CHAPTER 5
MAJOR FINDINGS IN TRANSACTION AUDIT

(A)    Loss/Over payment/Short recovery/Other recoveries at the instance of Audit

13    Non recovery of unused cable worth Rs 2.96 crore from contractors

Comment was made in the past

A comment was made in paragraph 21 of the Report of the Comptroller and Auditor General of India for the year ended 31 March 2000, Union Government (Post and Telecommunications), No.6 of 2001 regarding non recovery of unused cable worth Rs 2.02 crore from the contractors by eight Sub Divisional Engineers (SDEs) under General Manager Telecommunications (GMT), Patna telecom district in Bihar circle. This paragraph also highlighted excess payment of Rs 11.49 lakh towards laying charges to the contractors for cable shown laid in excess of cable actually issued to these contractors. The Action taken note on this paragraph was awaited from the Ministry as of December 2001.

Scrutiny of records of GMsT Dhanbad and Jamshedpur Secondary Switching Areas (SSAs) in Bihar circle between October 2000 and March 2001 revealed similar irregularities as discussed below:

Non recovery of unused cable worth Rs 2.96 crore from contractors

The GMsT Dhanbad and Jamshedpur SSAs, formerly in Bihar circle and now allocated to Jharkhand circle, awarded cable laying works to various contractors against estimates sanctioned during 1998-2001. Accordingly 11 SDEs under the above GMsT, issued cable of various gauges measuring 1117.493 km to the contractors against the above works from time to time. But after completion of cable laying work, these SDEs failed to recover unused cable measuring 250.625 km from the contractors resulting in a loss of Rs 2.96 crore as given in table 13.1 below:

Fictitious payment of cable laying charges of Rs 8.46 lakh for cable not laid

Audit scrutiny of measurement books in the following SSAs also revealed that cable shown to have been laid in these books was far in excess of cable actually issued to contractors by the SDEs concerned. This led to fictitious payment of Rs 8.46 lakh of cable laying charges to contractors as shown in table 13.2, without the cable being actually laid.

*    Net of total cable issued to contractor and the balance quantity of unused cable lying with them

The GMT Dhanbad stated in November 2000 that the SDEs concerned were being asked to explain the discrepancies. In his reply, the GMT Jamshedpur, stated in March 2001 that detailed reports were being called for from the respective sub-divisions. Further outcome of the case was awaited as of December 2001.

Keeping in view the seriousness of the irregularities pointed out, the case merits investigation by the Ministry for fixation of responsibility and taking up remedial measures to avoid recurrence of such serious irregularities in future.

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

14    Abnormal delay in finalisation of rates and resultant loss of interest

Placement of purchase order by DoT

Department of Telecommunications (DoT) placed a purchase order in December 1994 on M/s Ericsson Telecommunications Private Limited for procurement of 100k digital local telephone exchange equipment worth Rs 42.06 crore (provisional) for installation at Chennai, Calicut and Delhi.

Full payment made by the CGMs concerned for supply of equipment between January 1995 and February 1996

Downward revision of rates by DoT in December 1998 leading to excess payment of Rs 8.25 crore

Loss of Rs 2.64 crore towards interest

Audit scrutiny of records of Mahanagar Telephone Nigam Limited (MTNL), Delhi and Chief General Managers (CGMs), Chennai Telephones and Kerala Telecom circle between May and November 2000 revealed that MTNL Delhi made payment of Rs 24.35 crore to above supplier between January 1995 and January 1996, CGM Chennai Telephones made payment of Rs 13.20 crore to the above supplier between February 1995 and February 1996 and the CGM Kerala circle made payment of Rs 4.66 crore to the supplier between April 1995 and January 1996 as against 90 per cent of the then existing cost of the equipment. DoT in December 1998 made a downward revision of the rate of the above mentioned equipment after a lapse of four years of placement of purchase order and asked MTNL and the heads of circles concerned to regularise the payments accordingly. This downward revision resulted in excess payment of Rs 8.25 crore by MTNL Delhi and CGMs Chennai Telephones and Kerala Telecom circle. The excess payment could have been avoided, had DoT finalised the rates before the payments were made. Further, the CGMs Chennai Telephones and Kerala circle, even after receipt of DoT’s instructions, took nine and 14 months, respectively, in regularising the payments. Resultantly, the delayed action by DoT and the circles caused a loss of interest of Rs 2.64 crore to the state exchequer as detailed below:

(Rs in crore)

The Ministry stated in November 2001 that the prices of equipment could not be finalised due to the long time taken in submission of material list by the vendor and subsequent vetting by the Switching Planning Cell, circles/field units, which was a lengthy process.

The reply is not tenable because although the supplier delayed in furnishing the material list (furnished in January 1997), the department took nearly two years thereafter in finalising the rates. The units took a further 9 to 14 months in recovering/adjusting the excess payment. Thus, the supplier was given undue benefit of excess payment in the form of interest.

15    Non realisation of insurance claim

GMT Kozhikode sanctioned an estimate in December 1992 for installation of a 3K PRX type exchange equipment by replacing the existing 1000 lines MAX II exchange at Tirur under Calicut SSA of Chief General Manager Telecommunications (CGMT) Kerala circle. DoT in September 1993 allotted a 3k PRX equipment of MTNL Mumbai by decommissioning and diverting an exchange valuing Rs 1.08 crore after depreciation.

PRX exchange equipment was received in damaged condition at Tirur

The equipment was transported to Tirur by road in January 1994 for installation at Tirur, with an insurance cover for Rs 1 crore against theft, damage etc., with New India Assurance Company Limited. An insurance premium of Rs 0.36 lakh was paid before transportation of exchange equipment. The equipment was received at Tirur in January 1994 in an extensively damaged condition and as a result the PRX exchange could not be commissioned. The Insurance company, in response to the department’s notification about the damages, did not accept the insurance claim for want of details of items damaged and cost of the PRX equipment.

Insurance company rejected departmental claim of Rs 1 crore

Audit scrutiny of the records of GMT Calicut in December 1995 revealed that the Divisional Engineer (DE) Installation Calicut took up the matter with GMT Mumbai in June 1995 for supply of the cost particulars and copies of project estimates for claiming insurance claim i.e. after a lapse of 17 months of the receipt of the damaged equipment. On their receipt, the GM Calicut furnished the details to the insurance authorities in June 1995. However, owing to department’s inability to supply the complete details, such as invoice value of parts/components damaged and cost of repair of damaged equipment, the Insurance Company in April 1997 turned down the department’s claim for Rs 1 crore, filed by them in January 1996.

In July 2000 the equipment was declared obsolete and unsuitable to be commissioned in the network. Thus, failure of the department to provide the details required by the Insurance company led to rejection of the insurance claim, in addition to idling of equipment for over seven years (January 1994 to July 2001) which finally had to be declared obsolete for the purpose of disposal.

The CGMT in his reply stated inter alia in April 2001 that they made all out efforts to set right the damage to the equipment but in vain. He added that pending settlement of the insurance claim, scrapping of the obsolete equipment was kept in abeyance.

The reply is not acceptable since the GMT Calicut had taken more than 17 months to initiate action for obtaining the necessary details required by Insurance company. Failure to supply these details even after a lapse of over seven years led to non-realisation of insurance claim of Rs 1 crore and idling of the equipment which led to its further deterioration.

The Ministry replied in November 2001 that the Calicut SSA had been instructed to file before the Hon’ble High Court of Kerala both writ petition and civil suits for claiming the insurance claim, with petition for condonantion of delay before the local civil court, and that the progress would be intimated after filing the suit.

16    Excess payment of service charges

Article 285 of the Constitution of India exempted the properties of Government of India from payment of taxes imposed by local authorities in the States. However, the Government of India, Ministry of Finance decided in May 1954 to compensate Local Bodies in lieu of taxes and allowed them to levy service charges for specific services such as provision of water, drainage and scavenging.

Service charges were levied as a percentage of the net rentable/ annual value of the property

The service charges were levied as a percentage of the net rentable/annual value of the property. The annual value of the property was reckoned at nine per cent of the capital value of the property concerned. Hence the capital value had a direct bearing on the calculation of service charges.

PGMT Lucknow made excess payment of service charges of Rs 71.23 lakh due to wrong computation of capital cost

Scrutiny by Audit of the records of Principal General Manager Telecommunications (PGMT) Lucknow in May 2000 disclosed that he made excess payment of Rs 71.23 lakh towards service charges due to adoption of exaggerated capital cost by Lucknow Nagar Nigam and Lucknow Jal Sansthan in respect of the properties given in table 16 below.

When the overpayment was pointed out by Audit in May 2000 the PGMT Lucknow replied in July 2001 that the Nagar Nigam and Jal Sansthan authorities had been addressed to refund the excess amount paid. The amount was yet to be recovered (July 2001).

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

17    Loss of Rs 62.42 lakh in unauthorised procurement of unapproved version of 4 channel Very High Frequency systems

Under the terms and conditions of the Manual of Procurement of Telecom Equipment and Stores by DoT, only Indian companies registered to manufacture the tendered item in India and who had obtained Type Approval Certificate (TAC) from Telecom Engineering Centre (TEC) and had successfully executed commercial orders issued by DoT were eligible to bid in the tender. The purchase orders were to be placed on bidders whose offers were found technically, commercially and financially acceptable. These conditions were applicable in respect of telecom equipment and stores which were the subject of central purchase by DoT or the CGM, Telecom Stores at Kolkata. Any departure from the conditions was to be made in very exceptional cases under the authority of Telecom Commission. With decentralisation of procurement of stores by DoT from November 1997 onwards, CGMs of Telecom circles have been authorised to procure certain items by adhering to the above procedure.

Loss of Rs 62.42 lakh due to pre-mature failure of equipment

The CGMT Andaman and Nicobar circle placed five purchase orders between November 1995 and June 1998 on M/s Apel Radio Communication Systems Private Limited Secunderabad for procurement of 18 numbers of 4 channel (2+2) Very High Frequency (VHF) systems worth Rs 62.42 lakh against which he received the supply of these equipment between January 1996 and August 1998.

Procurement of unapproved version of equipment

Audit examination of records of the CGMT Andaman and Nicobar circle in December 1999 revealed that CGMT placed these purchase orders in violation of procurement procedure and for the systems which were neither approved by DoT nor had type approval of TEC. Even the rates and suppliers’ names were not approved by DoT. Thus, procurement of unapproved version of these equipment from an unapproved firm led to irregular and unauthorised expenditure of Rs 62.42 lakh during 1996-98. Further, this expenditure also proved infructuous as all these systems became faulty soon after working for a short period after their installation during 1996-99.

The CGMT Andaman and Nicobar circle, in his reply in March 2000, admitted that the company was having type approval only for single channel VHF system and that he himself had upgraded the said system for 4 channel. He added that the systems purchased were not faulty at the time of procurement as these were passed by the quality Assurance Wing during pre-despatch inspection.

The Ministry in their reply stated in December 2001 that earlier the office of the CGM, Andaman and Nicobar circle, Port Blair was under the control of West Bengal Telecom circle and the procedure/tender approved by that office was adhered to by the office of the CGM Andaman and Nicobar circle. They added that these systems were procured on the basis of approval granted by Telecom Directorate to North East circle for procurement of 2/4 channel VHF system.

The replies are not acceptable because the procurement was not only in contravention of the Ministry’s own instructions for procurement of equipment from companies having type approval from TEC, but was also in violation of the delegation of powers. The Ministry will also need to enquire into the circumstances which led to the Quality Assurance Wing passing the systems which did not have either the type approval or the permission of the Telecom Directorate.

18    Non recovery of compensation of Rs 55.17 lakh for damage caused to departmental property

Departmental rules provide for claiming compensation for damages caused to the departmental property

Departmental rules provide that when a departmental property is damaged by an outside agency compensation should be claimed from the party concerned. Further, the compensation claim should be levied as per the provisions taking into account the actual cash outlay and value of stores utilised in repairing the damage, along with departmental overheads.

