Fraud in the Purchase of Imported Luminaries during CWG - 2010

During the course of organizing and conduct of the Commonwealth Games 2010, several financial irregularities were carried out by people at the helm of affairs in the Govt. of NCT of Delhi, Delhi Development Authority, New Delhi Municipal Council, Municipal Corporation of Delhi, Ministry of Sports & Youth Affairs, Govt. of India, Organizing Committee and others. In response to huge public outcry and several reports in National and International media, the Govt. of India, CAG, CBI and CVC carried out several investigations. However, most of the investigations have been closed without reaching any logical and meaningful conclusion. In the absence of any concrete action by the Law Enforcement Agencies of the Govt. of India it is apparent that most of these investigations were just an eye-wash and public posturing by the Govt. of India without any intention to punish the culprits. To ensure accountability of the system at highest level, the Government of NCT of Delhi had called for several files, documents, tender related papers, CAG Reports, Shunglu Committee Reports etc. related to works executed by PWD, Govt. of NCT of Delhi during the Commonwealth Games 2010. The following facts emerged on scrutiny of the Performance Audit Report on XIX Commonwealth Games (CWG 2010), High Level Committee on the CWG (Shunglu Committee), Reply of the Department and available records related to modernization of Delhi Street Light System:The project for modernization of Delhi Street Light system was conceived by GNCTD in June 2006, with plans to implement it across Delhi within 2 years. Detailed lighting standards were prepared in November 2006 to be followed by all the departments concerned viz - PWD, NDMC and MCD. The project was executed on around 800 km of Delhi Roads at a tendered cost of Rs. 286 crore. The lighting standard provided only the technical parameters of performance of lamps and luminaries. PWD, while adopting the same specifications stipulated the use of a mix of imported and indigenous luminaries for different categories of roads. In the process, it appears that there was collusion with vendors by some officials and the then Chief Minister/Ministers to cause huge financial loss to the Government and wrongful gain to the vendors/contractors and others. SpaceAge Switch Gears Ltd. submitted (July 2007) EOI as a manufacturer of luminaries of international repute, and of poles in India. The bid by the firm was neither as a JV nor as a consortium, but was in the name of SpaceAge Switch Gears Ltd. The Board of Assessors (BoA) disqualified (November 2007), the firm on the following grounds: The firm could not obtain the required qualifying marks 75 out of 100, scoring only 48 marks out of 85. Non supply of imported as well as indigenous fittings Non clarification of works done by their foreign concern

On being disqualified by the BoA, the firm appealed (November 2007) to the then Chief Minister Smt. Sheila Dikshit for inclusion as a tenderer for the work. The vendor's plea to CM was directly forwarded to the E-in-C. Subsequently, a re-assessment of the eligibility of the firm was done by the BoA, who, this time, found the firm to be qualified. The firm did not make any appeal to BoA, Chief Secretary or any other higher authorities. Instead made it to the CM, who in turn marked it to Engineer-in-Chief directly and it was recommended. Had the BoA been fair, they would have given similar opportunity to the other two rejected firms. Records, however, do not show any such attempt by BoA. The CAG Performance Audit Report on XIX Commonwealth Games (CWG 2010) found the following aspects of re-evaluation, leading to an increase in the score from 48 to 67 (out of 85), as unreasonable: The score for experience in similar class of work increased from 10 to 15 (out of 15), though the relevant work was done by another firm, related by having a common majority shareholder, but which was in fact, a separate legal entity, and not a part of the bidding entity as a JV or consortium member. The firm did not submit any new financial statements in support of the required average annual turnover, yet its score increased from 10 to 19 (out of 19). The firm did not submit any new documents relating to personnel, establishment, and plant and equipment, yet its score in this regard increased from 10 to 12. The score on presentation before the BoA was also increased from 13 to 16.

The firm, SpaceAge Switch Gears Ltd., went on to supply low cost imported luminaries of SAUDI MAKE costing Rs. 5040/- and charging Rs. 25704/- for the same and in the process earning super profit of Rs. 2.68 crore. In this context, HLC observed: The process of tendering and allocation of work was badly compromised. By bringing in the concept of manufacturer as the lead partner, competition was restricted and electrical contractors were totally eliminated. From out of nowhere, the idea of using imported luminaries was brought in. They were 3 times more expensive than domestic luminaries. The wattage and lux level of both were the same. The successful made a 'killing' by bidding much more than the price at which they imported the luminaries. Considering the fact that the contract was being awarded inclusive of 7 years maintenance, the advantage of going in for imported luminaries was more than neutralized. Unusual interest was displayed by the Hon'ble Chief Minister in this project. This is demonstrated by the fact that meetings were held at her residence, imported luminaries were approved by her and competition was restricted to only three parties at her instructions.

