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CAG's CWG Audit Report - Chapter - 31 (2011)

CAG's CWG Audit Report - Chapter - 31 (2011)

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Published by The Canary Trap
The Comptroller and Auditor General's (CAG) report on the 2010 Commonwealth Games has indicted the Prime Minister's Office (PMO) for the appointment of Suresh Kalmadi as the Organising Committee Chief. The report also indicts Delhi chief minister Sheila Dikshit for irregularities in the preparation of the Games.
The Comptroller and Auditor General's (CAG) report on the 2010 Commonwealth Games has indicted the Prime Minister's Office (PMO) for the appointment of Suresh Kalmadi as the Organising Committee Chief. The report also indicts Delhi chief minister Sheila Dikshit for irregularities in the preparation of the Games.

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Published by: The Canary Trap on Aug 05, 2011
Copyright:Public Domain

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10/30/2013

 
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IntegratedSecuritySystem(ISS)forCWG-2010
ElectronicsCorporationofIndiaLtd.(ECIL)IaPSUIwasappointedbytheGolinMay2009on"nominationbasis"toprovideanIntegratedSecuritySystem(ISS)forCWG-2010.WefoundthatECILpreparedahighlyinflatedcostestimate(approvedatRs.
346
crore)whichallowedittomakeanexorbitantprofitofRs.
126
croreonjusttheprocureditems.Detailsofthesavingsonitemsmanufacturedin-housewerenotmadeavailabletous.SuchexorbitantprofitsbyaPSUappointedonnominationbasisbytheGolamountstoabreachoftrust.Consideringtheunreliabilityoftheestimatesandvariationbetweentheestimatedandactualcosts,
we
recommendthatfinalpaymentsmaybereleasedtoECILonlyafterdetailedexaminationofactualcostsandanappropriatecertificationbyECIL'sstatutoryauditorsafterallowingaprofitmarginofupto
20
percent.Wefoundthat
176
PortableExplosiveDetectors(PEDs)worthRs.
39
crorewerewronglyprocuredbyECILIandremainedunutilised;similarlyI15
1
090outof18
1
700RFIDtagsforaccreditedvehiclesalsoremainedunutilised.MHAdidnothaveanapprovedlegacyplanfortheutilisation/redeploymentofthesecurityequipment,withoutan"apriori"identificationofitemsaslegacYInon-legacyandconsumables.SubsequenttoCWG-2010
1
ECILidentifiedlegacyandnon-legacyequipmentworthRs.
272.65
crore,whichhadstillnotbeenredeployedorutilised.
31.1Introduction
AnIntegratedSecuritySystem(ISS)wasrequiredtoensureeffectivesurveillanceforCWG-2010tocoverevents,openareas,lanes/importanttrafficjunctions,andhighlysensitiveandcrowdedareasinDelhi.ThemajorcomponentsoftheISSwere:perimetersecurity;vehicleaccesscontrol;pedestrianaccesscontrolforaccreditedcardholdersandspectators;andvenuesecuritycommandcentre.ThesecurityarrangementsforCWG-2010werecoordinatedbytheMinistryofHomeAffairs(MHA)throughtheEmpoweredSecurityCommittee(ESC).ThedecisiontoprovideISSforallcompetitionandnon-competition/trainingvenuesforCWG-2010throughElectronicsCorporationofIndiaLtd.(ECIL),aPSU,on"nominationbasis"wastakenbytheCabinetinitsmeetingheldon8May2009.Thereafter,
PerformanceAuditReportonXIXCommonwealthGames(CWG-2010)
1539
 