Demand notes issued for Rs 16.78 lakh as against Rs 69.50 lakh

Scrutiny of records of the Telecom District Manager Bilaspur in Madhya Pradesh circle by Audit in January / February 2001 revealed that in six cases damage was caused to departmental cables during 1995-2000 by Bharati Telenet, Public Health Engineering and an OFC contractor. The TDM, however, wrongly issued demand notes for Rs 16.78 lakh to these agencies in four cases based on estimated cost, as against Rs 69.50 lakh recoverable as per rules. In the remaining two cases the TDM did not issue demand notes for Rs 2.45 lakh (June 2001).

When this was pointed out by Audit in February 2001, the department agreed to issue supplementary demand notes for Rs 55.17 lakh for non/short recovery of compensation.

The details of supplementary demand notes and recovery particulars were awaited as of December 2001.

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

19    Other recoveries at the instance of Audit

DoT permitted payment of advance to ITI/HTL against purchase orders

Advance to be adjusted/set off on or after delivery date, but within the same financial year

Department of Telecommunications (now Bharat Sanchar Nigam Limited-BSNL) issued guidelines in February 1996 for payment of advances to M/s Indian Telephone Industries Limited (ITI) and M/s Hindustan Teleprinters Limited (HTL) against purchase orders placed by DoT, as a temporary measure to help to tide over their liquidity crisis for the time being (i.e., 1996-97). The department further stipulated that it would be the responsibility of the Chief Pay and Accounts Officer (CPAO)/Accounts Officer (AO) Stores to recover the outstanding advance by 31 March 1996 in order to ensure that the fiscal deficit of the Government was not adversely affected. These guidelines, revised in August 1996 and December 1996, further stipulated that the advance would be subject to set off on or after the due date of delivery but within the same financial year against any other dues of the company. The advance amount of 50 per cent was enhanced to 75 per cent in January 1997. It was further laid down in November 2000 that in cases of delay in delivery where advances had been paid and were outstanding, advances against any other purchase orders should be withheld till delivery of the delayed purchase order was completed. This facility of advance was extended year after year.

Scrutiny of the records of DoT in July 2001 revealed that advances amounting to Rs 52.72 crore, payable to DoT, were outstanding as on 31 March 2001 against M/s HTL, as shown in table 19(i)(a) below:

(Rs in crore)

Result of a review of the performance of the company indicated that the company consistently performed better and earned profits during the years 1997-98 to 1999-2000.

BSNL attributed non-adjustment of advance to weak financial position of HTL

On this being pointed out, BSNL in their reply given in September 2001 accepted the non-adjustment of advances but stated that the profits of the company earned could be attributed only to their having received advances from the department by virtue of which they could manage to run their affairs smoothly. They further added that in the absence of this facility, these units would have been shut down or declared sick resulting in reference to the Board for Industrial and Financial Reconstruction.

The position of cash and bank balances, reserves and surplus and profits of the company is indicated below. It revealed that the liquidity crisis of this company had blown over and so continuation of payment of advances to the Public Sector Undertakings needed to be reviewed.

(Rs in crore)

Outstanding advances recovered with interest from HTL

The Ministry while accepting the facts stated in December 2001 that entire outstanding advance alongwith interest had been recovered from M/s HTL

Special study group of P and T department constituted for the needs of Defence services

The expenditure of study group was to be shared by Ministry of Defence and Ministry of Communications

Ministry of Communication in September 1979 constituted a special study group of the P and T Department for a period of one year to draw up a transmission plan to meet the needs of Defence Services. The cell started functioning from February 1980 and its tenure was extended from time to time up to March 1983. Thereafter it started functioning as a regular cell. The expenditure on account of pay and allowances, travelling allowance and other miscellaneous expenditure of officers and staff deputed by the P and T department was to be borne by the Ministry of Defence up to March 1983. Thereafter cost of the regular cell was to be shared equally between Ministry of Defence and Ministry of Communications.

DoT failed to raise bills in time and pursue the matter resulting in non-realisation of Rs 49.24 lakh

Scrutiny of records of BSNL, New Delhi (erstwhile DoT) in June 2001 disclosed that up to 1994-95, DoT regularly raised the claim for 50 per cent establishment charges and the Ministry of Defence paid the same. Thereafter, DoT preferred the claims belatedly and the dues were not realised resulting in non-realisation of Rs 49.24 lakh for the period 1995-2001.

Admitting the facts the Ministry stated in October 2001 that the entire amount was realised in July/October 2001.

Payment of mobilisation advance of Rs 8.92 lakh to TCIL

General Manager Telecom (GMT) Kolhapur in Maharashtra circle awarded cable duct work on eleven different routes to Telecommunications Consultants India Limited (TCIL) between March 1997 and January 1998. TCIL in turn awarded the work on these routes to five different contractors between April 1997 and January 1998. GMT accordingly paid in March 1998, mobilisation advance of Rs 8.92 lakh, being 12.5 per cent cost of work and Rs 21.57 lakh on account of 90 per cent cost of PVC pipes.

Non-recovery of outstanding advance of Rs 24.35 lakh even after cancellation of respective works

Examination of records of GMT Kolhapur by Audit in January 2000 revealed that GMT, in May 1998, cancelled the works as the same were not commenced till then. Out of Rs 30.49 lakh advance paid to TCIL, GMT adjusted Rs 6.14 lakh only between September 1998 and February 1999, leaving a balance of Rs 24.35 lakh.

On this being pointed out by Audit in January 2000, the GMT recovered the balance amount in June /July 2000.

The Ministry confirmed in September 2001 that the circle had recovered the entire amount.

(B)    Infructuous expenditure

20    Infructuous expenditure of Rs 2.19 crore due to contracting excessive power load

Comments were made in the past

Comments regarding infructuous expenditure due to contracting excessive power loads were made in the Reports of the Comptroller and Auditor General of India for the years ended 31 March 1998 and 1999, Union Government (Post and Telecommunications) No.6 of 1999 and 2000 under paragraphs 39 and 28.3 (ii), respectively.

Serious objections by PAC on such payments

Earlier Public Accounts Committee (PAC) also took serious note of such cases and as a follow up, the Ministry in April 1987 issued necessary instructions to the heads of circles to review periodically the contracted power demands and modify the same based on actual requirements. The Ministry again reiterated these instructions in October 1996.

Issuance of repeated instructions by the Ministry

The Ministry, in response to the above mentioned paragraphs of the Reports of the Comptroller and Auditor General of India, again issued instructions to the heads of circles in October 1999 to review their power requirements to avoid such infructuous expenditure. Despite all this, there was little improvement in this area.

Recurring cases of payment of minimum demand charges and resultant infructuous expenditure of Rs 2.19 crore

Scrutiny of records of the Chief General Manager Chennai Telephones, Dy. General Manager, General Managers Telecom of five Secondary Switching Areas in Tamil Nadu circle and General Manager Telecom, Dhanbad in Bihar circle between September 1999 and November 2000 showed that these officers failed to review their power demands although the actual consumption was far below the contracted demand, and they continued to pay minimum demand charges. This led to an infructuous expenditure of Rs 2.19 crore during April 1993 to March 2001. Details of these cases alongwith the reply given by the respective circles/units are given in the Appendix XXVIII.

The case needed investigation by the Ministry for fixation of responsibility as it reflected utter disregard of the instructions of the PAC.

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

21    Wasteful expenditure in procurement of defective power plants

CGM TS Kolkata placed purchase orders on two firms for supply of power plants

Chief General Manager Telecom Stores Kolkata placed two purchase orders in June 2000 on M/s Uptron Powertronics Ltd New Delhi and on M/s Shreetron India Ltd New Delhi for supply of 320 Single Mode Power Supply (SMPS) power plants (3+1) 100 Amps to various circles at the rate of Rs 2.69 lakh per power plant. Out of these, 60 power plants supplied by Uptron Powertronics Ltd and 24 by Shreetron India Ltd were allotted to Rajasthan circle, and were installed during the period 2000-01.

84 power plants supplied to Rajasthan circle were found defective

CGMT Jaipur brought to the notice of BSNL/CGMTS without success

Scrutiny of records of CGMT Rajasthan circle, Jaipur in June 2001 revealed that all the 84 power plants supplied by these firms were found to be defective, having major design problem, and as such the same could not be commissioned. Even where these were commissioned after attending to the fault, the fault recurred immediately. The CGMT Rajasthan circle intimated to the BSNL in March 2001 about non-functioning of the power plants. While bringing to the notice of CGM Telecom Stores, Kolkata in May 2001 about the supply of defective power plants, the CGMT asked him to place fresh supply order at the cost of the suppliers. Again in June 2001 the CGMT approached the Chairman and Managing Director BSNL to intervene in the matter. The 84 power plants supplied, however, were neither repaired /put to use nor lifted by the suppliers so far (June 2001).

Wasteful expenditure of Rs 2.15 crore in procurement of defective power plants

As a result, the entire expenditure of Rs 2.15 crore, being 95 per cent of the total amount paid for the procurement of the 84 defective power plants became wasteful.

While accepting the facts and figures, the Ministry stated in December 2001 that the power plants were supplied to Rajasthan circle after clearance from the Quality Assurance circle. However, the items were found defective later on. Despite best efforts, the firms failed to replace/repair the faulty power plants. Finally the requirement of Rajasthan circle was met by the supply from ITI. The Ministry added that bills worth Rs 3.85 crore alongwith valid bank guarantee were withheld and the recoverable amount would be adjusted against the withheld amount.

(C)    Idle/Unproductive expenditure

22    Defective planning and resultant blocking of funds

Sanction of project estimate in 1991 with a projected revenue of Rs 1.73 crore per annum

CGM 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.

Placement of purchase order and receipt of supply in 1996

Against the above mentioned project, DoT placed a purchase order in January 1996 on M/s Indian Telephone Industries for procurement of 6 GHz 140 Mbs microwave system (1+1) along with the other associated equipment and accessories for Rs 21.21 crore for various routes, including for Kolhapur-Belgaum route. The supply of main equipment and radio equipment was received in May 1996 and June 1998 respectively.

Change in specification not intimated by DoT to field unit which required additional space diversity equipment for its commissioning

Delay in mooting the proposal for procurement of additional space diversity equipment

Examination of records of Director (Telecom Projects) by Audit in February and April 2001 revealed that the system, as per original survey report, was to work in non-cross polarization interference cancellor (non-XPIC) environment i.e. one polarization only to be used to carry traffic and accordingly space diversity in some of the hops was provided for as per the existing guidelines. However, the XPIC facility of the equipment supplied could use both polarization to carry telephone traffic which needed provision of additional space diversity in hops by providing additional space diversity equipment. But this subsequent change in specification of the equipment was not brought to the notice of the field units by DoT. Thus the equipment received in May 1996 was installed in October 1998 on receipt of Radio equipment in June 1998, but this system could not be commissioned up to April 2001 for want of additional space diversity equipment. The Deputy General Manager (Project) Western region in April 2001 had taken up with higher authorities, the proposal for supply of space diversity equipment for commissioning of above system. This would further delay the commissioning of this project.

Blocking of funds of Rs 3.66 crore besides interest of Rs 0.64 crore and loss of potential revenue of Rs 3.46 crore

Thus, the delay of over four years by DoT in placing the order for procurement of equipment coupled with subsequent change in the specification led to non-commissioning of the system for almost a decade after the sanction of the project. All the above delays led to blocking of funds of Rs 3.66 crore for over three years besides loss of interest of Rs 0.64 crore on the blocked amount and loss of potential revenue of Rs 3.46 crore as per projection made in the project estimate since the date of installation of equipment in October 1998 till September 2000.

