OVERVIEW

I    Revenue Management in Airports Authority of India

Test check revealed that during 1997-98 to 1999-2000 delays in raising bills for traffic revenue resulted in loss of interest of Rs.75.28 lakh.

(Para 1.1.4.1)

The Authority did not raise bills for traffic revenue for Rs.2.26 crore for the services rendered at Cochin International Airport during the period from June 1999 to March 2000.

(Para 1.1.4.2.1)

Non-raising of bills on Druk Air for overflying Indian air space resulted in loss of Rs.56.14 lakh.

(Para1.1.4.2.2)

Raising of bills for RNFC on Indian Airlines Limited at incorrect rates led to excess billing for Rs.1.59 crore and under-billing for Rs.7.83 crore.

(Para1.1.4.2.5)

Considerable delays in realisation of traffic revenue against bills raised led to loss of interest of Rs.5.95 crore.

(Para 1.1.4.4.1)

Security deposits collected from various airlines was less than the norms to the extent of Rs.29.47 crore and required upward revision.

(Para 1.1.4.5.3)

Significant delays in raising bills for the non-traffic revenue viz. licence fee and delay in realisation of dues resulted in blockage of funds besides loss of interest of Rs.20.30 crore.

(Para 1.1.5.2 and 1.1.5.3)

Due to failure of the Authority in entering into agreements with the Central/State Government departments for the recovery of lease rent, licence fee etc., recovery of revenue of Rs.401.50 crore remained outstanding as on March 2000.

(Para1.1.5.4)

Failure to raise bills for licence fee with reference to the gross turnover of the licencees resulted in raising of adhoc bills, short billing to the extent of Rs.7.95 crore. The Authority did not take any penal action against the defaulting parties who had not intimated their turnover figures.

(Para1.1.5.4.14.1)

The Authority did not recover passenger service fee of Rs.42.94 crore for the years 1997-98 and 1998-99 from Indian Airlines Limited who had collected the same from the passengers on behalf of the Authority.

(Para 1.1.5.5)

Test check of bills for the cargo revenue revealed non-realisation of cargo revenue of Rs.77.72 lakh.

(Para 1.1.6.2)

Of the 897 cargo revenue bills test checked revealed significant delays in 94 per cent cases in raising of bills. Delays resulted in blockage of revenue of Rs.81.28 lakh and loss of interest of Rs.30.64 lakh.

(Para1.1.6.3.1)

Proper procedure for disposal of unclaimed cargo was not being followed.

(Para 1.1.6.3.2)

Failure of the Authority in raising bills on Air India Limited and Indian Airlines Limited for licence fee towards ground handling services rendered by these airlines to others at the airports resulted in non-realisation of revenue of Rs.71.74 crore.

(Para1.1.6.4)

Delay in realisation of cargo revenue from Air India Limited resulted in loss of interest of Rs.8.76 crore.

(Para 1.1.6.4.1)

II    Expenditure on foreign travel by officials of Coal India Limited and its subsidiaries

Non-formulation of guidelines regulating foreign travel of officials in accordance with Government of India guidelines resulted in payment of daily allowance in excess of limit, reimbursement of expenses incurred on unauthorised visits to foreign countries, payment of inadmissible daily allowance during training period, release of advance in foreign currency without insisting on detailed account, etc.

(Para 2.1)

III    Import and domestic distribution of fertilisers by MMTC Limited

The Company was a canalising agency for the import of fertilisers from 1970 onwards. The Company as per requirements specified by the Department of Fertilisers (DOF) undertook the import under the Ministry of Agriculture. Consequent upon decontrol and decanalisation (August 1992) of phosphatic and potassic fertilisers, the Company entered into the import of Di-Ammonia Phosphate (DAP) and Muriate of Potash (MOP), for its own distribution. The Company ventured into domestic distribution of fertilisers on a commercial scale from the year 1995-96 onwards and also entered into pool handling arrangements of imported urea for distribution in the domestic market.

(Para 3.1.1)

The Company did not draw up any procurement plan for import of fertilisers for distribution/domestic sale before commencement of each cropping season. The Company did not prepare any annual sales/ purchase budget.

(Para 3.1.3.1)

Though the Company was dealing in fertilisers since 1970, no Purchase Manual had been prepared by it. In most of the cases, open tenders were not called for and purchases were made without taking approval of the Sale Purchase Committee.

(Para 3.1.3.2.1)

Despite having huge stocks of fertilisers at the end of 1994-95, the Company went into heavy purchases in the following year, due to which stock accumulations at the end of 1995-96 increased considerably, resulting in heavy inventory carrying cost amounting to Rs.26.91 crore during 1994-95 to 1996-97.

(Para 3.1.3.3.1 to 3.1.3.3.3)

The Company suffered a loss of Rs. 2.16 crore due to sale of DAP at a price lower than the cost price.

(Para 3.1.3.3.4)

The working results of the Company in respect of non-canalised fertilisers during the 6 years ending 31 March 2000 showed that it had incurred huge losses.

(Para 3.1.3.4.1)

During 1995-96, the Company imported 107470 MT of DAP. Letters of credit were opened under Bankers Acceptance Facility (BAF) with 180 days. The Company could have saved Rs.7 crore towards exchange fluctuations by taking a forward cover.

(Para 3.1.3.4.2)

The Company incurred losses of Rs.33.98 crore in handling of pool urea during the years 1995-96 to 1999-2000. Besides, the Company incurred inventory-carrying cost of Rs.24.58 crore up to 1999-2000.

(Para 3.1.4.2)

The Company did not obtain the Sale Purchase Committee/Board’s approval while entering into the business of pool urea for the years 1995-96, 1996-97 and 1997-98.

