and also potential revenue to the tune of Rs 103 crore lost due to delay in handing over telephone exchange buildings

Examination of records showed that even after completion of the civil portion, either the buildings could not be handed over by the concerned civil division or were not taken over by the requisitioning authorities for want of electrical installations and other facilities. In 295 works of construction of staff quarters detailed in Appendix XXIII, the department ended up paying avoidable HRA and losing licence fee amounting to Rs 1.92 crore due to delay ranging up to 50 months in handing over of quarters.

In respect of 21 works executed by two circles, potential revenue to the tune of Rs 103 crore was lost due to delay of up to 56 months in completion and handing over telephone exchange buildings vide Appendix XXIV.

To cite a few instances in Gujarat circle, the delay in handing over MAX-I Telephone Exchange building at Pandesara, Surat by 17 months was due to delay on the part of agency and slow progress of work. This resulted in potential loss of revenue to the tune of Rs 26.06 crore. Similarly, the delay in handing over 10k C-DoT exchange building at Bardoli under Surat GMTD by 12 months was due to slow progress of work and delay in taking over possession by GMTD Surat resulted in loss of potential revenue amounting to Rs 9.53 crore and the delay in handing over 20k E-10-B exchange building at Panigat, Baroda by 10 months due to slow progress of work and delay in taking over by GMTD Baroda resulted in potential revenue loss of Rs 9.22 crore.

Delayed completion of buildings/staff quarters was primarily due to departmental delays on account of non supply of structural drawings, non availability of clear site, non laying of electrical conduits in time and non furnishing of completion certificate by the Senior Architect. These could have been avoided by proper planning and co-ordination among various agencies of the department.

At the time of issuing NIT for a particular work, the engineer-in-charge is required to specify the “time allowed for completion of the work” consistent with the magnitude and urgency of work as required under departmental instructions of June 1999. Whenever any hindrance comes to the notice of the Assistant Engineer, he should at once make a note of such hindrance in the register kept at site and take further action as per departmental instructions. The following deficiencies were noticed during the scrutiny of records.

12.10.3.1    Grant of extension of time in violation of codal provisions

Extension of time granted to contractors in violation of codal provisions

Time is the essence of a contract and the contractors are bound to execute the work within the prescribed time schedule mentioned in the NIT. Extension of time (EOT) for the completion of work over and above the time allowed can be granted by the Superintending Engineer of Civil Circles within 30 days, of a hinderance occurring during the execution of work. This would be done on the basis of an application which should be received from the contractor within 30 days of such hinderance. A test check conducted by Audit revealed that extensions were applied for by the contractor only after the completion of work and was granted by the Superintending Engineer as a matter of routine as shown in Appendix XXV. On this being pointed out by Audit, EEs, Telecom Civil divisions Punjab circle and A.P. circle stated that the SE was fully competent to grant EOT as per the powers vested in him by the Supreme Court. The reply of the EEs was not tenable because in codal provisions, Ministry of Law had opined that although the contractor was required to seek extension within 30 days from the date of hinderance on which the extension was sought, it did not debar the grant of extension sought later as it was always open to the competent authority to waive a delay and accept performance after the stipulated time. The Ministry of Law, however, advised that extraordinary concession should not be granted save in the most exceptional circumstances where very good reasons were given for not seeking it within the period of 30 days. Unless adequate explanation was furnished for asking the extension, it must be refused. According to them i.e. Ministry of Law, the contractor has no right to have his request for extension considered where he has not applied for it in accordance with clause 5 of the agreement. In view of this opinion of the Ministry of Law, the department needs to investigate in detail the extension granted routinely by EE Jalandhar in eight works during 1997-2001 where in all cases applications were submitted by the contractors after completion of the works and there was no justification for extension with reference to the hindrance register. Such extensions as in the case of Civil Division, Ahmedabad detailed below not only result in delayed award of allied works but also in extra expenditure due to time overrun; moreover, the projects conceived decades ago remain incomplete.

Delay in completion of foundation work cost the exchequer Rs 58.14 lakh

The award of superstructure work on a project for construction of administrative building at Navrangapura at Ahmedabad (conceived in 1982) was delayed due to inordinate delay in completion of the foundation work. Though the stipulated completion date of foundation work was July 1994, the work was completed only in May 1996 after a delay of 666 days. No penalty was levied however citing departmental lapses. This delay cost the exchequer Rs 58.14 lakh because at the time the tenders were opened in September 1995 for the allied work, the tendered cost was Rs 2.80 crore; by the time it was awarded in November 1997 the cost went up to Rs 3.37 crore. The amount would have been much lower had the work of substructure been completed by July 1994 as scheduled. As such a scheme conceived in 1982 had not been completed for the last 19 years resulting in extra cost in award of works and other delays besides the alternative rental arrangement.