The CGM Western Telecom Projects Mumbai stated in July 2001 that the original survey report of Pune-Kolhapur-Belgaum 6 GHz digital microwave route was prepared with the guidelines existing then and meant for non-XPIC environment. However, the equipment received in the field was of XPIC type. The Pune-Kolhapur hop was commissioned in December 1999 by diverting additional equipment from Kolhapur-Belgaum section. The Kolhapur-Belgaum section needed additional space diversity equipment for commissioning of the scheme as per revised guidelines issued by the DoT in June 1999. The requirement of additional equipment was communicated to Telecom Commission. As OFC was already commissioned on this route, there was no loss of traffic.

The reply of the CGM Western Telecom Projects is not tenable because as soon as the equipment was supplied with XPIC facility between May 1996 and June 1998, the CGM should have taken up the matter with the DoT at that time itself. DoT also on the other side failed to intimate its field units regarding the change in specification. This indicated lack of proper coordination between the Telecom Commission and their field units. Further, the contention of the department that there was no loss of traffic is not acceptable because the project estimate envisaged revenue of Rs 1.73 crore per annum.

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

23    Unfruitful expenditure in procurement of tower material and laying of foundation

Non-observance of codal provision before taking possession of land

Departmental rules provide that before land is purchased, the suitability of the site should be examined and a land suitability certificate should be given jointly by a Telecom Engineer, an Architect and a Civil Engineer. While giving the certificate, the Telecom Engineer should ensure inter alia that the plot is free from legal encumbrances and encroachment. Scrutiny of records of the Telecom District Engineer (TDE), (now General Manager Telecom, Darbhanga), between June 1999 and March 2001 revealed how problems arose due to non-fulfillment of the above requirement.

Projected annual profit of Rs 17.55 lakh on completion of project.

The Chief General Manager Project East Zone Kolkata sanctioned a project estimate in August 1995 for the installation of 7 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.

Scrutiny of records of GMT Darbhanga revealed that at the request of the TDE (now GMT) Darbhanga, the District Magistrate Madhubani provided in February 1993, a portion of land with three rooms for installation of electronic exchange at Benipatti. The TDE Darbhanga, however, failed to follow the codal provisions for taking over the land/building. It turned out that the title to the land/building was disputed and as a result the TDE could not obtain the title and get the land registered in the name of the department. This led to the following problems:

Even before the dispute could be settled, the Vyapar Mandal, an organisation of the State Government raised a claim of Rs 20 lakh in June 1998 towards the cost of this land/building; the department had not paid the same as of April 2001.

Unfruitful expenditure of Rs 11.48 lakh on foundation and erection work

When the erection work of tower was in progress, in January - February 1998, the Vyapar Mandal under the Agriculture department of the State Government intervened and stopped the work stating that one leg of the proposed tower was allegedly falling in their land. This had rendered the expenditure of Rs 11.48 lakh on foundation/erection work, shifting of tower material from site of work to stores and labour charges unfruitful.

Idling of material worth Rs 18.63 lakh

The TDE received the supply of tower material worth Rs 18.63 lakh from Telecom factory Kolkata between January and September 1997, but because of dispute in the title of the land/building, this material could not be put to use which led to blocking of funds to that extent.

Loss of potential revenue of Rs 36.56 lakh

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. This led to a loss of potential revenue of Rs 36.56 lakh up to September 2000 based on the projections made in this project estimate.

Thus 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 an unfruitful expenditure of Rs 30.11 lakh on tower material and civil work, besides loss of potential revenue of Rs 36.56 lakh.

The Ministry stated in their reply in November 2001 that getting the land allotted by State Government was a long drawn process. Since this was not private land, there was no risk involved in commencing the works before formal transfer of title, which takes 5-10 years in Bihar. There was no dispute between 1993-98. Now the dispute was almost resolved and Vyapar Mandal agreed to transfer the land to the department on payment of Rs 20 lakh. Since the dispute could not be resolved within reasonable time, the material were shifted to Maner microwave station to save expenditure towards guarding of materials. The proposed 7 GHz digital microwave system was planned as an alternative route in addition to OFC system commissioned in May 2001.

The reply of the Ministry is not tenable because when District Magistrate Madhubani allotted the land/building in February 1993 the department ought to have clearly enquired about the title and cost. Failure to do this led to unfruitful expenditure on construction of tower foundation/erection work and shifting of tower material. Further, failure of the department to ascertain the position about the encumbrance and cost of land before commencement of the project resulted in Vyapar Mandal demanding Rs 20 lakh in May 1998 based on the cost prevailing in 1998 and not the price prevailing in 1993. Also, the contention of the Ministry that the microwave system was planned as an alternative to OFC is not convincing because the OFC system was commissioned only in May 2001 and 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. Because of the delay the department suffered loss of potential revenue of Rs 36.56 lakh.

24    Unproductive investment on electronic telex exchanges

Due to introduction of better modes of communications such as fax, data modems and increased Subscriber’s Trunk Dialing, Public Call Offices, telex traffic and waiting list for new telex connections in the country as a whole declined steadily since 1990-91 and 1991-92 respectively as shown below:

Sharp declining trend in the demand for new telex connections

The capacity utilisation of EDX equipment drastically came down from 91 per cent in April 1995 to 11 per cent in September 2000

As a result of all round decrease in the number of working connections, capacity utilization of Electronic Data Exchange (EDX) equipment commissioned at Bhopal too, slumped from 91 per cent in April 1995 to 11 per cent in September 2000 with zero waiting list as shown in table 24 below:

Unproductive expenditure of Rs 5.60 crore due to gross under utilisation of EDX

Scrutiny of records of CGMT Madhya Pradesh circle by Audit in November 1997 revealed that the CGMT received the supply of 650 lines EDX equipment worth Rs 5.60 crore in August 1994, against purchase order placed by DoT in June 1991 on M/s Electronic Corporation of India Limited.

The Telecom authorities in Madhya Pradesh circle, however, failed to notice the above mentioned downward trend in the telex traffic/demand and the GMT Bhopal upgraded the telex exchange at Bhopal by 650 lines EDX in May 1995 in replacement of 200 lines Electromechanical telex exchange. There was nothing on record to show whether the CGMT made any efforts to take up the matter with the DoT for cancellation or diversion of the exchange to other needy units.

The decision to commission EDX equipment of capacity substantially in excess of actual requirement, despite the declining trend in the requirement, led to unproductive expenditure of Rs 5.60 crore.

The Divisional Engineer (EDX) Telex Bhopal stated in October 1998 that the supply order for EDX (300 local plus 350 trunk) was placed by DoT. This would indicate that DoT, too, did not analyse the trends in the light of technological changes and take corrective action.

Failure to assess properly the actual requirement of capacity of the above equipment, thus, led to procurement of higher capacity exchange equipment which remained grossly underutilised.

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

25    Procurement of high bit rate digital subscriber line system and their utilisation

High bit rate digital subscriber line system (HDSL) is a technique which allows high speed data transmission in the local net work through existing copper pairs, by providing 64 kbps channel, supporting voice, FAX, and data services. HDSL allows subscriber connectivity over a distance of about 4.5 km.

DoT placed order for 1345 HDSL systems worth Rs 12.59 crore

DoT invited tender in January 1997 for procurement of 2566 HDSL system for supply to 22 circles. It opened the tender in May 1997 and placed Purchase Orders (POs) in May/September 1999 on three firms for supply of 1345 system at a total cost of Rs 12.59 crore with a delivery schedule of nine months after the placement of POs.

Delay of 696 days in placing the purchase orders

Scrutiny of records of DoT in April/May 2001 disclosed that it took 876 days in placing the purchase orders as against the stipulated period of 180 days as detailed below:

*    According to the department’s manual of procurement of telecom equipment and stores.

Non- consideration of reduction in Customs duty during 1998-99 resulted in excess payment of Rs 20.70 lakh

Meanwhile, Customs duty on parts of telecom equipment was reduced from 43.96 per cent in 1997-98 to 22 per cent in 1998-99. The department, while finalising the tender opened in May 1997, failed to take the reduction in Customs duty into consideration at the time of placement of POs. This resulted in excess payment of Rs 20.70 lakh.

The Bharat Sanchar Nigam Limited (BSNL - erstwhile DoT) while accepting the delay of 696 days i.e. over 23 months, stated in June 2001 that the HDSL tender was invited for the first time and lack of sufficient experience with them led to the delay. BSNL added that after the case was pointed out by Audit, they issued instructions to circles in June/August 2001 to recover the excess payment.

451 systems out of 995 systems received, valuing Rs 3.44 crore lying unutilised

Audit, with a view to examine the utilisation of the equipment carried test check in 12 out of 22 circles viz., Andhra Pradesh, Bihar, Gujarat, Karnataka, Kerala, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Chennai Telephones and Uttar Pradesh (West). This revealed that out of 995 systems received, 321 systems were utilized up to June 2001 (information regarding utilisation of 223 systems from Karnataka, Kerala and Tamil Nadu circles was awaited). Balance 451 systems valuing Rs 3.44 crore were lying unutilised due to non-allocation of systems to the units, failure of the systems to function beyond a range of three km, supply of faulty systems, delay in dial tone, auto switch off etc as given in the Appendix.-XXIX.

Additional order placed

While on the one hand the department was not able to fully evaluate the performance and utilise the systems already procured, on the other it placed an order in December 2000 for another 1301 HDSL systems valuing Rs 13 crore, which were received in June 2001, putting a question mark on the efficient utilisation of these 1301 systems.

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

26    Idling of raw material and semi finished goods worth Rs 2.32 crore due to unplanned bulk procurement of raw material

Comment was made in the past

A comment was made in paragraph 13.5 (iii) of the Report of the Comptroller and Auditor General of India for the year ended 31 March 2000, Union Government (Post and Telecommunications) No.6 of 2001 regarding unused raw material worth Rs 3.36 crore lying in stock for over five years. The Ministry’s reply thereto was awaited as of December 2001.

Procurement of raw material is done as per the plan/demand

As per the procedure laid down, DoT, before finalisation of production programme of telecom factories for a particular financial year, invites proposals from Chief General Managers of Telecom Factories, normally during the month of October/November of the preceding year. Simultaneously, DoT calls for forecast demand for various products from its planning cells. Based on this information, DoT prepares a tentative production programme. After its approval by the competent authority, the production programme is circulated to all concerned, including the heads of circles. The CGM Telecom factory concerned procures the raw material based on the production programme/availability of orders.

Audit scrutiny of the records of Manager, Telecom Factory (TF) Bhilai in December 1999 revealed yet another case of excessive procurement of raw material between 1995 and 1998 for manufacture of 60/80 metre Triangular Tubular Hybrid (TTH) towers, which led to blocking of funds of Rs 2.32 crore as brought out below.

Procurement without ascertaining the demand

In order to meet the requirements of 60/80 metre TTH tower by various field units, DoT approved the production plan from time to time for the manufacture of these towers by TF Bhilai. The Manager, TF Bhilai, however, without ascertaining the actual requirement of the towers, either from the user field units or from DoT, went ahead with bulk procurement of raw material during 1995-98 for manufacture of 95 towers as per the DoT’s approved production programme, but he managed to produce and sell only 73 towers to field units during 1995-2000, as indicated below, to the extent of demands received.

As shown above, the procurement was not in tune with the requirement. To illustrate, in 1997-98, though there was a surplus of 35 towers at the end of 1996-97 without any specific orders the factory procured material for manufacture of another 35 towers.

Phasing out of 60/80 TTH tower due to space constraint

The factory, due to lack of demand and a decision taken by the DoT to introduce 40 metre narrow base tower in place of 60/80 TTH towers, on account of space constraints, stopped producing TTH towers.

Blocking of funds of Rs 2.32 crore on unnecessary procurement of raw material

Thus, procurement of raw material in large quantities, purely on the basis of production plan, without co-relating it to actual demand, led to idling of surplus raw material and semi finished goods worth Rs 2.32 crore between 1995 and 2001.