(Para 3.1.4.3.1)

No proper guidelines were laid down by the Company regarding appointment of clearing, forwarding and stevedoring agents and the agents were appointed without calling for quotations/tenders or formally executing any agreements with them.

(Para 3.1.5.1)

In the absence of adequate financial security, dues of the Company to the tune of Rs.1.12 crore and Rs.45.19 lakh in two cases could not be recovered from the handling agents.

(Paras 3.1.5.1.1.1 and 3.1.5.1.1.2)

Lack of adequate security and appointment of a stockist without verification of his antecedents resulted in misappropriation and shortage of stocks valuing Rs.1.79 crore.

(Para 3.1.5.2.1.1)

Appointment of a stockist without specifying the terms of the contract resulted in non-realisation of dues of Rs.44.74 lakh from the stockist.

(Para 3.1.5.2.1.2)

Another stockist misappropriated stock worth Rs.40 lakh. An amount Rs.1.11 crore was outstanding against the stockist as on 31 March 2001.

(Para 3.1.5.2.1.3)

Non-implementation of the terms of contract and misappropriation of stock by a stockist resulted in non-realisation of dues of Rs.1.09 crore.

(Para 3.1.5.3.2)

There was a shortage of 16558 MT of fertiliser valuing Rs.9.00 crore during the years 1995-96 to 1999-2000.

(Para 3.1.5.4.2)

There was an avoidable expenditure of Rs.20.94 crore due to a faulty decision of the Sale Purchase Committee in the purchase of urea.

(Paras 3.1.6.4.2.1 and 3.1.6.5)

The Company could not recover its claim of Rs.2.53 crore including demurrages incurred from a supplier whose whereabouts were not known.

(Para 3.1.6.5.3)

The Company incurred a loss of Rs.2.36 crore due to failure to insure cargo.

(Para 3.1.7.1)

There was a loss of Rs.1.10 crore and blocking of funds of Rs.1.58 crore due to entering into a venture with a sick company.

(Para 3.1.7.2)

Dues amounting to Rs.1.40 crore could not be recovered after allowing unauthorised credit sales against post-dated cheques to a party.

(Para 3.1.7.3)

Failure to invoke performance guarantee and allowing the same to expire resulted in non-recovery of claims amounting to Rs.1.29 crore.

(Para 3.1.7.4)

The Company utilised HDPE bags in excess of the norms resulting in extra expenditure of Rs.44 lakh.

(Para 3.1.7.5)

IV    Marine Logistics Support Services in Oil and Natural Gas Corporation Limited

Since late seventies when Oil and Natural Gas Corporation struck oil in Mumbai offshore region the requirement of marine logistics support services of off shore operation of the ONGC were being met through off shore supply vessels (OSVs). OSVs are deployed for constant vigil to meet contingencies such as fire, emergency, and evacuation of personnel besides deploying on standby, cargo and rig move duties. The requirement of OSVs under the jurisdiction of the Mumbai Region Business Centre of the ONGC are being met through a mix of owned and hired OSVs.

(Para 4.1.1 and 4.1.1.2)

Over the years, ONGC Management had attempted to fix the norms or standards regarding the number of OSVs required to be deployed per off shore duty stations. In spite of entrusting this job to different consultants and also to its own institutions from time to time, ONGC could not fix the specific norms for hiring the OSVs. ONGC justified its non acceptance of norms recommended by various consultants on the grounds that the owned OSVs could not be disowned and the charter hired Indian National Ship owners Association vessels operating under the formula approved by the Government could not be de hired without referring the same to the Government. Consequently the actual deployment of OSVs for the period from 1995-96 to 1998-99 remained 57 though the number of duty stations have decreased from 45 to 42.

(Para 4.1.4)

Incorrect application of ceiling rates in respect of two vessels hired from M/s. Essar Shipping by ONGC resulted in overpayment equivalent of Rs. 4.86 crore over a period of seven years.

(Para 4.1.5.6.3)

Against the total requirement of 22 stand by vessels worked out by an in house study report of May 1992, further revised to 25 OSVs in October 1996, the actual deployment of OSVs on stand by duties for the period from 1995-96 to 1998-99 exceeded the norms by 4 to 7 OSVs. However the deployment of OSVs during 1999-2000 was actually less than the requirement. Based on per day hire charges as of first day of April of the relevant year the cost of excess deployment of these OSVs amounted approximately to Rs. 85.61 crore.

(Para 4.1.6.2)

The quantity of cargo delivered per trip to rigs/installation was much below their storage capacity and also well below the deliverable capacity of OSVs. OSVs thus made more number of trips and resultantly more number of OSVs were deployed for supply duty than required as the quantity of cargo delivered by OSVs fell well below the storage capacity of rig/installation. The cost of such excess trips to rigs and platform during the five years ending 1999-2000 amounted to Rs. 101.60 crore. Besides 40 to 60 per cent of the cargo loaded was returned to the base undelivered resulting in infructuous expenditure of Rs. 104.81 crore on unfruitful OSV carriage.

(Para 4.1.7)

Facilities for generating potable water (PW) through water maker (WM) were installed on all own/hired rigs as well as platforms to cater to the requirement of PW as the supply of PW by OSVs is an expensive preposition as compared to production of PW through WM. However, in most of the platforms and owned rigs these WM were either not in operation or water generation was insufficient as such ONGC had to make the shortages of PW good by supplying water through OSVs. Expenditure incurred on the supply of PW through OSVs to platforms during the five years period ending March 2000 amounted to Rs. 63.83 crore besides Rs. 11.66 crore incurred on the supply of PW on its own rigs during the years 1997-98 and 1998-99.