12.10.3.2    Non/short levy of penalty for delay

EOT in 79 cases sanctioned with levy of nominal compensation of Rs 10.47 lakh

In case of delay for reasons attributable to the contractors, penalty of one per cent per week subject to a maximum of 10 per cent of the tendered cost is to be levied. Out of the total 168 extension of time (EOT) cases noticed by Audit in nine Circles, no amount was levied in 89 cases whereas in another 79 cases EOT was sanctioned with levy of nominal compensation, amounting to Rs 10.47 lakh, ranging from almost zero to 0.89 per cent for delays ranging from four weeks to 148 weeks as shown in Appendices XXV and XXVI; this was far less than that prescribed under the rules. The decision for non-levy of compensation was taken by the SE because the delays were attributable to the Department. Even after such delayed completion the taking over/utilisation of the completed structure by the user unit was not done. Though SE was competent to decide the quantum of compensation in all cases of delayed completion of works, compensation levied was not commensurate with the total delay. Departmental lapses paved the way for breach of contract as the time factor was fully ignored.

Non-utilisation of constructed building and resultant blocking up of capital

Due to lack of co-ordination between civil wings and users, ‘Y’ type microwave building constructed on a tendered cost of Rs 13.45 lakh remained unutilised for the last three years

The works of construction of ‘Y’ type microwave building and construction of 70 M heavy weight tower foundation for Optical Fibre Cable Division (OFC) Microwave Project, Tiruchirapalli were completed by Civil Division, Trichy (TCD) in September 1998 and January 1998 respectively with an overall delay of one year. Tower erection was completed at a cost of Rs 15 lakh in 1999-2000. Though project authorities were informed in October 1998 by TCD Trichy to take over the building, DE (OFC) Trichy did not take over the building till June 2001. Scrutiny of concerned works files by Audit revealed that some cracks had developed in the walls of the building and were to be attended. Also, stones dumped were not removed by the civil contractor from the site fully. However, project authorities made request for some minor works and sub-works only after the completion of the building work instead of doing so alongwith the main work, thereby delaying the taking over of the building. The, Civil Wing contended that the building was not taken over for simple reasons which could have been attended to later. Due to lack of co-ordination between Civil Wing and user unit, the essential building constructed on a tendered cost of Rs 13.45 lakh on the leased land remained unutilised for the last three years, depriving the department from augmenting the transmission media as proposed, though an expenditure of Rs 15 lakh towards tower erection and Rs 8 lakh on tower construction was also incurred.

Telecom Civil Wing also carries out works for other organisations such as VSNL, MTNL and other outside agencies in accordance with codified procedures and other provisions/instructions issued from time to time. Further, as per DoT’s instructions issued in August 1996, addition to cost of work and overhead profit of 10 per cent on the total cost for all works completed and handed over after 2 August 1996 shall be recovered in advance.

Violation of codal provisions led to outstanding dues of Rs 8.26 crore from MTNL, VSNL and other outside agencies

It was noticed in audit that Telecom Civil wings were carrying out deposit work on behalf of MTNL and VSNL without getting adequate advance payment from them. The 10 per cent profit required to be recovered from these agencies for the work completed and handed over after 2 August 1996 was also not recovered, which resulted in outstanding to the tune of Rs 8.26 crore towards balance due from VSNL alongwith accrued interest thereon in eight cases noticed in seven telecom circles as shown in the table 12.12:

(Rs in lakh)

The Agreement between the department and the contractor provides for appointment of an arbitrator in case of disputes relating to matters specified therein arising at any stage between the parties.

Arbitration awards amounting to Rs 5.44 crore passed in favour of contractors due to departmental lapses

Test check by Audit revealed that there were 92 arbitration cases in 14 circles, in 85 of which, the award was passed in favour of contractors, citing departmental failures. The awards amounted to Rs 5.44 crore out of which Rs 4.03 crore had been paid/deposited in court. Had the departmental lapses been avoided, extra payment by way of award amount would have been curtailed as detailed in Appendix - XXVII.

Further, to avoid payment towards accrual of interest, the award amount had to be deposited in court under DoT’s instructions of June 1993. As against the award amount of Rs 5.44 crore only Rs 4.03 crore had been deposited without taking cognizance of DoT’s orders. This might result in avoidable payment towards interest also.

2110 paras of internal check were outstanding in nine circles.

Internal check inspections were being conducted by respective Circle Offices annually. The reports contained only routine and procedural irregularities. Effective steps were required to reduce the 2110 paras outstanding in nine circles as exhibited in the table below:

No internal check had been conducted since formation in Malda Division (formed in 1996) under West Bengal Circle and Itanagar Division (formed in 1994) under NE circle. The reasons for non-coverage by internal check in the last five to seven years required to be analysed and such omission checked.

DoT plans to construct only as much accommodation as is needed. However it was noticed that in the accommodation at Makapura, Baroda, in Gujarat Circle constructed in May 1998 as vertical extension of new telephone exchange building (technical and administrative block), an area of 7,843 Sq. ft. out of 14,124 Sq. ft. was in excess of requirement, as indicated by its non-occupation/non allotment for any office till date (July 2001). As a result the expenditure of Rs 22.70 lakh incurred on this extra constructed space was lying idle.

Telecom Civil Wing was established to cater exclusively to the needs of the telecommunications department with a view to ensure speedy execution of civil works in co-ordination with users. However the examination of records of civil divisions revealed lack of co-ordination amongst various wings and also slow execution of works. There was delay at every stage starting from planning to completion and handing over of work. The funds earmarked for capital and maintenance works could not be utilised fully and the ratio of working expenses over cost of work was not maintained within the prescribed percentage. There was no effective internal check control system within the Civil Wing of the department.

The matter was referred to Ministry in November 2001; their reply was awaited as of December 2001.