The Ministry in September 2001 while accepting that as per the procedure laid down, the CGM Telecom factory concerned had to procure raw material based on the production programme/availability of the purchase orders, stated that procurement of raw material could not be kept pending till availability of orders; this could lead to the work force remaining idle for a major portion of the year. The Ministry further stated that a decision was taken in Quarterly Performance Review meeting held on 25 June 2001, to issue fresh letter to all heads of circles to explore possibility of utilising the existing surplus material. The fact, however, remains that the chances of utilisation of above surplus raw material, lying in semi finished condition, are remote as TTH towers for which this material was procured, were no longer in use. Moreover, the department would have to spend further towards their inventory carrying cost till they are disposed of.

27    Wasteful expenditure of Rs 2.22 crore in procurement of testing instruments

DoT incurred wasteful expenditure of Rs 2.22 crore in procurement of testing instruments for I-NET phase II after one year of commissioning of the I-NET. Further, DoT encashed the performance bank guarantee of Rs 18.90 lakh only at the instance of Audit.

I-NET is based on packet switching systems, and enables error free transmission with dynamic re-routing of calls (in case of route failure and congestion) and inter connecting of computers/terminals of different speeds and protocols. I-NET phase I was commissioned in 1991.

DoT placed two purchase orders in November and December 1998 on two firms for supply of Bit Error Rate (BER) testing instruments and Packet Assembly and Disassembly (PAD) for I-NET Phase II at a cost of Rs 4.81 crore.

Scrutiny of records of DoT by Audit during May to September 2000 revealed the following irregularities:

Member (T) accorded administrative approval in December 1994

DoT procured the testing instruments after more than one year of commissioning of I-NET phase II

Wasteful expenditure of Rs 2.22 crore

The testing instruments were required for installation, testing and commissioning of Packet Switch Public Data Network (PSPDN) during 1995-97 for which Member (T) accorded administrative approval for procurement in December 1994. The I-NET Phase II was commissioned in phases between March 1996 and April 1998. However, DoT procured these testing instruments and PAD during 1999, after more than one year of commissioning of PSPDN for I-NET Phase II, defeating the very purpose of procurement. The prospect of their utilisation in the near future was also bleak, as these instruments were specifically procured for installation, testing and commissioning of PSPDN for I-NET Phase II. This resulted in wasteful expenditure of Rs 2.22 crore on the procurement of these instruments.

In reply to audit, the department stated in November 2000 that these testing instruments were not only required during installation, testing and commissioning of main PSPDN switches, but were also required for regular working. The contention of the department is not acceptable because at the time of purchase of these instruments was decided upon, the only objective stated was to use them during testing and commissioning; there was no mention of any requirement during the regular working. The department failed to ascertain from CGM Data Network, the user wing, about its requirement before actually placing the purchase orders. Interestingly, the department procured these instruments, when the subscriber base was showing a declining trend.

27.2    Non-encashment of performance bank guarantee of Rs 18.90 lakh

DoT got encashed the performance bank guarantee of Rs 18.90 lakh at the instance of Audit

DoT placed a purchase order in November 1998 on M/s Wandel and Goltermann for supply of Analogue Tester by May 1999. The firm neither supplied the items even after more than one year of the scheduled date of delivery nor sought for any extension of time for supply. As such, the department should have short closed the purchase order and encashed the performance bank guarantee of the firm for non performance of the contractual obligations.

When pointed out by Audit, the bank guarantee for Rs 18.90 lakh was encashed (November 2000).

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

28    Idling of pulse code modulation multiplexing equipment

Procurement of pulse code modulation multiplexing equipment and racks even after digitalisation of exchanges led to idling of equipment worth Rs 2.10 crore.

Multiplexing equipment is used in communication networks to connect the digital stream with telephone exchanges.

DE Telecom Projects received 128 MUX and 64 racks based on DoT’s order

DoT placed a purchase order in 1993 for procurement of 168 units of multiplexing equipment (MUX) and 20 racks for 13 GHz Microwave system for Kerala circle, against which Divisional Engineer (DE), Telecom Transmission Projects, Trivandrum received 128 units of Primary MUX and 64 racks during March - April 1994.

MUX and racks not used due to digitalisation of network

Idling of equipment worth Rs 2.35 crore

Audit scrutiny of records of DE Telecom Transmission Projects, Trivandrum in May 2000 revealed that DE had a stock of 75 units of primary MUX and 26 racks at the time of placing the purchase order. Thus the total stock of primary MUX and racks rose to 203 and 90 respectively. With digitalisation of the network, 2 MB stream could be connected directly to the telephone exchange and as a result, the Microwave system for which these primary MUX and racks were procured in 1994, were commissioned in 1995-96 without using these equipment. Consequently, equipment worth Rs 2.35 crore remained lying idle since their procurement in March 1994 upto November 2000.

When this was pointed out by Audit, the Chief General Manager, Southern Telecom Project replied in April 2001 that out of 203 MUX and 90 racks, they utilised 13 MUX and 7 racks amounting to Rs 0.25 crore elsewhere; efforts were on to divert the balance equipment worth Rs 2.10 crore to other units, but no fruitful results had been obtained.

The reply is not acceptable because the department was aware by 1992-93 itself of the fact that the digital exchanges could accept 2 MB stream directly, as digital exchanges were introduced some time during this period.

Thus, lack of watch on changing requirements in view of technological developments led to idling of equipment worth Rs 2.10 crore.

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

29    Non utilisation of land

Land acquired in 1984-85 at a cost of Rs 17.87 lakh for construction of administrative building

District Manager Telecom, Lucknow, acquired a piece of land at Laplace, Lucknow from Lucknow Development Authority (LDA) in 1984-85 at a cost of Rs 17.87 lakh for the construction of an administrative building and microwave complex. The building was to house various offices of Lucknow Telephones, which were then housed in rented buildings. The department took possession of the land only after the open drain was filled with mud by LDA in September 1987.

Department failed to construct the building within validity period

Three years delay in according AAES

Scrutiny of records of Principal General Manager Telecom (PGMT), Lucknow, in February 2000 disclosed that the department in October 1989 submitted the drawings for construction of the administrative block for approval by LDA, which was rejected in December 1989, as it was not as per the plan. The department submitted the revised drawings in November 1992, which were approved by the LDA in November 1994. However, the department failed to construct the building within the validity period of the approved drawings, which expired in November 1998. Meanwhile, the approach road to the plot was blocked by LDA. This fact came to the notice of the department only in July 1998 during a visit to site by the Executive Engineer, Telecom Civil Division, Lucknow. The department took up the matter with LDA in September 1999, but the blockade had not been cleared up to August 2001. The DoT issued the administrative approval and expenditure sanction (AAES) for the construction of administrative office building at Lucknow in September 1998, i.e after more than three years of approval of the plan by LDA in November 1994. In June 2001, the LDA extended the validity of the approved drawings till November 2001.

DoT’s inordinate delay in issuing the AAES coupled with failure of PGMT, Lucknow, to pursue the matter with LDA for clearance of the blockade to the approach road, led to non-construction of the building. This in turn, resulted in continuance of the offices in rented buildings at a rental of Rs 1.24 crore for the period April 1996 to September 2000. The rent of Rs 15.35 lakh for the period October 2000 to March 2001 was also paid. Further, the possibility of completing the construction of the building before expiry of extended period was remote, as the LDA had not yet (August 2001) cleared the blockade to the approach road. Thus, the very purpose for which the land was purchased 16 years ago could not be accomplished.

The PGMT Lucknow in his reply stated in November 2000 that the matter was being taken up with LDA for provision of approach road.

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

30    Unplanned procurement of pulse code modulation cable

CGMT Orissa circle could not utilise PCM cable worth Rs 1.13 crore procured during 1995-96, reportedly due to non-supply of PCM systems by DoT.

Pulse Code Modulation (PCM) cables were required for inter-connecting telephone exchanges within a radius of 10 km of the short distance charging centre, with the help of PCM systems. Chief General Manager Telecommunications (CGMT) Orissa circle, Bhubaneswar procured 301.297 km of PCM cable at a cost of Rs 3.08 crore from two private firms, between July 1995 and July 1996. Retail Telecom Store Depot (RTSD) Bhubaneswar, being the consignee, received the cable between September 1995 and July 1996.

Scrutiny of records of RTSD Bhubaneswar and 22 sub divisions in October 1999 and May 2000 disclosed that out of 301.297 km of PCM cable received, 109.446 km of cable, worth Rs 1.13 crore was lying unutilised at RTSD and 13 sub divisions as indicated below:

36.32 per cent of cable worth Rs 1.13 crore lying unutilised at RTSD Bhubaneswar and 13 sub divisions

With the advent of OF cable, the possibility of utilisation of not only the PCM cable lying in stock but also the PCM cable already issued/laid was remote. This gets support from the fact that the DoT did not accede to the request of the CGMT for supply of 91 PCM systems for 1995-97, as ascertained during an audit enquiry.

Thus, lack of proper planning led to non-utilisation of 109.446 kms of PCM cable worth Rs 1.13 crore lying at RTSD Bhubaneswar and 13 sub-divisions, putting a question mark on their utilisation in future.

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

31    Idling of equipment due to inaccurate assessment and poor follow up action

Orders placed for procurement of 14 numbers of solar power panels

Chief General Manager (CGM) Task Force, Guwahati received a suggestion from Director Task Force, Jorhat in October 1996 for installing solar power systems to cope up with non-availability of commercial power supply for commissioning certain Microwave systems. In the same month he received an offer from M/s Telemats India Private Limited for supply of solar power systems at the rates approved by DoT for M/s Central Electronics Limited (CEL). Based on these he placed 13 Purchase Orders (POs) between November 1996 and June 1997, on this firm for the supply of 14 numbers of solar power panels worth Rs 1.56 crore at DoT’s approved rates, which were all inclusive, but with payment of transportation charges as per actuals or rates approved by North East circle. The POs provided for 90 per cent payment against proof of despatch and the balance on satisfactory installation and commissioning of the equipment.

Examination of the records of CGM Task Force Guwahati by Audit between September 2000 and January 2001 revealed that:

Inadmissible payment of transportation charges of Rs 5.21 lakh

The CGM allowed payment of transportation charges of Rs 5.21 lakh over and above the prices fixed by DoT. This led to an excess payment of Rs 5.21 lakh.

Non recovery of liquidated damages of Rs 1.29 lakh

The CGM failed to recover liquidated damages of Rs 1.29 lakh for delay in supply of the systems against three POs placed in November 1996 and June 1997.

Pre-despatch inspection was not carried out by the Quality Assurance wing.

Idling of solar power panels worth Rs 85.34 lakh

Out of 14 numbers of solar power panels received, the suppliers could install and commission only six panels between March 1997 and October 1998. This led to idling of eight numbers of panels worth Rs 85.34 lakh from the time of their receipt between March 1997-February 1998 up to January 2001.

The supplier short supplied 148 modules and did not replace one broken module. The CGM, however, did not take any action against the supplier.

Attempt to divert the equipment to cover up the lapse

The CGM stated in January 2001 that the spare panels were diverted to GMT Itanagar in February 2000, but had not been lifted by GMT Itanagar up to January 2001. The CGM also stated in July 2001 that the balance 10 per cent payment due to the supplier was withheld, which was sufficient to adjust the amount of liquidated damages of Rs 1.29 lakh. He further added that DoT was asked in January 2001, to withhold payments due to the supplier against the other POs placed by them.

The attempt to divert the solar power panels would indicate that appropriate requirement analysis was not done before procurement. Moreover, failure to obtain the total supply of the solar power panels and get them installed, led to unfruitful expenditure and idling of the same. Further utilisation of the panels in the absence of replacements for short supplied/damaged modules was also doubtful.

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

32    Idling of high density polyethylene pipes

Project estimates were sanctioned between June 1998 and February 2000 for laying of OFC

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.

Audit scrutiny of records of the above GMT in June 2001 revealed that before procurement of OFC, the GMT awarded the work of trenching and laying of high density polyethylene (HDPE) pipes to various contractors in December 1999. Against this work, the GMT incurred an expenditure of Rs 58.54 lakh during the period December 1999 to September 2000 on procurement of these pipes and trenching and laying thereof. The OFC, however, had not been procured upto June 2001. In the absence of OFC, these 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.