(Para 4.1.7.8)

The percentage of ‘cargo remained on board’ to ‘cargo loaded’ during the period from 1995-96 to 1999-2000 ranged between 58.21 and 36.06 per cent. In three vessels reviewed in audit the number of sailings without delivering the cargo were very high which indicated complete lack of planning for assessing the requirement vis a vis delivering the cargo. Besides cases of discrepancies were noticed between the quantity delivered by OSVs and the quantities acknowledged by the rigs. Such discrepancies in respect of bulk commodities noticed during the review of five rigs during the period from 1997-98 to 1999-2000 amounted to Rs. 3.07 crore.

(Para 4.1.7.10)

With a view to improving navigation, reporting position of cargo and traffic management, Global Positioning System -Assisted Improved Navigation System was handed over to the user department (Logistics) of ONGC in May 1997 after its commissioning by M/s Industries and Engineering Corporation, Ahmedabad at a total cost of Rs. 3.75 crore. Inspite of this the daily activities still continue to be regulated entirely on radio and the GAINS had not been put on effective use. Thus, non utilisation of the GAINS for the intended purpose resulted in infructuous expenditure of Rs. 3.75 crore.

(Para 4.1.9)

Prior to 1990-91, contract for the operation of owned OSVs were awarded to private operators and the maintenance repairs were on ONGC’s account. Since 1990-91 the operators were awarded a combined contract of the operation and maintenance of these vessels. The defects noticed in OSVs at the time of handing over and taking over (HOTO) from old contractors to new contractors of the OSVs were normally the responsibility of the outgoing operator. It was noticed in audit that there were abnormal delays in the settlement of HOTO defects resulting in poor upkeep of OSVs for prolonged period leading further to deterioration of OSVs and increase in downtime. Even responsibilities in respect of defects noticed during HOTO in 32 ONGC vessels between August 1996 and June 1997 were not decided up to November 1998.As of September 1998, Rs. 66.71 lakh had been spent on rectification of these defects by ONGC and estimated expenditure of Rs. 2.80 crore was yet to be incurred. This indicated that only bare minimum repairs had been carried out and the major repairs were yet to be done for which no liability was fixed on the contractors.

(Para 4.1.10)

In terms of the agreement entered with M/s. Urmila & Company for operation and maintenance of ONGC owned vessels, the operator was required to keep the vessels in good running orders and substantially the same condition as were received by them. Further the operator was required to pay for the cost of repair and replacement of all such equipment, tool spares which were damaged as against the inventory handed over on delivery to the operator and also to bear all charges which were required to be incurred to bring the vessels fully operational and in the same shipshape conditions. ONGC officials while inspecting the vessels from time to time brought out unsatisfactory performance of the contractor regarding the maintenance of the vessels. In spite of this the vessels remained inoperative for long period due to non-repair of defects by the operator and ultimately the contract had to be terminated. ONGC instead of getting them repaired from the operator as per the agreed terms and conditions got these vessels repaired at a cost of Rs. 14.02 crore after taking over from the operator so as to bring them back in shipshape condition.

(Para 4.1.10.10)

ONGC deployed higher capacity Anchor Handling Tug cum Supply vessel hired for deep water drilling for regular supply and stand by duty during the period from December 1997 to March 1998. The supply and stand by duties were normally performed by the lower capacity vessels; therefore the deployment of higher capacity OSV on normal duty resulted in an extra expenditure of Rs. 5.30 crore.

(Para 4.1.12.1)

Annual O&M rate paid to operators included dry docking expenditure of OSVs. Although no dry docking was to be carried out by the operators for the extended period of the contract during 1991-1996 the daily rates payable were not correspondingly reduced by the ONGC to the extent of element of dry docking expenses built in to the daily operating rates. Thus non-adjustment of daily rates payable in respect of dry docking expenses resulted in overpayment of Rs. 1.62 crore.

(Para 4.1.12.2)

ONGC owned OSV Sindhu-12 operated by M/s Orient Ship Management and Managing Private Limited caught fire in November 1996. The services of the vessel could not be utilised since then, pending decision for its repair. The delay in repair has resulted in further deterioration of the vessel thereby increasing the repair cost to Rs. 19.59 crore (quoted by Mazagon Dock Limited in December 1999) from original survey estimate of Rs. 5.00 crore besides recurring expenditure on maintaining the vessel as per the statutory requirements.

(Para 4.1.12.3)

V    Implementation of rehabilitation plan for displaced persons of Tehri Hydro Project

Tehri Dam project, which envisaged generation of 600 MW of electricity, was cleared by the Planning Commission in June 1972 at an estimated cost of Rs.197.92 crore as a state sector project. The administrative approval of the Government of Uttar Pradesh for the project was accorded in July 1976. The project, however, made little progress till June 1989 when it was transferred to Tehri Hydro Development Corporation Limited (Company).

The total cost of the project had been revised by Uttar Pradesh Irrigation Department in 1983 to Rs.1065.86 crore at 1983 price level so as to enhance the generation capacity of the powerhouse envisaged under the project to 1000 MW. Later the project cost was estimated at Rs.5583 crore (at the March 1993 price level) adding another 1400 MW and thus increasing the projected generation capacity from 600 MW as planned earlier to 2400 MW. Construction of Tehri and Koteshwar dams involved dislocation of 14581-(including 3998 families not requiring displacement) families living in 125 villages and Tehri Town. In order to rehabilitate the affected families, requirement of funds, which was estimated at Rs.414 crore in 1994, went up to Rs.875.06 crore by March 2001. During the years from 1990 to 2001, the Company acquired 992.43 acres of land in 23 villages against the requirement of 3291.53 acres of land in 102 villages.

As the rehabilitation work done by THDC was unsatisfactory, it has been transferred back to the State Government of Uttar Pradesh in January 1999 under the supervision of the Commissioner, Garhwal Mandal with effect from March 1999 on the recommendation of Professor Hanumantha Rao Committee. Consequent upon the reorganisation of State of Uttar Pradesh and formation of Uttaranchal State the work has been transferred to the State of Uttaranchal with effect from January 2001.