Justification rates were not evolved on the basis of market rates but were concocted on the basis of L1 rates. Loss to Government (PWD, NDMC, MCD) is estimated to the tune of Rs. 31.07 crore. Use of Imported Luminaries:The initial proposal for street lighting in PWD was sent for government approval in November 2006 but was not sanctioned on account of change in scope of work. A revised estimate involving use of indigenously manufactured luminaries was sent in May 2007 and was accorded approval in June 2007, but the approval was withdrawn. Meanwhile, the Chief Minister desired (July 2007) that while PWD was implementing a comprehensive plan for street lighting, such lighting may be demonstrated on at least one or two roads in time for Diwali 2007. PWD invited spot quotations to install street lighting on a sample stretch of roads. The sequence of events as detailed below indicates systematic plan to incur financial loss to the exchequer to benefit certain private companies and individuals:Period July 2007 August 2007 Events Spot quotation from three firms using indigenous luminaries for a sample stretch of reads was invited Second call for a spot quotation was invited from the same three firms on the same conditions. The bidders now quoted for imported and indigenous luminaries. While Philips quoted only for indigenous luminaries, Trilux quoted for imported luminaries and KeselecSchreder quoted for both indigenous and imported luminaries Third call for spot quotation from three firms invited in two separate sections, one each for imported and indigenous luminaries. The work was however not executed. Sample luminaries of some of the leading manufacturers were displayed before the CM in September 2007. Indigenous and imported luminaries installed on a sample stretch were inspected by the CM, and also by PWD minister. Based on the inspection and approval of CM, PWD decided to use imported luminaries on 'A' category roads, a mix of imported and indigenous luminaries on 'B' category roads and only indigenous luminaries on 'C' category roads. It may be noted that this 'A', 'B', and 'C' categorization of roads was not specified in the lighting standard. Thereafter, PWD revised the preliminary estimate by incorporating use of imported along with indigenous luminaries. The decision of PWD on use of imported luminaries on 'A' category roads was also adopted by MCD and NDMC. NDMC specified all of its roads as 'A' category, and called tender for imported luminaries only.

September 2007

October 2007

A total of Rs. 45.80 crore was spent on procurement of imported luminaries, with Rs. 28.95 crore by PWD, Rs. 6.51 crore by MCD and Rs. 10.34 crore by NDMC. The imported luminaries were procured at a cost much higher than the cost at which indigenous luminaries were procured, leading to avoidable extra expenditure of Rs. 31.07 crore across the three agencies (PWD, NDMC and MCD). It may be noted that NDMC adopted the tender rates and agencies of PWD:Avoidable Expenditure on Imported Luminaries (In Rs. Crore) Number of Imported Additional expenditure Luminaries incurred * PWD 10,631 19.81 NDMC 4,166 6.76 MCD 2,337 4.50 Total 17,134 31.07 *Against average procurement cost of indigenous luminary (400 W and 250 W) of Rs. 8600 in MCD Agency Name Manner of enrolment of imported luminaries The technical specifications for both imported and indigenous luminaries were identical, and technical test reports of the imported and indigenous luminaries supplied by the various firms were equally compliant with specifications for luminaries given in the lighting standards. The HLC has observed about the conflict of interest as :General Manager, Philips was Convener of the Committee set up by the Delhi Government for finalization of 'Standards for Integrated Street Lighting'. A conflict of interest is observed as M/s Philip was a potential bidder and a party in the tender process. Similarly it was noticed that to decide upon the type of fixtures and fittings for 8 lane roads matter was referred to NHAI and SpaceAge, which was also a bidder in the tender process. PWD selected and enrolled as approved, the models demonstrated by the bidders, except SpaceAge who was declared qualified later, on the basis of inspection by the CM. The whole method of awarding work to M/s SpaceAge Switch Gears Ltd., smells criminal conspiracy. In another case and records of M/s Keslec-Schredder made available to HLC by the PWD, the cost of imports and the duties/taxes paid on that had been blacked out! After obtaining the information from Customs Department, a comparison was made between the actual cost of import including duties/taxes and the contracted amount per unit. The details in brief are as under:Agency/ Division Supplier 400 W HPSV Contracted Price 27,000 Actual Import 21,534 250 W HPSV Contracted Price Actual Import -

PWD/Div. M1

Bajaj (Trilux, Germany)

PWD/Div. M2 PWD/Div. M3 NDMC

27,000 27,000 25,071

12,313 6,363 18,006

24,445

17,754

Thus, the apparent loss to Govt. of Delhi to the tune of Rs. 31.07 crores, caused by the PWD, MCD and NDMC, due to the fact that items were imported instead of using indigenous items, was unwarranted. Further, when the real cost of the imported item is considered as the base price, the loss is much more. The whole scheme of upgradation and use of imported items at exorbitant rates was apparently a conspiracy and an exercise to benefit certain companies or individuals at the cost of public money, since the performance of indigenous items was no less compared to that of imported ones. The reply of the Department to CAG and Shunglu Committee Report is not in consonance with the facts on record. Further, no independent inquiry was possible when the accused were in power. Obviously, the reply of the Department was on expected lines i.e. to defend the indefensible. It is strange that such glaring observations of the High Level Committee appointed by the Prime Ministers Office are yet to be acted upon by the Govt . of India. It is, therefore, necessary to investigate the matter to bring out the truth and punish the culprits in the entire spectrum of Rs. 286 crore Lighting System Contracts with specific reference to the procurement of Imported Luminaries for Rs. 46 crore. Accordingly, the Government of NCT of Delhi has referred the matter to the Anti Corruption Branch for a thorough & impartial investigation and necessary action.