Unproductive expenditure of Rs 85.79 lakh on idling of already laid HDPE pipes

Audit further noticed that these works remained under execution, even after the incorporation of Bharat Sanchar Nigam Limited (BSNL) with effect from 1 October 2000 up to May 2001, against which further expenditure of Rs 88.80 lakh was incurred. Out of this expenditure, BSNL booked an expenditure of Rs 27.25 lakh against DoT, apparently being the cost of HDPE pipes procured earlier by the GMT. This increased the unproductive expenditure to Rs 85.79 lakh.

Failure of the department to ensure procurement of OFC, before taking up the work of trenching and laying of HDPE pipes, therefore, led to idling of HDPE pipes worth Rs 85.79 lakh.

The Ministry stated in December 2001 that procurement of cable before the pipes are laid, was not advisable as that would result in blocking of funds for the whole period till trenching was completed. They added that the procurement of optical fibre cable ran into problems because of heavy fluctuations in the prices; cable pulling was now in progress.

The reply indicated that the department failed to coordinate the trenching and laying of HDPE pipes with the procurement of optical fibre cable.

33    Unproductive expenditure on expansion of telephone exchange

DoT in September 1997 refixed the average capacity utilisation of exchanges in circles as under:

Premature expansion of exchange as this exchange was working at 57 per cent capacity as against minimum requirement of 75 per cent

Unproductive expenditure of Rs 78 lakh on unjustified expansion of exchange

Audit scrutiny of records of General Manager Telecommunications (GMT), Itanagar under North East circle in May 2000 revealed that out of the existing capacity of 1.4k C-DoT Single Base Module (SBM) exchange at Bomdila, only 801 connections were working, with no waiting list as on March 2000 i.e. 57 per cent of its capacity was being utilised as against the DoT’s norm of 75 per cent. Inspite of the spare capacity of 599 connections and no further demand for telephone connections, the GMT expanded this exchange by installing a 2k C-DoT Multiple Base Module exchange (MAX-L) in March 2000 at a cost of Rs 78 lakh, raising the equipped capacity to 2599 i.e. 325 per cent of utilisation. This injudicious expansion of telephone exchange by GMT not only led to an unproductive expenditure of Rs 78 lakh but also rendered 77 per cent of its capacity unutilised. Realising the under utilisation after nine months, GMT proposed to divert 1k line equipment from Bomdila.

The CGMT North East circle in his reply stated in December 2000 that the transfer of working connections from C-DoT SBM exchange to C-DoT MAX-L was completed recently and 1K line equipment out of the existing C-DoT SBM exchange would be diverted to Bhalokpung. He added that the balance equipment would be utilised for expansion of existing C-DoT SBM exchange in Itanagar district itself. He further stated that C-DoT MAX-L was installed to provide additional facilities to the customers such as provision of 180 seconds pulse rate, within the short distance charging area and adjacent short distance charging area, Integrated Services Digital Network and Internet etc.

The reply is not tenable because such facilities could have been provided through the existing C-DoT SBM exchange as well, with the help of stand alone synchronisation equipment, developed by C-DoT and approved by Telecom Engineering Centre in July 1998.

Thus, the expansion of the exchange as pointed above was unjustified as there was sufficient spare capacity on the dates of expansion thereof. This led to unproductive expenditure of Rs 78 lakh.

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

34    Unfruitful expenditure on purchase of disputed land

Appropriate land suitability certificate to be obtained before purchase of land for departmental use

Departmental rules provide that before purchase of a site for departmental purposes, the suitability of the land should be examined and a land suitability certificate should be given by a combination of the head of secondary switching area, the Architect and the Civil Engineer. While giving this certificate the telecom officers should see that the plot was free from legal encumbrances and encroachment. The rules further provide that no payment should be made until all issues relating to title, price, demarcation of boundary wall of the plot of land etc. are satisfied.

Payment of Rs 39.47 lakh towards cost of land without study of site suitability

General Manager Telecom (GMT) Kanpur under Uttar Pradesh (East) circle made payment of Rs 39.47 lakh between March and November 1995 to the Kanpur Development Authority (KDA) for purchase of three plots of land indicated below for construction of telephone exchange buildings. These plots could not be made use of either due to inherent shortcomings or disputes regarding their title as indicated therein.

Examination of records of GMT Kanpur during March-April 2001 revealed that while making the above payments to KDA for the purchase of land, the GMT failed to obtain detailed site suitability certificates in respect of plots of land at Maharajpur and Mandhana from the competent authority as required under the above codal provisions. The Executive Engineer, Civil Kanpur in the site suitability certificate in respect of plot of land at Hanspur, Naubasta issued by him in August 1995 pointed out certain shortcomings in this plot like non demarcation, non-provision of water supply and sewerage by the Municipality and area being low lying, but the GMT ignored these short comings and made the above payment to KDA.

The GMT pointed out to KDA between October 1995 and November 1997 that all the above three plots of land were not suitable to meet his requirements. He also added that out of these plots, one plot at Hanspur Naubasta was disputed and requested KDA to allot alternate plots of land. Thus despite making payment of Rs 39.47 lakh in 1995, he could not get possession of land up to November 1997.

Subsequent purchase too ended in dispute

Subsequently, KDA allotted two plots to GMT Kanpur at Transport Nagar (January 1998) and at Jajmau (March 1998) at a cost of Rs 46.81 lakh and adjusted the amount of Rs 39.47 lakh paid in November 1995. Here again, GMT Kanpur did not obtain the suitability certificate. The possession of these plots, too, could not be taken over by the department as they were also found to be chronically under dispute, as detailed below:

Possession not taken even after six years led to unfruitful expenditure of Rs 46.81 lakh

Thus non observance of codal provisions with regard to title, demarcation of land and encroachment free land by the GMT led to an unfruitful expenditure of Rs 46.81 lakh between March 1995 and April 1998 towards the cost of land, the possession of which was yet to be taken as of April 2001.

The GMT while confirming the facts and figures stated in March-April 2001 that the case was being pursued actively with KDA for getting possession of the land.

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

35    Idling of microwave equipment

DoT placed purchase order for supply of 11 GHz equipment

DoT placed purchase order on M/s Indian Telephone Industries (ITI) for supply of 11 Ghz-140 Mbs microwave equipment in July 1996 for various routes including Satrod-Hissar in Haryana circle. The equipment was to be supplied within six months i.e. by December 1996. The GMT Hissar did not receive the system within the scheduled delivery period (December 1996). Hence another system of 140 Mbs optical fibre cable was commissioned in January 1997 on this route.

Due to non-receipt of 11 GHz equipment 140 Mbs OFC was commissioned on Satrod - Hissar route

GMT Hissar sanctioned a project for Rs 2.58 crore to cover the purchase order placed by DoT

CGMT Haryana circle in February 1998 i.e., more than one year after commissioning of the OFC system requested DoT to cancel the purchase order for microwave equipment for the Hissar-Satrod route, as this scheme was no longer required. GMT Hissar, however, sanctioned a project estimate for Rs 2.58 crore in the same month in anticipation of supply of equipment by M/s ITI in order to accommodate the purchase order already placed by DoT in July 1996. This indicated lack of coordination between GMT Hissar and the CGMT. GMT Hissar justified the project on the ground of providing reliable inter-connection between RLU Satrod and Hissar Main E-10-B exchange in case of failure of existing OFC laid in January 1997 between these two stations.

11GHz equipment was received in May 1998

DoT ordered for diversion of equipment to Bihar circle

Ultimately GMT Hissar received the equipment worth Rs 44.29 lakh in May 1998. He requested the CGMT Haryana circle in April 1999 to divert the equipment; this, however, was done after one year of receipt of the equipment. The CGMT, after eight months addressed the DoT in January 2000 for diversion of the equipment, as the same could not be reengineered in Haryana circle. In May 2000, DoT conveyed their approval for diversion of the equipment to Bihar circle and the equipment was diverted in September 2000 to Katihar SSA, Bihar. The same was yet to be commissioned as of June 2001.

Idling of equipment worth Rs 44.29 lakh

Thus, inordinate delay in supply of equipment by ITI, improper planning by DoT and CGMT Haryana circle coupled with failure of GMT Hissar in taking timely action for diversion of equipment led to idling of equipment worth Rs 44.29 lakh for over three years.

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

36    Unproductive expenditure on procurement of ineffective meter reading monitoring systems

Detailed call recording systems (DCRS) enable downloading of meter readings for bill processing and generation of management reports like bulk meter reading, error meter readings, spurt analysis and detailed call billing for all subscribers.

General Manager Telecom (GMT) Madurai in Tamil Nadu Telecom circle, on receipt of a proposal from M/s Tricom Technologies in January 1999, procured equipment valued at Rs 31.21 lakh between February and September 1999 from this firm for centrally monitoring the operations of remote telephone exchanges in Madurai Telecom District.

Audit scrutiny of records of GMT Madurai in March 2001 revealed the following irregularities;

Systems procured did not have the approval of DoT and TEC

The monitoring equipment had neither the approval of the DoT nor the Telecom Engineering Centre (TEC).

Procurement without field trials

Procurement was done based on the introductory offer and without conducting any field trials.

Procurement without proper justification

In violation of financial powers, GMT Madurai procured the equipment without appropriate justification, despite repeated objection by the Director Finance.

Systems not put to use for the purpose they were procured

Despite claim by the suppliers, downloading of meter reading data was not carried out using the system. Floppies/adaptors were used for such operations in respect of majority of remote exchanges where the equipment was installed.

Lack of compatibility with TRA billing package.

The system did not have compatibility with the revenue billing package (Trichur) used by the unit.

Potentiality of the equipment to generate exception reports was not utilised for monitoring purposes

Thus procurement of unapproved monitoring equipment in large numbers by the GMT Madurai without conducting field trials and ensuring compatibility with prevalent infrastructure and billing package, resulted in the idling of equipment worth Rs 31.21 lakh from September 1999 up to March 2001.

GMT Madurai, while confirming the fact of the equipment not having TEC approval, stated in March 2001 that they were ordered to cover more exchanges after observing their performance in one Sub-Division. However, no evidence in support of the claim was made available to Audit.

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

(D)    Excess expenditure in violation of rules

37    Irregularities in decentralised procurement of C-DoT 256 P exchange equipment

Procurement under decentralised system

The planning for the local switching capacity i.e. capacity to provide connections for the telephone network depends on the existing demand for lines and the demand on the date of commissioning/demand within six months of commissioning. The selection of type of switching equipment depended on the demand. The DoT recommended that if the demand was more than 88 lines but less than 92 lines a C-DoT 256 P equipment should be installed. Prior to January 1999, the department used to procure the equipment based on the requirement of the circles. However, the department decentralised in January 1999 the procurement of 256 P switching equipment from April 1999 onwards and authorised the heads of telecom circles to procure the equipment by floating tenders at circle level. While assessing the requirement the existing inventory and the inventory in the pipeline was required to be taken into consideration.

The irregularities noticed in procurement and utilisation of C-DoT 256 P exchange equipment in the circles test checked were as under:

Eight circles incurred excess expenditure of Rs 5.50 crore

Audit scrutiny of records in eight circles test checked revealed that the rate of 256 P equipment procured by the circles under the decentralised procurement system varied between Rs 7.77 lakh and Rs 9.07 lakh per package for ‘B’ type equipment and between Rs 8.47 lakh and Rs 8.60 lakh per package for ‘C’ type equipment as indicated below. This variation in rates resulted in an excess expenditure of Rs 5.50 crore in comparison with the lowest rates as given in table 37.1.

**    One package = three units

Detailed test check conducted by Audit of procurement and utilisation of C-DoT 256 P exchange equipment in three telecom circles viz., Andhra Pradesh, Orissa and Tamil Nadu revealed the following irregularities.