(Paras 5.1.1.1, 5.1.1.2 and 5.1.1.3)

By keeping its Corporate Office away from the scene of action despite creation of facilities at New Tehri Town/Rishikesh at a cost of Rs.3.13 crore, the Company had lost an opportunity of interacting closely with the population likely to be affected by the project though such interaction with local population could have speeded up the project work, more particularly the rehabilitation of affected families.

(Para 5.1.2)

Under the earlier rehabilitation policies up to 1995, the family included only the husband and wife and their entitlement was determined with reference to land owned by them as per revenue records. This failed to take into account the total number of adult family members like major sons and daughters as well as dependent parents living under the umbrella of a joint family. To that extent, the need for their rehabilitation was not recognised. This shortcoming in the policy generated resentment amongst the affected families and resistance against the relocation/rehabilitation process.

(Para 5.1.3.4 (a))

The policy evolved in 1995 gave, rural families affected by the project, an option to receive cash in lieu of land surrendered by them. Since only 565 out of 5012 rural families opted for cash compensation it is clear that the cash compensation was not sufficiently attractive.

(Paras 5.1.3.4 (b) and 5.1.5.1)

Though the policy of 1995 stated that local population was to be consulted while deciding upon the rehabilitation package, no steps were taken in this regard.

(Para 5.1.3.4 (d))

The co-ordination mechanism for speedy implementation of the project including rehabilitation of families likely to be affected by the project was restructured and downgraded after formation of THDC. The new set up for coordination could not expedite the resettlement process as its decisions lacked finality. The decisions taken by the Co-ordination Committee were not implemented effectively because the various constituents of the Co-ordination Committee were functioning at cross-purposes.

(Para 5.1.4.3)

Against total requirement of acquisition of 5354.01 acres of land in 125 villages of 9290 families, only 3054.91 acres of land was acquired in 46 villages (2062.48 acres by Uttar Pradesh Irrigation Department and 992.43 acres by THDC) leaving a balance of 2299.10 acres of land yet to be acquired in 79 villages of 6198 families. The main reason for slow acquisition was non-fulfillment of various provisions of Land Acquisition Act, 1894 by SLAOs/State Government.

(Para 5.1.4.5)

The SLAO-II, Tehri made fraudulent payment of Rs.34.30 lakh to three non-existing families by manipulating relevant records like survey sheets, valuation sheets, award etc.

(Para 5.1.4.5 (ii))

SLAO II, Tehri had not given detailed accounts for Rs.6.55 crore claimed to have been paid by him to affected families of Old Tehri Town.

(Para 5.1.4.5 (v))

THDC accepted Rs.24.23 crore claimed to have been paid by Uttar Pradesh Irrigation Department for compensating landowners without insisting on any details in support of such payments.

(Para 5.1.4.5 (vi))

THDC had to pay Rs.89.69 lakh on account of interest on delayed payment of compensation to the affected families in 6 villages although the responsibility for delay in declaration of awards was attributable to the SLAOs.

(Para 5.1.4.5 (vii))

The District Magistrate of Dehradun who was a member of the Co-ordination Committee, allotted 2 acres of land which was meant for rehabilitation of displaced families to the National Airports Authority of India and also failed to prevent it from taking possession of additional 26.5 acres of land earmarked for rehabilitation of oustees. The Commissioner of Garhwal Division who was the Chairman of the Co-ordination Committee also did not take any action to correct the situation created by the order/inaction of the District Magistrate.

(Para 5.1.4.5 (ix))

Out of the 2255 developed plots 220 plots were not allotted to displaced families. These were instead allotted by the Uttar Pradesh Irrigation Department to outsiders.

(Para 5.1.5.1(ii))

157.676 acres of land acquired by Uttar Pradesh Irrigation Department/THDC for rehabilitation of families during 1988 to 1992 at a cost of Rs.73.14 lakh in Renapur, Central Hope Town, Ranipur Roh and Rudrapur could not be allotted due to litigation in regard to title of the land under acquisition/non-demarcation of land etc.

(Para 5.1.5.1(iii))

13 contracts valued at Rs.8.96 crore were awarded on limited tender basis even though there was no urgency thereby depriving THDC of most competitive rates.

(Para 5.1.5.4.1)

A cost over run of Rs.52.87 crore was noticed in 21 contracts for institutional buildings, Roads, Hospital etc.

(Paras 5.1.5.4 3 and 5.1.5.4.4)

Rs.77.01 crore incurred for construction of additional residential and non-residential covered space measuring 146338.11 sq. mts built by Uttar Pradesh Irrigation Department/THDC for various Government and semi-Government departments could not be recovered by THDC.

(Para 5.1.5.6)

Public utility buildings i.e, bus stand, temples, mosque, fire station, post office etc. constructed at New Tehri Town, Bhagirathipuram during the period 1992-97 at a cost of Rs. 16.40 crore, were not taken over by the concerned authorities/ local bodies.

(Para 5.1.5.7)

VI (a)    Modernisation of Bokaro Steel Plant of Steel Authority of India Limited

Government of India approved in July 1993 a modernisation scheme for reconstruction of Steel Melting Shop (SMS) No. II, installation of Continuous Casting Department in SMS II, Modification of Hot Strip Mill etc. Its objective was to increase the capacity of production of liquid steel from 4.08 MTPA to 4.50 MTPA at a capital cost of Rs.1625.79 crore. It also aimed at reduction in energy consumption and improvement in quality of finished product. The cost was revised to Rs.1792.90 crore in August 1994 and further to Rs.2468.18 crore in October 1999.

