CHAPTER 9
DEPARTMENT OF ATOMIC ENERGY

9.1    Avoidable expenditure due to negligence

Directorate of Purchase and Stores (DPS) of Department of Atomic Energy (DAE) placed an order on a foreign firm in August 1990 for supply of one Ionization Mass Spectrometer with accessories and spares at a cost of DM 750837.25, equivalent to Rs 1.07 crore, for urgent replacement of old and obsolete equipment at Nuclear Fuel Complex (NFC), Hyderabad, a unit of DAE. The terms and conditions of the purchase order stipulated that DPS would arrange an open insurance cover issued by New India Assurance Company Limited (NIACL).

DPS did not clear the equipment immediately on its receipt on 27 June 1991 at Mumbai by air consignment. The consignment was cleared only on 22 July 1991, when it was found to be completely wet due to rain water.

DPS on 30 July 1991 lodged an insurance claim for Rs 93.56 lakh on United India Insurance Company Limited with whom the consignment was reinsured by the NIACL as provided in the purchase order.

DPS transported the packages from the airport to Bhabha Atomic Research Centre warehouse at Trombay (Mumbai) where it was stored till 7 August 1991 and thereafter, it was sent to NFC, Hyderabad on 8 August 1991. Though it was already known that the packages were wet, NFC did not open and inspect them on receipt on 13 August 1991. NFC opened the packages only on 21 October 1991, after over two months and found that the equipment was damaged.

The service engineer of the supplier who visited NFC during 26 to 29 September 1992 could not install the equipment and reported that there was severe damage due to seepage of water on all units in the Ion Source Cabinet and rusting of the internal components and connectors.

In February 1992, the insurance company, while rejecting DPS insurance claim for Rs 93.56 lakh, attributed the damage to negligence and undue delay of over 20 days by DPS/NFC in transporting the equipment to Hyderabad from Mumbai and over two months delay in opening the packages for inspection at Hyderabad, which resulted in rusting of the equipment due to rain water. The Air Cargo Carriers also rejected DPS’s claim for damages on the ground that while there was only an insignificant damage caused by wetness, the real damage was due to not examining the equipment immediately in August 1991 and repairing it at that time. DPS subrogated the right for recovery of the claim for damage from the carrier to the insurance company in May 1993.

DPS was also not able to export the damaged equipment to the supplier for repair, as the supplier’s Government did not give permission for the re-export. NFC repaired the equipment departmentally after procuring fabricated/partly assembled components and utilising in-house expertise at a cost of Rs 99.70 lakh and made it operational on manual mode in November 1997.

Though, DPS again requested the insurance company to settle the claim, the latter again rejected the claim in December 2000 on the ground that DPS had paid the premium only on 27 August 1991, though the spectrometer was declared for insurance on 17 July 1991. Hence, it was not covered for insurance.

DAE stated in December 2001 that non-payment of insurance claim was being taken up with the Cabinet Secretariat as per the advice of the Ministry of Law.

Thus, negligence and undue delay by DPS and NFC in transporting the equipment costing Rs 1.64 crore from Mumbai Airport to Hyderabad and not inspecting it immediately on receipt at NFC resulted in its damage. The repairs to the equipment cost an additional amount of Rs 99.70 lakh. Further, DPS also failed to pay the premium immediately on declaring the equipment for insurance, which ultimately resulted in rejection of the insurance claim by the Insurance Company. No action has been taken by DAE to fix responsibility for the delays in inspection of equipment on receipt and in arranging proper insurance cover.