Tamil Nadu circle incurred idle investment of Rs 5.96 crore in procurement of C-DoT equipment

During 1999-2000 Tamil Nadu circle had 454 C-DoT 256 P exchange equipment (including 298 recovered exchange equipment) and during the same period the circle installed 361 C-DoT 256 P exchange equipment. As a result 93 exchange equipment were left for use in the subsequent year. During 2000-01 the circle recovered 396 exchange equipment. Against 489 exchange equipment thus available, the circle installed 430 exchange equipment during 2000-01 leaving 59 exchange equipment.

However, the circle placed a purchase order for 201 additional equipment during 1999-2000 without assessing the requirement and availability of stock. This resulted in idle investment of Rs 5.96 crore for these two years. This reflected poor planning and coordination and improper use of funds.

Andhra Pradesh telecom circle incurred unnecessary expenditure of Rs 1.06 crore

DoT authorized Andhra Pradesh (AP) circle to procure 201 C-DoT 256 P exchange equipment during the year 1999-2000. In order to overcome the anticipated delay in commissioning of Single Base Module exchanges in the circle due to non-receipt of 600 AH batteries, however, the circle procured 36 C-DoT 256 RAX equipment over and above the allotment already made. This resulted in an unauthorized procurement of C-DoT 256 P exchange equipment costing Rs 1.06 crore. It was observed that CGM Telecom Stores Kolkata supplied 600 AH batteries by December 1999 itself. Thus, the hasty decision of CGMT Andhra Pradesh circle led to unnecessary expenditure of Rs 1.06 crore.

37.4    Excess procurement of C-DoT 256 P equipment- Rs 2.15 crore

AP circle incurred excess expenditure of Rs 2.15 crore in procurement of equipment more than allotment

Similarly, DoT allotted 600 C-DoT 256 P ‘B’ type RAX equipment for AP circle during 2000-01. Subsequently DoT allotted additional 102 numbers C-DoT 256 RAX. As against the total allotment of 702 RAX, the circle procured 780 RAX equipment invoking clause 25 of the tender which provided for 25 per cent additional orders over and above the tendered quantity. Out of 78 RAXs excess procured at a cost of Rs 2.24 crore, 75 RAXs costing Rs 2.15 crore remained unutilised and were lying idle in the Retail Telecom Store Depot at the end of March 2001. No reason for excess procurement was furnished.

C-DoT 256 P exchange equipment - Rs 1.63 crore

Stock of 18 C-DoT 256 P exchange equipment costing Rs 1.63 crore was not available in Orissa Telecom circle

431 C-DoT 256 P-exchange equipment were working in Orissa circle as of March 1999. During 1999-2001, 386 C-DoT exchange equipment were commissioned and in addition 87 upgradation kits were also commissioned. During the same period 151 C-DoT exchanges were replaced with higher capacity exchanges and the recovered exchange equipment were also reinstalled at other places in the district/circle. Thus 753 C-DoT 256 P exchange equipment were used in Orissa circle. As per records, however, only 718 C-DoT 256 P exchanges were functioning at the end of March 2001. Thus although 35 C-DoT 256 P exchange equipment should have been in stock, only 17 exchange equipment were available in the circle for commissioning. The utilisation of the remaining 18 C-DoT 256 P exchange equipment costing Rs 1.63 crore was not available.

DoT decentralised procurement of upgradation kits

DoT in May 1998 authorised the telecom circles for procurement of upgradation kits (128 P RAX to 256 RAX) on decentralised purchase basis for 1998-99 and 1999-2000. The CGMs were to procure these items by inviting tenders and strictly for the quantity allotted to each circle.

The irregularities noticed in procurement of upgradation kits in Madhya Pradesh and Orissa Telecom circles are as under:

CGMT Bhopal procured 755 upgradation kits as against 553 allotted by DoT

CGMT was not authorised to procure maintenance spares of upgradation kits

(i) Madhya Pradesh circle:    Scrutiny of records of CGMT Madhya Pradesh (MP) circle, Bhopal in September 2000 disclosed that CGMT placed six purchase orders between September 1999 and February 2000 on various firms for supply of 755 upgradation kits although DoT allotted only 553 upgradation kits for the year 1999-2000. Thus, CGMT MP circle unauthorisedly purchased 202 upgradation kits valuing Rs 3.44 crore. Moreover, although the CGMsT were not authorised to purchase maintenance spares under the decentralised procurement orders of May 1998, CGMT MP circle procured 251 upgradation kits valuing Rs 1.70 crore as maintenance spares.

Unauthorised procurement of upgradation kits and spares valuing Rs 5.14 crore

Thus, in all CGMT MP circle unauthorisedly procured upgradation kits and spares valuing Rs 5.14 crore during 1999-2000 under the decentralised procurement system.

Orissa circle procured upgradation kits in excess of requirement and the unutilised 56 upgradation kits costing Rs 66.62 lakh were not in stock.

(ii) Orissa circle:    At the end of March 1998, Orissa circle had 131 C-DoT 128P exchanges in the network; thereafter the circle procured no such exchange equipment. During 1998 -2001, 182 up-gradation kits were procured and issued to the field for upgradation of the 128P C-DoT exchanges to 256P exchanges. The number of 128P C-DoT exchanges in the circle were reduced to five in March 2001. Considering that all the 126 exchanges were upgraded during the period, equal numbers of upgradation kits would have been utilized leaving a balance of 56 upgradation kits in stock. The circle development report for March 2001, however showed nil stock of upgradation kits. No reason for procurement of more upgradation kits than actually required was furnished. Thus the circle incurred an infructuous expenditure of Rs 66.62 lakh in procuring 56 upgradation kits. The department needed to get the procurement in excess of requirement and their utilisation investigated and fix responsibility.

Thus due to various omissions and commissions, the department incurred extra/irregular/unjustified expenditure of Rs 22.11 crore in procurement of C-DoT 256 P exchange equipment/upgradation kits.

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

38    Unauthorised procurement of equipment/stores

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 DoT, (ii) items for decentralised procurement by Heads of circles and (iii) other items not falling under the above two categories being procured by secondary switching areas (SSAs). DoT issued instructions in March 1990 not to carry out any civil/electrical works by TDEs/TDMs/GMs.

CGMT MP circle and its five SSAs unauthorisedly procured stores worth Rs 4.16 crore

Scrutiny by Audit of records of CGMT Madhya Pradesh (MP) circle Bhopal and five SSAs in the same circle between August 1999 and June 2001 disclosed that these units procured centralised items without the approval of DoT, various items of stores beyond their delegated financial powers and also electrical goods which they were not authorised to procure, as detailed below:

(Rs in crore)

Heads of circles not to delegate the power to lower formations under decentralised procurement procedure

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 the lower formations.

Unauthorised procurement of equipment/stores worth Rs 2.15 crore

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, in nine test checked SSAs of Andhra Pradesh, Madhya Pradesh and Maharashtra circles, the lower formations such as GMs/TDMs unauthorisedly procured decentralised items of stores worth Rs 2.15 crore as detailed in table 38.2.

(Rs in crore)

The GMT Indore stated in May 2000 that the purchases were made to meet urgent requirement for releasing new telephone connections and the circle was being requested to regularise the same. His counterpart at Sholapur in his reply stated in May 2001 that the purchase of internet nodes for Sholapur was not irregular as he took the administrative approval from the CGMT in December 1998. The reply is not tenable as the CGMT was not empowered to redelegate the decentralised procurement to lower formations and had, in fact, issued specific instructions in February 1999 to cancel the tenders for these items of equipment pending finalisation of centralised tendering by him. Replies from the other units were awaited as of November 2001.

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

39    Excess expenditure on laying of cable beyond prescribed norms

Earlier Audit Report pointed out similar irregularity

A comment was made in Paragraph 12.14 of the Report of the Comptroller and Auditor General of India for the year ended 31 March 1998 Union Government (Post and Telecommunications) No.6 of 1999 regarding avoidable expenditure on laying of cable in excess of norms fixed by the DoT. The Ministry in the Action taken note on this paragraph stated in January 2001 that as far as possible, the cable laying schemes were limited within the prescribed norms.

GMT Jamshedpur incurred an avoidable expenditure of Rs 37.31 lakh

Examination of records of the GMT Jamshedpur in Bihar circle during November 2000 disclosed recurrence of the above irregularity involving an avoidable expenditure of Rs 37.31 lakh during 1999-2001 as given below:

The GMT Jamshedpur, while accepting the facts and figures, stated in February 2001 that care would be taken to ensure observance of DoT’s instructions while preparing the next cable plan.

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

(E)    Avoidable payment/expenditure

40    Excess payment due to inconsistent application of procurement policy

Procurement policy of the department stipulates consideration of rates of earlier tenders for assessing reasonableness of rates

As a matter of financial prudence, the prices obtained in earlier tenders are taken into account while determining the counter offer rates of the tenders under evaluation. This practice helps in assessing the reasonableness of rates. To provide for this, DoT (now BSNL) issued appropriate instructions to all their circles to take into account the prices obtained in the previous tenders and made a guideline in their Manual of Procurement of Telecom Equipment and Stores too.

Scrutiny of the records of DoT during June-July 2001 revealed inconsistent application of this policy, leading to an excess payment of Rs 6.88 crore in procurement of 2/140 Mbs Optimux and Regenerator equipment as detailed below:

Tender prices higher over the prices of previous tender

The department invited tenders during the period December 1998 to February 1999 for procurement of 2/140 Mbs Optimux and Regenerator equipment, 12 F Optical Fibre Cable and 24 F Optical Fibre Cable (OFC). The prices obtained in the tender, estimated prices of the earlier tender and the percentage increase over the earlier tender were as given in table 40.

(Rs in crore)

Excess payment of Rs 6.88 crore

Purchase order placed in 1999-2000

Audit observed that the Tender Evaluation Committee (TEC) for evaluation of 2/140 Mbs Optimux and Regenerator equipment which submitted its report in April 1999, compared the prices with the earlier tender price and found that the prices obtained in the current tender were reasonable. However, the Committee for Evaluation of tenders for 12/24 F OFC which submitted their reports in June 1999 did not find any justification to consider accepting the increase in ordering price, and recommended to counter offer the earlier year’s all inclusive ordering price for the current year’s tender also. In addition the department reduced the unit price of earlier tender further after taking into account the reduction in duties (Customs duty from 53.40 per cent to 47.90 per cent and Excise duty from 18 per cent to 16 per cent) in the 1999-2000 budget and approved the same for procurement. The fact that TEC did not recommend a counter offer for 2/140 Mbs Optimux and Regenerator equipment resulted in excess payment of Rs 6.88 crore in procurement of 2059 numbers against 2636 numbers for which purchase orders were placed between March 1999 (reserved quota in favour of M/s ITI) and January 2000.

The Ministry stated in December 2001 that the TEC did compare the earlier tender price with the lowest evaluated L1 price and since those were marginally higher, TEC had considered the prices to be reasonable taking into account the import content of L1 bidder being 60 per cent as compared to 50 per cent of L1 bidder of earlier tender even though the excise duty had come down to 16 per cent. The Ministry, while stating that the right to counter-offer the price could not be exercised as a matter of routine, added that the practice of counter offer was adopted only under abnormal circumstances, taking all other relevant aspects including prices into consideration. In the case of 12F/24F optical cable, the Ministry stated, the department were aware of the falling prices of fibre in the international market, hence the counter offer.

The reply is not convincing in view of the fact that though the import content of L1 bidder was 60 per cent as compared to 40 per cent (not 50 per cent as stated by the department) of the L1 bidder of the earlier tender, there was not only reduction in Excise duty by two per cent in the 1999-2000 budget, but the Customs duty element was also lower by 8.30 per cent. Further, the department’s contention is at variance with the reasoning adopted by Committees for Evaluation of Tenders for procurement of 12F OFC and 24F OFC. It is pertinent to mention here that the members who evaluated the tender for procurement of 2/140 Mbs Optimux were also the members for evaluation of the tender for procurement of 24F OFC.