(Paras 6.1.2 and 6.1.8.2)

The modernisation proposal submitted by SAIL in February 1990 was deferred by the Ministry of Steel (MOS) in September 1990 mainly on the ground of poor production performance of BSL, a large number of modernisation programme already undertaken in other steel plants and severe resource constraints. However, the MOS revived the scheme in January 1992 although the conditions on which the scheme was deferred were still prevalent at the time of revival. Further, MOS did not take into account at the time of approval of the modernisation programme, the likely competition BSL was expected to face due to liberalisation of steel industry. As a result thereof, the assumption of 100 per cent capacity utilisation and full net sales realisation, taking marketability of the products as granted, proved to be unrealistic as SAIL had to close down its one blast furnace and two coke oven batteries for want of demand.

(Para 6.1.2.2(a))

As per the original proposal, the project was to be implemented with Tiazpromexport (TPE) as turnkey contractor. However, at the instance of MOS, the implementation strategy was revised from single turnkey mode to competitive global bidding due to non-availability of Rouble credit from USSR. However, no credit was made available by the other bidders who participated in the global bidding. This resulted in increase in project completion schedule by 6 months and increase in capital cost by Rs.1497.23 crore due to change in the implementation strategy, devaluation of Indian currency, higher incidence of interest, price escalation between the intervening periods.

(Para 6.1.2.2(b))

In the note submitted to the Government in April 1993, SAIL/MOS inter-alia mentioned that the production of saleable steel during 1992-93 was 95 per cent of the rated capacity and the project would be financed through external borrowings and internal sources in the ratio of 1:1. Based on these parameters, the Internal Rate of Return (IRR) of the scheme was estimated to be 22.6 per cent. However, the actual position prevalent at the time of approval of project by Government was different. The actual production of saleable steel during 1992-93 was 87.27 per cent and not 95 per cent of the rated capacity. Further, SAIL could raise only less than 2 per cent from internal sources. The actual debt equity requirement of the fund for capital work projected for VIII plan clearly indicated that 77 per cent of the fund would be made available mainly through commercial borrowings only, yet the project was approved with debt equity ratio of 1:1.

(Para 6.1.2.2 (c))

The offers of EPI and MECON for Re-heating furnace (RHF) were evaluated considering the heat consumption as 260 tonnes per hour instead of 300 tonnes per hour. The offer of EPI would have been cheaper considering the capacity as 300 tonnes per hour as required under tender specification. However, order was placed on MECON resulting in a loss of Rs.13.22 crore.

(Para 6.1.3.1.1 (b))

The contract for HSM package was awarded to M/s. SMS (AG), Germany combining 12 AMR schemes which were not part of modernisation scheme. The company could have saved an amount of Rs.7.13 crore, had order for AMR schemes been awarded separately.

(Para 6.1.3.1.3 (a))

The contract for structural work relating to CCD package was awarded to HSCL on single tender basis without considering their earlier offers. This resulted in loss of Rs.10.07 crore. Further, HSCL (a PSU under the same Ministry) off loaded major portion of civil work to a private contractor on nomination basis.

(Para 6.1.3.2 (a) and (b))

Work order for DART TYPE slag stopper system was awarded to M/s. Indomag Steel Technology at a cost of Rs.5.16 crore on single tender basis as against Pneumatic type for which tender was invited. No opportunity was given to other parties to quote for DART TYPE system.

(Para 6.1.3.3 (B))

No uniformity was maintained in formulating terms and conditions of the contract with different parties. This led to financial benefit of Rs.13.14 crore to MECON.

(Para 6.1.4 (A) (a))

There was no provision of binding quantities in CCD package for civil work, which resulted in loss of Rs.17.09 crore.

(Para 6.1.4 (A) (b))

BSL paid an escalation of Rs.76.38 crore to the Indian Associates of M/s. VAI and SMS (AG) although it was not contractually payable as per the opinion of the Solicitor General of India.

(Para 6.1.4(C))

Operational and maintenance spares valuing Rs.7.21 crore for CCD and Rs.17.06 crore for HSM package were procured much before the requirement in 1996-97 resulting in blocking of fund and consequent loss of interest thereon.

(Paras 6.1.5.1 (A) (i) and 6.1.5.1 (B) (i))

Rs.32.69 crore, being the 5 per cent of contract price of CCD package, was to be released after issue of Preliminary Acceptance Test (PAT). Disregarding the above provisions, the plant released Rs.28.28 crore (86.5 per cent of the amount payable after PAT) although as many as 20 defects noticed during PAT remained unattended.

(Para 6.1.5.1 (A) (iii))

There was infructuous expenditure of Rs.4.29 crore on construction of foundation for Coiler No.5, which was not required under the modernisation scheme.

(Para 6.1. 5.1 (B) (ii))

The extra shut down period consumed for the modernisation of Hot Strip Mill resulted in loss of production of 1.21 lakh tonnes of HR coil during 1998-99 and consequent loss of contribution of Rs.77.44 crore.

(Para 6.1.5.1 (B) (iii))

SAIL incurred a loss of Rs.2.11 crore due to non-replacement of prematurely failed load cells supplied by M/s. ABB Limited, Bangalore.

(Para 6.1.5.1 (B) (v))

An amount of Rs.2.41 crore being the extra cost incurred by the company in executing civil works relating to RHF package (excess over binding quantity) was not recovered from the principal contractor.

(Para 6.1.5.1 (C) (i))

There was a blocking of capital amounting to Rs.19.34 crore for last 7-10 years due to injudicious decision of the management to upgrade/modify RHF no.1 just before the upgradation/ modification of RHF 2,3, and 4.

(Para 6.1.5.2 (b))

The improper functioning of Mechanised Work Roll changing system resulted in extra expenditure of Rs.11.76 crore due to increased consumption of bearings.