Chapter31-IntegratedSecuritySystem(ISS)forCWG-201OonthedirectionofESC,theexistingJoint
Committee'
consideredthetechnicalsolutionproposedbyECILforeachvenueintermsofits'spread';theJointCommittee'srecommendationswerethenexaminedbytheSteeringCommittee(headedbyShriR.Narayanswami)fortheessentialityandreasonablenessoftheBillofQuantities(BOQs);thereasonablenessofECIL'scommercialofferpreparedonthebasisoftheapprovedBOQwasthenexaminedbyanInter-MinisterialFinancialAdvisers
Committee'
constitutedbyMHA,andapprovedbytheEFCinSeptember2009for23venuesandMarch2010for10venues;Thereafter,eachvenueownerenteredintoaseparateagreementwithECILforsupplyandinstallationofequipment.TheapprovedcostofprovidingISSat33competitionandtrainingvenueswasRs.345.70crore,asdetailedbelow:
Table
31.1-
Break-upojCostojProvidingISS
Equipment
ImportedItems196.18Indigenous/in-houseitems105.80
Equipment
Installationcharges12.62Testing10.16Commissioning7.72Integration7.57Decommissioning5.65Total
43.72
otal
301.98
Thesecostswereapportionedamongfouragencies".Theschemewasfinallyimplementedonlyin31venues,sinceShivajiStadiumandShriRamCollegeofCommerceweresubsequentlyremovedfromthelist.However,sincethevenueownershadalreadysignedacontractwithECIL,equipmentforthesevenues,thoughprocured,wasnotinstalled.ThevalueofthisequipmentattheratesindicatedintheEFCmemowasRs.2.62crore.
consistingofrepresentativesoftheIntelligenceBureau,theDelhiPolice,venue-ownersandEc/LFinancialAdvisorsofMHA,MYASandMaUD;FA/Director(Finance)ofDDA,SAlandotherassociatedbodies;representativeofDC(meetingsattendedbyADG-Tech);representativesofvenueowners;andDirector(Prov],MHA.MYAS{Rs.
225.89
crarefor
20
venues),MaUD(Rs.73.41crarefor
4
venues),NDMC(Rs.
18.68
crarefor
3
venues)andGNCTD(Rs.
27.72
crarefor
6
venues)
31.2InflatedestimatesofECILresultedinexorbitantprofitofRs.126.38crore
AlthoughtheInter-MinisterialFA'sCommitteewasnotconvincedofthereasonablenessoftheestimatesproposedbyECIL,itrecommendeditsapprovalwithanacross-the-boardcutof10percentontheestimates,subjecttothefollowing:theproductioncostsofitemsproducedin-housebyECILweretobeassessedbytheCostAccountsBranchofMoFandsavingsinexcessof2percentweretobepassedontotheGol.Volumediscounts,ifany,wouldbetothebenefitoftheGol.
540
I
PerformanceAuditReportonXIXCommonwealthGames(CWG-2010)
 
Chapter31-IntegratedSecuritySystem(ISS)forCWG-2010Theestimatesapprovedweretheabsolutecap.ECILprovidedequipmentagainst50approvedBOQs-43forequipmenttobeprocuredbyECILand7forin-houseitems.Wecomparedthepurchasepriceofitemsprocuredunderthe43BOQswiththeirEFC-approvedratesandfoundthatin41oftheseBOQs,theactualpurchasepriceoftheitemswaslowerthantheEFCapproved
rates',
Overall,ECILprocureditemsinthe43BOQsforjustRs100.65crore(againsttheEFCapprovedestimateofRs.227.04crore),thussecuringaprofitofRs.126.38crore(126percent)ontheseitems.DetailsaregiveninAnnexe-31.1.InrespectofthesevenBOQsforitemsmanufacturedin-house,ECILdidnotprovideuswiththeircostanalysis.Further,wefoundthatthisanalysishadnotbeensenttotheCostAccountsBranchoftheMoF,asofMarch2011.Consequently,wecouldnotascertainwhetherthereweresavingsinexcessof2percent,whichshouldhavebeenpassedontotheGal.Further,ECILwasrequiredtotestindividualISSequipmentandissueajobcompletioncertificate,forwhichitchargedRs.10crore.However,itdidnotproducetherelevantrecordstous.
Intheremaining
2
BOQs,theEFCratewaslowerthantheactualprocurementrateby
6
percentand
16
percent.
Clearly,theinflatedestimatespreparedbyECIL(approvedatRs.346crore)didnotreflecttruemarketrates,andallowedECILtomakeexorbitantprofitsofatleastRs.126crore.SuchconductbyaPSUappointedonnominationbasisbytheGolamountstoabreachoftrust.Consideringtheunreliabilityoftheestimatesandvariationbetweentheestimatedandactualcosts,werecommendthatfinalpaymentsmaybereleasedtoECILonlyafterdetailedexaminationofactualcostsandanappropriatecertificationbyECIL'sstatutoryauditorsafterallowingaprofitmarginofupto20per
cent",
31.3ExcessCashAdvance
to
ECILofRs.37crore
WefoundthatECILreceivedexcesscashadvanceofRs.37.08crore(outofthetotalcashadvanceclaimofRs.137.32crore)forimporteditems.Thiswasonaccountofmis-classificationofitemsimported/procuredindigenously.ECILwaseligibleforadvanceof70percentoftheCIF
6
valueofimportedequipmentand40percentonindigenouslyprocuredequipment.However,outoftheequipmenttobeimported,equipmentworthRs.123.60crore(atEFCrates)wasactuallyprocuredindigenously,resultingininflatedcashadvancestoECIL.
Thisprofitmarginof
20
percenthasbeenindicatedinEc/L'sestimates.CIF:CostInsuranceandFreight
PerformanceAuditReportonXIXCommonwealthGames(CWG-2010)
541

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