Thus, the department suffered a loss of Rs 6.88 crore due to their inconsistent application of the procurement policy.

41    Transportation of stores by Circle Telecommunications Store Depots and Telecommunication units

CTSDs in Assam, Bihar, Haryana, Maharashtra, North East, Orissa and West Bengal circles failed to adhere to the directions of Department of Telecommunications, which led to ambiguity in contracts/agreements for transportation of stores, non-utilisation of forklifts, non availing of concessional freight under class-200 and payment to un-approved contractors etc., resulting in avoidable expenditure of Rs 3.49 crore during 1995-2000.

Circle Telecom Store Depots (CTSDs) obtain stores from different sources such as Telecom factories, private manufacturers etc., and supply the same to various Telecom units under their jurisdiction by transportation through rail or road. DoT incurred the following expenditure on freight charges during the period 1995-2000:

Keeping in view the large amount of freight charges being incurred every year the department in its various directions issued to CTSDs and Telecom units laid down that while transporting stores the following aspects should be ensured for optimum utilisation of resources:

• There should be a valid contract/agreement through tenders between the department and transporter.
• There should be no ambiguity in the agreement.
• Contract/agreement should be signed for a period of 12 months only.
• Transportation of stores should be carried out strictly in accordance with the clauses of the contract/agreement.
• No advance payment should be made to the transporters.
• Loading and unloading facilities such as cranes/forklifts etc. which were available with the CTSDs/Telecom units should be fully utilised and no charges should be paid to the contractor on that account.
• Concessional railway freight under class-200 should be availed of.
• No payment should be made to unapproved contractors.

A test check of records of Maharashtra, Haryana, Orissa, Bihar and Assam circles and Kolkata Telephones by Audit revealed the following deficiencies:-

RTSD, Kolkata entered into agreement with SCTA for two years as against one year in violation of departmental instructions.

It was noticed in Retail Telecom Store Depot (RTSD), Kolkata Telephone District that during 1995-2000 a contract/agreement was entered into by the unit with M/s SCTA for a period of two years, in spite of directions not to exceed a 12 month period. During 1994-96 M/s SCTA was the lowest bidder and the contract was awarded to him although he did not possess a valid trade licence. During 1996-98, when the contract was again signed for a two year period, the lowest bidder failed to submit the relevant document regarding possession of five trucks, and so the transport contract was awarded to the second lowest bidder viz., M/s SCTA without obtaining the requisite trade licence; this was irregular.

RTSD Kolkata made irregular payment of Rs 94.25 lakh due to engaging the transporter irregularly.

The contract was valid up to 15 December 1998 but no tender was floated in time and the existing irregular contract was extended. During October 1999, although a tender was floated it could not be finalised on account of a court order to maintain the status quo. As a result the existing transporter (M/s SCTA) remained engaged up to now (May 2001). The sequence of events indicated that the contract for the entire period was irregular and the payment of Rs 94.25 lakh made to the transporter was unauthorised. When this was pointed out by Audit, Sub-Divisional Engineer RTSD-II, Kolkata stated in May 2001 that tenders were finalised by the Evaluation Committee but the basis for the finalisation was not known.

CGMT, Assam Telecom circle incorrectly computed the road distance between Ranchi-Guwahati.

Test check of carriage contracts executed in August 1995 by CGMT, Assam circle, Guwahati with M/s GTC India Private Limited, Guwahati revealed that as per schedule-II of the agreement, the road distance from Ranchi to Guwahati was taken as 1620 kms and payment was made accordingly. A comparison of the records of CTSD, Assam circle, Guwahati and CTSD, North East circle, Guwahati, however, revealed that the distance used by the North East circle between the same two stations was much lower. During 1995-2000, the same transporter viz. M/s GTC India Private Limited claimed standard distance from Ranchi to Guwahati as 1174 kms and in addition to that local distance of 48 kms depending upon the location of their store depot at Dharapur; a total of 1222 kms had been allowed. The local distance from Guwahati to Dispur CTSD would be 18 kms and taking into account the local distance as correct, the actual distance from Ranchi to CTSD, Assam circle, Guwahati should be (1222+18) 1240 kms whereas Assam circle CTSD, Guwahati allowed 1620 kms. As a result an excess of 380 kms (1620-1240) was allowed in each bill due to improper calculation of chargeable distance.

CGMT Assam Telecom circle made excess payment of Rs 22.65 lakh to transporter due to incorrect computation of distance between Ranchi-Guwahati

Consequently, M/s GTC India Pvt. Limited being the carriage contractor for CTSDs for the circles took advantage of the flaw in the agreement of Assam circle (CTSD) Guwahati, resulting in avoidable excess payment of Rs 22.65 lakh during the period May 1996 to August 1998.

CTSDs Guwahati, Siliguri RTSD Kolkata, Bhubaneswar incurred loading/ unloading charges of Rs 1.06 crore

Clause 17 of the contract/agreement for transportation of telecom material stipulated that handling charges were inclusive of charges for loading and unloading at both ends, loading and unloading wagon at Railway platforms, weighment of stores at Railway sheds, stations, their distribution, counting, stocking etc., at both ends and were inclusive of crane charges, if any.

It was noticed in CTSD, North East circle (Guwahati), Assam circle, CTSD, Siliguri and Retail Telecom Stores Depot Kolkata Telephone District, under West Bengal circle and RTSD Bhubaneswar under Orissa circle that although forklifts were available, an expenditure of Rs 106.35 lakh was incurred on account of loading and unloading charges as per details given in Appendix-XXX.

RTSD II, Kolkata Telephones incurred expenditure of Rs 68.09 lakh towards transportation of stores/ loading/ unloading/arranging/rearranging stores

In Retail Store Depot-II, Kolkata Telephones, payment of Rs 4.47 lakh on account of transportation of stores and Rs 21.69 lakh for loading and unloading of stores was made to the contractor. In addition to this, however, an amount of Rs 68.09 lakh (more than 300 per cent of loading and unloading charges and 1500 per cent of transportation charges) was paid for arrangement/re-arrangement work. On this being pointed out by Audit the department stated that action had been taken to reduce the expenditure by utilising forklifts and strict watch was being kept over arrangement/re-arrangement work. This reply is not acceptable because the handling charge was inclusive of crane charges, if any.

Orissa circle made overpayment of Rs 18.87 lakh towards freight charges

According to the decision of the Railway Board of September 1994 private suppliers became entitled to despatch the telecom stores through train at concessional rate charged under class-200 of goods tariff of Indian Railways. Further, if goods were despatched by road, the freight charges to be reimbursed would be actual road freight paid or charges that would have been incurred had the goods been despatched by goods train wagon under class-200 whichever is lower. It was noticed in Orissa circle that this provision was properly included in the bid documents but while making payment to transporters/suppliers for transportation of Polyethylene Insulated Jelly Filled (PIJF) under ground cable during 1995-98 the procedure was not followed. Further while computing the wagon load charges, the capacity of the railway wagon was not properly calculated. This resulted in over payment of Rs 18.87 lakh, being freight charges for supply of PIJF underground cable.

GMs Dhanbad, Gaya and Chapra in Bihar Telecom circle incurred irregular expenditure of Rs 22.51 lakh towards transportation charges to private parties

CGMT Bihar Telecom circle did not execute any agreement for transportation of stores during the period 1995-99. In turn, GMs Telecom, Dhanbad, Gaya and Chapra, instead of executing agreements for transportation of stores, incurred irregular expenditure of Rs 22.51 lakh on transportation of store materials through private agencies from the open market. The amount was charged to ACE-II accounts against temporary advance paid to these units (GMT, Dhanbad Rs 9.25 lakh, GMT, Gaya Rs 10.40 lakh and GMT, Chapra Rs 2.86 lakh). On this being pointed out by Audit the units confirmed the facts and figures.

Four units in three telecom circles incurred avoidable expenditure of Rs 15.89 lakh in transportation of store

According to departmental instructions of December 1997 transportation of telecom stores by private contractors should be on the basis of volume and weight, separately. Test check revealed that units failed to fix the rate per metric tonne (MT). per KM for a specified tons capacity or part thereof. Final goods transported were justified for full capacity of the truck load or 10 MT and not on the tons capacity of the vehicle by which the stores were transported. This resulted in an avoidable expenditure of Rs 15.89 lakh during the period 1995-96 to September 2000 by TDM, Chapra (Bihar circle) 0.68 lakh, PGMT, Pune (Maharashtra circle) Rs 0.39 lakh, GMT, Raigad (Maharashtra circle) Rs 0.14 lakh and CTSD, Ambala (Haryana circle) Rs 14.68 lakh.

The points brought out above indicated that the CTSDs and Telecom units failed to make payment to transporters/suppliers according to the directions of DoT. Moreover, there was no mechanism to check the variation in contractual rates for similar service.

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

42    Avoidable expenditure on inessential protection of under ground cables below 100 pairs

DoT instructions for protection of underground cables of 100 pairs and above

For protection of underground telephone cable from external damage, the department reiterated in April 1990 their decision to use bricks as protective device to the underground cable of 100 pairs and above, implying that mechanical protection of warning bricks need not be provided for underground cable of less than 100 pairs.

DoT in March 1994 while issuing instructions to the heads of circles stated that the bricks being used in mechanical protection were in the nature of warning device and not a protective arrangement for underground cable. They further added that this could be met by use of a continuous Polyvinyl Chloride (PVC) tape of suitable width marked “Telephone cables” which was to be placed 15 centimeters vertically above the cable and all along the length of the cable. In July 1994 while taking serious note of procurement of a new device called “Joint protection shell” by some circles DoT instructed the heads of circles, not to resort to such procurement and stressed upon them to provide standard method of joint protection as laid down in their letter of April 1990.

Avoidable expenditure of Rs 63.22 lakh and Rs 50.00 lakh in provision of warning bricks

Scrutiny of records of the General Managers Telecom (GMsT) Raigad and Panaji Goa under Maharashtra circle by Audit in April 2000 and February 2001 revealed that these GMsT did not adhere to the DoT’s instructions and continued to award cable laying contracts which included mechanical protection by warning bricks for underground cable of less than 100 pairs. This led to an avoidable expenditure of Rs 63.22 lakh and Rs 50.00 lakh in respect of GMsT Raigad and Panaji, respectively, between April 1997 and September 2000. Their counterparts at Aurangabad, Jalgaon, Kolhapur, Sangli and Sholapur under the same circle, however, were not providing such mechanical protection for under ground cable below 100 pairs.

The Ministry in their reply stated in December 2001 that while their letter of April 1990, suggested that use of protective methods over UG cables of 100 pairs and above was desirable and not to be dispensed with, the emphasis was on local conditions for the use of warning devices. Such conditions could be terrestrial or related to the District development programme, keeping the fault rate low, minimising loss or customer satisfaction.

The reply is not convincing because while the orders of April 1990 recommended protective methods for underground cables of 100 pairs and above sizes, its general stress was on the use of warning devices which according to their order of March 1994 could even be the continuous PVC cable suitably labeled. Moreover, five secondary switching areas in Maharashtra circle did not use the bricks as mechanical protection over underground cable of less than 100 pairs.

43    Avoidable expenditure on repair of faulty C-DoT cards from unauthorised agencies

DoT opened a National Repair Centre for repair of faulty C-DoT exchange cards

A National Repair Centre (NRC) for repair of printed circuit boards of C-DoT exchanges was opened at Bangalore in October 1990. Gradually the number of repair centres increased to 24 by July 2000.

DoT took serious note of repair of faulty C-DoT cards from unauthorised agencies

DoT intimated to all heads of circles in October 1992 regarding the facility of such repair centres and advised them to obtain from C-DoT the details of testing and repair facilities available. While taking serious note of repair of faulty C-DoT cards from unauthorised agencies, the DoT in June 1999 directed all the heads of circles to get such repairs done either at the Regional Repair Centres or through the manufacturers of C-DoT exchanges. These instructions were reiterated in July 2000.