(Para 6.1.5.2 (c) (ii))

LD amounting to Rs.19.07 crore was not recovered from foreign contractors, although none of the global packages could be completed within the contractual completion period.

(Para 6.1.6 (i))

LD amounting to Rs.11.40 crore recovered from the Indian Associates of global suppliers were refunded subsequently and further recovery of LD was postponed on the plea that recovery of LD would be decided after completion of the contract.

(Para 6.1.6 (ii))

Consultancy work was awarded to MECON at a total fee of Rs.42 crore despite SAIL was having its in-house consultancy wing viz, Centre for Engineering and Technology (CET).

(Para 6.1.7 (i))

As per the sanction of the Government, the project was to be completed by July 1997. However, even after a lapse of 50 months, the project could not be completed in full. The extent of delay in completion of the different packages ranged between 3 and 39 months. Although all the indigenous packages were completed by September 1999, one global package was yet to be completed (September 2001).

(Para 6.1.8.1)

The cost of the project increased from Rs.1625.79 crore to Rs.2468.18 crore mainly due to escalation, interest and under estimation of costs. Inspite of clear indication that the project would be funded mainly through borrowings, the MOS went ahead for clearance of the project with debt equity ratio of 1:1. The actual debt equity ratio worked out to 59:1 due to SAIL’s inability to provide funds from internal sources. Consequently, the burden of interest had gone up from Rs.90.91 crore to Rs.551.56 crore. Further, based on the current price of finished goods, the IRR had come down to 7 per cent from 22.6 per cent envisaged.

(Paras 6.1.8.2 and 6.1.9)

The envisaged production of 45 lakh tonnes of crude steel and 37.80 lakh tonnes of saleable steel after modernisation was not achieved and the actual production stood at 33.53 lakh tonnes and 32.46 lakh tonnes during 1999-2000 and 36.35 lakh tonnes and 33.13 lakh tonnes during 2000-01 respectively. In fact, it registered negative growth over pre-modernisation period of 1993-94.

(Para 6.1.10)

BSL sold 3.59 lakh tonnes of Slab directly from the plant during 1999-2000 at an average net sales realisation of Rs.7877 per tonne as against Rs.8359 per tonne realised by the Central Marketing Organisation of the company during the same period. This resulted in loss of revenue of Rs.17.30 crore. The actual production of HR coil (having the highest profit margin of Rs.2173 per tonne) was 6.56 lakh tonnes against the production plan of 10.10 lakh tonnes during 1998-99. The shortfall in the production of HR Coil resulted in a loss of profit margin by Rs.76.92 crore. Further, production of 1.33 lakh tonnes of Thick Plate during 1998-99 to 2000-01 resulted in loss of Rs.43.61 crore.

(Para 6.1.10.1)

Various techno-economic parameters envisaged after modernisation could not be achieved. The specific heat consumption per tonne of HR Coil was abnormally high at 1.075, 0.974 and 1.03 G Calorie during 1998-1999, 1999-2000 and 2000-01 respectively against 0.576 G. Calorie envisaged. This resulted in excess consumption of heat valuing Rs.120.98 crore during 1998-1999 to 2000-01. The yield from liquid/ingot steel was 82 per cent during 2000-2001 as against 84 per cent envisaged. Tap to tap time in SMS-II have also increased from 71 minutes (1993-1994) to 99 minutes (2000-01) against 60 minutes as envisaged.

(Para 6.1.10.2)

The plant had been earning profit for the past several years and the cumulative profit up to 1997-98 stood at Rs.4304.71 crore. However, it suffered a loss of Rs.164.61 crore during 1998-99 mainly due to higher incidence of interest and depreciation after modernisation. The loss was understated by Rs.34.47 crore due to delayed capitalisation of CCD and treatment of revenue expenditure as capital expenditure. The plant registered profit of Rs.119.88 crore and Rs.49.17 crore in 1999-2000 and 2000-01 respectively due to financial relief granted by the Government of India and due to overstatement of sales, undercharge of depreciation, non-provision against stores and spares declared surplus/not moved for more than ten years.

(Para 6.1.11)

Engagement of Voest Alpine Industrial Service (VAIS) at a cost of Rs.26.26 crore for providing operational and maintenance support services at Continuous Casting Department and experts from VAI, (Austria)/ GFA (Germany) for improvement and stabilisation of production at Hot Strip Mill at a cost of Rs.8.73 crores lacked justification as the scope of supply of the package suppliers under the contract included, inter alia, testing, commissioning, training of SAIL’s personnel and demonstration of performance guarantee.

(Para 6.1.12 (a))

VI (b)    Township Management in Steel Authority of India Limited

Steel Authority of India Limited (SAIL) has four integrated steel plants located at Bokaro, Rourkela, Bhilai and Durgapur for producing Iron & Steel. Each plant has a separate township, which contains inter-alia residential quarters, shopping complexes, educational institutions, etc. The management ipso facto provides basic amenities like electricity, water, sewerage, roads etc. in the township.

(Para 6.2.1)

The Company acquired land measuring 113307 acres through Land Acquisition Act for construction of 4 integrated steel plants and township. However, as per Government records total area of land transferred to the plants was 112560 acres. The discrepancies in land records have not been reconciled with the respective State Governments. Further, the Company could not so far get the title deeds in respect of 53979 acres of land transferred to it.

(Para 6.2.2.1)

Government of Bihar claimed Rs. 52.17 crore from Bokaro Steel Plant towards additional compensation paid to the landowners in excess of the ceiling price fixed by the State Government. However, as per the agreement reached between the Central Government and the State Government, any amount paid in excess of ceiling price was to be borne by the State Government. As such, the Company did not pay the amount, as their liability was restricted up to the ceiling price. Non-settlement of the issue would delay the transfer of title of the land to Bokaro Steel Plant.