As a follow up, the CGMT Karnataka circle also issued such instructions in October 1999, January and March 2000 to all the heads of secondary switching areas under his jurisdiction. In January 2000 he also pointed out that M/s Larsen and Toubro, Limited, the manufacturers of C-DoT exchanges, had authorised M/s Annapurna Electronics for repair of faulty C-DoT cards.

Avoidable expenditure of Rs 93.41 lakh on repair of faulty cards from unapproved firms

Scrutiny of records of the General Managers Telecom (GMsT) Belgaum and Shimla in Karnataka and Himachal Pradesh circles, respectively, by Audit in September and November 2000 revealed that even after establishment of NRCs at Bangalore and Jallandhar and issuance of repeated instructions by DoT and the concerned CGMT (in case of Belgaum unit) the General Managers Telecom continued to get the faulty C-DoT cards repaired from unapproved outside agencies. This led to an avoidable and unauthorised expenditure of Rs 93.41 lakh during the period January 1997 to November 2000 as detailed in table 43.

(Rs in lakh)

*    Designated as an authorised agency in January 2000 only.

GMT Shimla while noting the observations for future compliance stated in November 2000 that the cards were repaired through an outside agency on emergent basis to avoid public complaints and loss of revenue. GMT Belgaum, however, stated in January 2001 that the faulty cards were got repaired through the outside agencies due to general delay experienced in getting such repairs done through NRC.

Considering the well spread network of NRCs and lack of evidence in support of the reported delay by the NRCs, the replies of the GMsT are not tenable. Such repairs through unauthorised agencies would not only damage the cards, as pointed out by C-DoT from time to time; it would also end up in avoidable expenditure as brought out above.

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

44    Avoidable payment

DoT invited two tenders in December 1998 for procurement of 280 Nos. of Synchronous Transport Module-16 (STM-16) and 604 Nos. of Synchronous Transport Module-4 (STM-4) Synchronous Multiplexer after reserving 30 per cent quantity for its PSU, M/s Indian Telephone Industries. The department placed purchase orders on seven firms viz., M/s HTL, ITI, HFCL, Siemens, BEL, Fibcom and Alcatel between May 1999 and October 1999 for Rs 440.39 crore for the quantities shown below:

Unit prices decided based on basic price and Excise duty

Scrutiny of records of the department by Audit in June 2001 revealed that the department arrived at unit price (L-I) after taking into account the percentage of freight and insurance on basic price plus Excise duty instead of basic price alone. This resulted in avoidable payment of Rs 35.27 lakh in procurement of 417 Nos. of STM-16 and 592 Nos. of STM-4. A similar treatment was also noticed with regard to the tenders floated in April 2000 and opened in June 2000 for procurement of 255 Nos. of STM-16 and 118 Nos. of STM-4 for which purchase orders were placed during March-April 2001. This would result in avoidable expenditure of Rs 11.75 lakh if not attended to at this stage.

Deviation from the practices followed in the past

This action of the department was at variance with the procedure followed in revision of the price due to reduction in duties of six armoured optical fibre cable (OFC) for the year 2000-01. The department in this case worked out the all inclusive unit price by charging freight and insurance on basic price alone inspite of the fact that the L-I bidder in the tender had quoted all inclusive price initially by charging freight and insurance on basic price plus Excise duty.

Lack of consistency and appropriate procurement policy

On this being pointed out by Audit, the department replied in September 2001 that the ordering prices were all inclusive unit prices determined based on the quote of the lowest evaluated bidder. It further added that the quotes were at the discretion of the bidders and the department had no control over their quote as no specific terms and conditions in the matter of quote had been laid down in the bid document. While stating that the reduction in unit price of 6F armoured OFC was done by the Finance Wing, the department added that such stray cases may not be taken into account. It further added that if the freight and insurance on basic price alone was taken into account by the CET during the evaluation, it would be taken as a counter offer.

The reply of the department is not convincing because the present case too, was vetted by the Finance Wing and the circumstances under which the Finance Wing did not point out this omission in this case were not known. Moreover, lack of consistency in determining the counter offer rates, and absence of backing by appropriate procurement policy indicated adhocism in the manner in which prices were determined. The department's argument that treating the CET's action of determining the prices would be deemed as the counter offer rate is not acceptable because the CET is only a recommendatory body and the ultimate authority rested with the department.

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

45    Avoidable expenditure due to poor planning

Replacement of old cross bar Exchange

Central AC plant kept in operation for cooling one room containing OFC equipment

GMT Himatnagar in Gujarat circle installed 3.5k lines E-10B exchange at Himatnagar in March 1997. He transferred all working connections from the old cross bar exchange to the new exchange in a phased manner, and closed the old cross bar exchange in September 1997, thus rendering the existing central air conditioning (AC) plant surplus, as the new exchange had a separate air conditioning arrangement. The old cross bar exchange, however, contained a unit of Optical Fibre Cable (OFC) equipment in one of the rooms, since 1990.

Non provision of package type air conditioned unit for OFC equipment for over 20 months

Avoidable expenditure of Rs 34.46 lakh towards electricity charges and cost of maintenance of the plant

Examination of records of the GMT in October 1998 and August 1999 revealed that despite closure of the old cross bar exchange in September 1997, the GMT Himatnagar kept the central AC plant in operation merely for cooling the OFC equipment located in a single room. When this was pointed out by Audit in October 1998, the GMT installed three package type ACs of 5 TR capacity each, worth Rs 3.74 lakh in April 1999 for cooling the OFC equipment; he finally shut down the central AC plant in May 1999. The package type ACs for cooling the OFC equipment were commissioned in June 1999. As a result, the central AC plant remained in operation for cooling just a single room for over 20 months i.e. between October 1997 and May 1999 and led to an avoidable expenditure of Rs 32.21 lakh on account of electricity charges for running the AC plant i.e. after excluding the probable expenditure on running the package type AC. Besides avoidable expenditure of Rs 2.25 lakh on maintenance of the plant during the same period was also incurred.

CGMT stated inter alia in April 2001 that the AC plant was run to maintain the optimum efficiency of the OFC systems which was necessary in the interest of service for earning STD revenue.

The reply is not acceptable because the CGMT could have provided package type ACs to the room containing OFC equipment, soon after shifting the old cross bar exchange. Failure to plan for it and initiate appropriate action for over 20 months led to an avoidable expenditure of Rs 34.46 lakh.

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

(F)    Other irregularities

46    Execution of works without sanction of estimates

Comments made in the past

Comments were made in paragraphs 9.12 and 40 of the Reports of the Comptroller and Auditor General of India for the years ended 31 March 1994 and 2000, Union Government, Post and Telecommunications No. 7 of 1995 and No.6 of 2001, respectively regarding incurring of irregular expenditure on the execution of works without sanction of estimates.

The Ministry, in the Action Taken Note on paragraph 9.12 stated that they issued necessary instructions to the heads of circles in May 1995 to avoid recurrence of such lapses in future.

Irregular expenditure of Rs 7.77 crore against unsanctioned works

Examination of records of the General Managers Telecom (GMsT) Hyderabad, Khammam, Nellore, Tirupathi and Telecom District Manager (TDM) Srikakulam in Andhra Pradesh circle by Audit between September and December 2000, however, revealed that these GMsT/TDM executed routine nature of works without sanction of estimates, which resulted in an irregular expenditure of Rs 7.77 crore on execution of 53 works during 1999-2001.

Expenditure of Rs 5.20 crore yet to be regularised

All the GMsT uniformly stated between September and December 2000 that these works were taken up for execution by them to meet the targets. The GMsT Nellore, Srikakulam, and Tirupathi further stated between November 2000 and January 2001 that all their respective estimates were got sanctioned and the expenditure was regularised. However, GMsT Hyderabad and Khammam were yet (May 2001) to get these estimates sanctioned against 25 works to regularise excess expenditure of Rs 5.20 crore against these estimates.

The Ministry in their reply stated in October 2001 that in view of development targeted programme, the works had been executed without prior sanction of estimates. It further stated that expenditure in respect of 37 cases had been regularised and for rest of the cases regularisation action was under process. Necessary instructions had also been issued by the circle to all Heads of Secondary Switching Areas to stop commencement of work on advance numbers and to ensure the cases of the emergent nature mentioned in the rules were regularised within the stipulated period.

The fact, however, remained that the works, which were taken up for execution did not relate to restoration of communication or prevention of breakdown of communication for political or defence needs, and therefore, did not fall within the category of works which could be taken up in advance of sanction of estimates. Execution of routine works in advance of sanction, therefore, indicate disregard of Ministry’s instructions and warranted investigation for fixing of responsibility.

47    Irregular expenditure on procurement of cable route tracers and cable fault locators

Departmental provisions stipulate invitation of tenders for all procurement costing more than Rs 0.50 lakh. Further the CGMT, Maharashtra circle while reiterating these instructions in December 1997 directed his SSAs that any violation in this regard would be treated as wilful misconduct.

GMT Nasik and Nanded incurred irregular expenditure of Rs 41.07 lakh by procuring testing instruments without inviting tenders

Test check of records of General Managers Telecom (GMT) Nasik and Nanded in April /October 1999 disclosed that the GMsT procured cable route tracers, cable fault locators and other testing instruments during 1996-2000 at a total cost of Rs 41.07 lakh from different private firms, without inviting tenders. This resulted in irregular expenditure.

In reply to an audit enquiry the GMT Nasik stated in April 1999 that the instruments were procured from the manufacturers only, on the recommendation of field units about the high quality as well as necessity, and as such tenders were not invited. The GMT Nanded stated in June 2000 that in order to give better Telecom services to the subscribers during monsoon and to locate the cable faults immediately, the cable fault locators were procured. He added that the requirement of the instruments was not received in one lot. However, he promised that in future tenders would be invited.

The fact, however, remained that the procurement of these instruments without inviting tenders was in contravention of departmental rules/instructions on the subject.

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

48    Follow up on Audit Report

The Public Accounts Committee (PAC) decided in 1982 that in order to ensure accountability of the executive in respect of all issues dealt within various Audit Reports, should furnish final remedial/corrective action taken notes (ATNs) on all paragraphs contained therein.

The Committee took a serious view of inordinate delay and failure to furnish these ATNs within the prescribed time frame. It was further reiterated in the Ninth Report (Eleventh Lok Sabha) presented to the Parliament on 22 April 1997 that ATNs on all paragraphs pertaining to the Audit Reports for the year ended 31 March 1996 onwards be submitted to them duly vetted by Audit within four months of laying of the Report in Parliament.

Review of ATNs relating to Department of Telecommunications, revealed that final ATNs in respect of 92 paragraphs were awaited as of December 2001.

Details of pending ATNs are given in Appendix XXXI.

49    Response of the Ministry/Department to Draft Audit Paragraphs

Ministry/ Departments were required to send their response to draft audit paragraphs within six weeks

On the recommendation of the Public Accounts Committee, the Ministry of Finance issued directions to all Ministries in June 1960 to send their response to the Draft Audit Paragraphs (DAPs) proposed for inclusion in the Report of the Comptroller and Auditor General of India within six weeks.

119 Draft audit paragraphs (61 Revenue paras, 55 Expenditure paras and three comprehensive performance reviews) proposed for inclusion in the Report of the Comptroller and Auditor General of India for the year ended March 2001, Union Government (Post and Telecommunications) No.6 of 2002 were forwarded to the Secretary Department of Telecommunications during May 2001 to November 2001 through demi-official letters.

The Ministry did not send replies to 60 DAPs (26 Revenue paras and 31 Expenditure paras and three comprehensive performance reviews) up to 31 December 2001 as indicated in Appendices XXXII and XXXII1. The fact of non-receipt of replies from the Ministry is also indicated at the end of each such paragraph included in the Audit Report.