(Para 6.2.2.1(c))

825 acres of land was not delivered to Bokaro Steel Plant although compensation for the same had already been paid.

(Para 6.2.2.1(d))

Out of total 113307 acres of land acquired, 14117 acres were transferred to Central, State Government and Semi-Government organisations and 18713 acres have been lying vacant.

(Para 6.2. 2.2)

Bokaro Steel Plant sub-leased 418 acres of Government land to various agencies without the permission of the State Government although the plant itself did not possess the title of the land.

(Para 6.2.2.3.1(i))

In Bokaro Steel Plant, 90 acres of land was allotted to a co-operative housing society without the permission of the State Government. Further, the society encroached 13 acres of land illegally.

(Para 6.2.2.3.1(ii))

Bhilai Steel Plant transferred 1920 acres of land to an autonomous body at a price much lower than the minimum upset price fixed by the Government of Madhya Pradesh.

(Para 6.2.2.3.3(i))

In 1980, Bhilai Steel Plant constructed 2000 dwelling units under non-Company housing scheme for allotment to its employees without the permission of the State Government. Of this, 1986 units could not be got registered so far.

(Para 6.2.2.3.3(ii))

The condition relating to allotment of land to outside parties was revised in July 1997. Durgapur Steel Plant leased out 10 acres of land in November 1998 to a cultural organisation at pre-revised rate.

(Para 6.2.2.3.4(ii))

1466 acres of land valuing Rs. 387.04 crore was unauthorisedly occupied by various agencies at Durgapur, Rourkela and Bhilai Steel Plant. No survey was conducted in Bokaro Steel Plant to find out the actual quantum of land held under unauthorised occupation.

(Para 6.2.2.4)

Out of 118155 residential quarters held by the four integrated steel plants, 9906 quarters were allotted to outsiders. The Company has not yet evolved any uniform policy for allotment of quarters to outsiders.

(Paras 6.2.3.1 and 6.2.3.2)

1192 residential quarters were unauthorisedly occupied by various agencies. Of these 811 quarters belong to Bokaro Steel Plant.

(Para 6.2.3.3)

As on 31 March 2001, an amount of Rs. 35.99 crore remained outstanding on account of licence fee, electricity, water and other service charges.

(Para 6.2.3.5)

The standard licence fee of residential quarters was not revised during the last twenty years by BSL and BSP. In RSP the standard licence fee for employees (executives/non-executives) has not been revised in last 28 years since 1973, though in case of non-employees, licence fee was revised in 1996. Similarly, in DSP the licence fee of newly built houses for executives was revised in 1993 and 1999 but for other employees/non-employees, no such revision has been taken place so far since inception.

(Para 6.2.3.6.1)

Till 31 January 2000, no recovery of water charges from the employees as well as non-plant agencies was made by BSL although other sister plants like DSP had been making cost recovery of water charges from non-plant agencies since long ago.

(Para.6.2.3.6.4)

The license fee of shops was neither revised regularly by the steel plants nor they adopted any uniform policy.

(Para 6.2.4 (i))

640 shop owners of Durgapur Steel Plant and 71 shop owners of Bokaro Steel Plant had not been paying rent and other charges for the last 5-6 years. The total outstanding dues worked out to Rs. 1.13 crore in Durgapur and Rs. 0.72 crore in Bokaro Steel Plant.

(Para 6.2.4 (ii))

Rourkela Steel Plant could not get possession of 303 shops from the Notified Area Council.

(Para 6.2.4 (iii))

Under self-financing rehabilitation scheme, 940 unauthorised temporary shops in Durgapur Steel Plant were regularised by converting them into permanent shops.

(Para 6.2.4(iv) b)

The total amount of Rs. 4.51 crore (BSL-Rs. 1.35 crore; RSP-Rs.1.19 crore and DSP-Rs.1.97 crore) was outstanding towards shop rent, electricity and water charges as on 31 March 2001.

(Para 6.2. 4(v))

The annual average deficit suffered by plants on maintenance of township during the last 7 years ended 31 March 2001 worked out to Rs. 198 crore. Expenditure per quarter per year varied widely from Rs.11405 (Durgapur) to Rs 39810 (Bokaro) during 2000-01.

(Para 6.2.5)

Durgapur Steel Plant had been paying Rs. 86 lakh annually towards holding tax since April 1992 due to the plant's inability to obtain the status of Industrial Township from the State Government. The 74th amendment of the Constitution of India came into force with effect from 1 June 1993 which allowed Industrial Establishment providing municipal services to be exempted from the payment of holding tax if the said area is declared as Industrial Township Incidentally, it may be mentioned here that RSP had already got the status of Industrial Township from the Government of Orissa with effect from 15 April 1995.

(Para 6.2.6.2)

VI (c)    Working of Research and Development Centre for Iron and Steel of Steel Authority of India

The need for corporate research and development centre in the Public Sector in iron and steel industry in India was recognised for the first time in the late 1950. Accordingly, a Central Research & Development Organisation was set up at Durgapur Steel Plant in 1967 and was revitalised and made functional at Ranchi in 1972. Over a period of time, it has grown into a full-fledged centre as Research and Development Centre for Iron & Steel (RDCIS).

(Para 6.3.1)

RDCIS is headed by a Director (presently part time) who is assisted by two Executive Directors and eight General Managers.

(Para 6.3.2)

The Board of Directors in a meeting held in June 1973 envisaged that investment in R&D would be increased to 1 per cent of the gross sales turnover within next 5 years i.e. by 1978-79. This has, however, remained around 0.25 per cent only.

(Para 6.3.3)

There is no established system of appraisal of the performance of the R&D projects by the qualified and eminent scientists of the reputed national and international research laboratories or institute of technology on the pattern of other R&D Centres.

(Para 6.3.4.1)

RDCIS has been reorienting its thrust areas during last few years primarily as a result of the present market scenario from the BSR projects to PPI projects and ICA projects in order to face competition from domestic as well as global players.

(Para 6.3.4.2)

During the period 1994-95 to 2000-2001, 663 projects were completed. Of this, only 307 i.e. 46.30 per cent projects could generate monetary benefits. Further 132 projects executed at direct cost of Rs. 17.43 crore though generated monetary benefits were discontinued mid-way. Of these, 35 projects generated only one time benefit although they were expected to generate annual recurring benefit in the micro plan documents.

(Para 6.3.5.1)

24 projects were abandoned mid-way during 1994-95 to 2000-2001 after incurring Rs. 60 lakh.

(Para 6.3.5.2)

48 projects were completed between 1995-96 to 1998-99 after incurring expenditure of Rs.4.49 crore but could not be evaluated due to non-submission of completion reports by the Group leaders. Further, 7 projects lying unevaluated after completion between 1999-2000 to 2000-2001 were due to non-submission of completion report.

(Para 6.3.5.3)

During the period from 1994-95 to 1999-2000, incremental benefit of more than one crore of rupee was established in respect of 95 projects. Of these, 18 projects were discontinued subsequently.

(Para 6.3.5.4)

The project for improvement in naphthalene yield was stage closed after incurring direct expenditure of Rs.32.85 lakh without assigning any reasons. A project on stabilisation of combined blowing technology was stage closed due to non availability of Argon reservoir and non-receipt of statutory permission from Explosive Department at Nagpur after incurring an expenditure of Rs.11.13 lakh.

(Para 6.3.5.6)

A project on production of impregnating pitch was completed at a total direct expenditure of Rs.40.98 lakh without yielding any commercial benefit to the user plant.

(Para 6.3.5.7)

RDCIS has so far commercialised only six out of 41 patents sealed since inception and generated income of Rs.79.62 lakh up to November 2000. The achievement in this regard was poor when compared to other reputed research and development institutions where 20 per cent of funds required are generated by royalty on patents.

(Para 6.3.5.8)

The average output of scientific publications worked out to 0.15 papers per scientist per annum during the last 7 years.

(Para 6.3.5.9)

The major purchases were on single tender basis while the remaining purchases were done through limited tender enquiries issued to the manufacturers/traders.

(Para 6.3.6.1)

There were delays ranging between two months to three months in conducting final inspection after receipt of goods in the stores.

(Para 6.3.6.2)

Although RDCIS was envisaged to be a flat organisation with a minimum of hierarchy, it has grown into a typical hierarchy based organisation over the years with 10 tiers of executives. In April 1996, the Board had decided to induct qualified and well-motivated scientists not only from the reputed research organisations within the country but also from abroad at middle level. However, no such recruitment has been made during last five years. Although long-term human resources plan envisaged continuous flow/redeployment of executives at senior level to plants/units, no such redeployment has been done during last five years. The Board decided to increase executive strength in technical areas as a part of the long term plan. However, no large perceptible shift has taken place from RDCIS to Plant/Units during last five years.

(Para 6.3.7.1)

The percentage of engineering days planned for research work to total available engineering days ranged between 55.45 per cent (2000-2001) and 60.58 per cent (1997-98) only. There are no norms for the utilisation of engineering days for development of professional skills, co-ordination, meeting, administration, organising corporate life etc. However, it ranged around 25 per cent. There is no system of identification of the actual deployment of engineering days with reference to planned allocation against each project.

(Para 6.3.7.3)

The Board desired to re-deploy the surplus non-executive to other units of SAIL at Ranchi and in the areas where contract labour was engaged. However, no such efforts were made.

(Para 6.3.7.4)

Although the management had surplus non-executives, it employed private contractors for routine nature of jobs and paid a sum of Rs.48.31 lakh for maintenance of two sub-stations and operation of D.G sets in the Township during the period from 1992-93 to 2000-2001.

(Para 6.3.7.5)

The allocation towards capital expenditure as compared to the revenue expenditure was declining rapidly and ranged between 41.95 per cent (1994-95) and 6.15 per cent (2000-2001). Actual expenditure was lower than the amount allocated.

(Para 6.3.8)

Although the meter installed by BSEB for recording units of power supplied to RDCIS was not working since July 1997, no effort was made to replace the meter. RDCIS continued to pay the electricity bill on the basis of the peak period consumption resulting in excess payment of Rs. 79.68 lakh

(Para 6.3.9.1)

RDCIS created a facility for supply of power during break down period by installing an additional D.G. set at an investment of Rs.1.44 crore from borrowed fund bearing an annual interest burden of Rs.23 lakh which was avoidable as the unit already had 7 DG sets and the new equipment was hardly utilised.

(Para 6.3.9.2)

Standard license fee in many cases was not fixed in terms of the cost of construction and the existing rate applicable for old construction were being recovered.

(Para 6.3.9.3)

Although the nature of work of majority of the officials/employees of the RDCIS was confined within the office premises, almost all officials and employees are claiming maximum amount permissible under the scheme every month. Due to inherent shortcomings of the scheme, the RDCIS had to admit irregular and patently fraudulent claims of Rs.5.69 crore during a period of four years when its finances were facing severe constraints and liquidity crisis.

(Para 6.3.9.4)

Injudicious decision to procure land close to Ranchi Air Port has resulted not only in blocking up of capital of Rs. 72.11 lakh but also the Company had to bear loss of interest to the extent of Rs.1.41 crore (March 2001).

(Para 6.3.9.5)