The Comptroller and Auditor General raps the Defence Ministry for breaching principles of propriety in making purchases in the context of the Kargil War.
DEFENCE MINISTER George Fernandes is in the eye of a storm once again, following the release of the latest report of the Comptroller and Auditor-General (CAG) on defence acquisitions. The CAG conducted a special audit at the request of the Defence Ministry in the context of allegations of irregularities in emergency defence procurement for the operations in and around Kargil. The CAG assessed the efficiency, economy and effectiveness of the defence procurement system in an emergency situation such as the Kargil conflict. As per information provided by the government, 129 contracts worth more than Rs.2,175 crores were signed. The CAG reviewed contracts worth Rs.2,163 crores.
The CAG report, which was released in the second week of December, states that nearly all the supplies were either received or contracted well after the end of the conflict in July 1999. Its most damning revelation relates to the purchase of 500 aluminum caskets and 3,000 body bags at a cost of Rs.6.5 crores. According to the report, though these were not "complex items", only one bid (from an American company) was entertained and the possibility of indigenous and other sources was not considered. What the Opposition parties and many former defence personnel find even more objectionable is the price of the metal coffins - $2,500 (about Rs.1.2 lakh at the current exchange rate) apiece. Before taking delivery, the report says, no evaluation or acceptance tests were carried out. According to the Defence Ministry, the procurement was expedited owing to the urgent need to airlift bodies from the Kargil sector. But the coffins came too late.
The CAG investigations showed that the United States-based firm Butron and Baize had requested the Defence Ministry in December 1999 that the weight specification of the caskets be changed from 18 kg to 55 kg. Even before the government could consider the request and give a formal reply, the company shipped 150 caskets in March 2000. The government had already made a down payment of $337,500, that is, 90 per cent of the contracted value. On inspection it was found that the coffins were in an unsatisfactory condition. And they were too heavy. They were welded, and not die-pressed as specified by the Army.
The CAG report points out that the supplier had indicated that the aeronautical grade aluminum used for making the casket accounted for 75 per cent of the cost. This would work out to a rate of Rs.45.31 lakhs a tonne. The CAG has said that the price of high grade aluminum at the London Metal Exchange in August 1999 was Rs.63,360 a tonne ($1,440) at the rates that prevailed then. The American company had obviously given a different price. Reports from the U.S. cast doubts about the standing of the company and indicate that the contract from India was the only one of its kind that it had bagged. In August 2001, the government cancelled the contract on the grounds that the caskets were too heavy and decided not to pay the remaining 10 per cent of the amount.
The CAG report details 35 other cases in which rules and procedures were flouted. According to it, the government "knowingly paid" Rs.44.21 crores more for certain items by ordering supplies (worth Rs.260.55 crores) that did not meet the quality requirements. The government also found itself saddled with time-expired ammunition worth Rs.91.86 crores. It made purchases worth Rs.107.97 crores that were in excess of the authorised and required quantity.
Besides, the report says, ammunition worth Rs.342 crores was "contracted for import on grounds of operational emergency" though similar ammunition was being produced in ordnance factories in India. Bureaucratic delays cost the exchequer another Rs.199.42 crores, it says. The CAG concludes: "Thus, while critical supplies of clothing, ammunitions and arms could not reach the troops during the (Kargil) operation, an amount of Rs.1,046 crores, almost half of the total, entirely in foreign exchange, was spent fruitlessly, breaching established principles of propriety."
THE "casket" issue rocked Parliament, which was already agitated over the reinduction of Fernandes as Defence Minister. Most of the Opposition parties objected to the Prime Minister's decision to take back Fernandes when an inquiry commission was investigating the "Tehelka tapes expose" relating to defence purchases. There are reports that even some sections within the Bharatiya Janata Party and the National Democratic Alliance led by it are unhappy with the reinduction of Fernandes.
The Opposition was united in demanding the resignation of Fernandes. The Polit Bureau of the Communist Party of India (Marxist) issued a statement describing the CAG report as a "damning indictment" of the government. It said that Fernandes should be "immediately removed" in order to restore people's confidence in the vital Defence Ministry. Addressing the media on behalf of the Opposition, Somnath Chatterjee, the CPI(M)'s leader in the Lok Sabha, said that the House would not be allowed to transact any business until Fernandes was removed from the Cabinet. The Opposition, he emphasised, had no other option as the government had failed to come up with a response to its demands. He accused Fernandes of withholding information on the dates of purchase of the equipment mentioned in the CAG report.
Former Prime Minister V.P. Singh held Prime Minister Atal Behari Vajpayee responsible for the matter. He pointed out that Vajpayee had re-inducted Fernandes as Defence Minister before the Justice K. Venkataswami Commission investigating the Tehelka affair had cleared his name.
The Congress reminded Vajpayee of his demand for immediate action on the CAG report on the acquisition of Bofors howitzers 13 years ago when he was a leading player in the Opposition. Party spokesperson S. Jaipal Reddy objected to Law Minister Arun Jaitley's "attempts to defend" the beleaguered Defence Minister. Referring to Jaitley's comment that the CAG report was a "routine" one, he accused the Minister of trying to play down its importance. "It is unfortunate that this kind of outrageously wrong precedent is being set by none other than the Law Minister," he said.
Addressing mediapersons at the BJP's office in Delhi, Fernandes tried to play down the importance of the report by saying that it was the job of Parliament's Public Accounts Committee (PAC) to fix responsibility on the basis of the CAG report. However, Somnath Chatterjee rejected Fernandes' argument. He said: "Since the report has become the property of both the Houses of Parliament, the members could decide on the issue, considering the seriousness of the findings."
Fernandes generated another controversy when he told a news agency that the order for caskets was revived after the Army's Eastern Command chief, Lt.Gen. R. Eipe, made a request to the then Chief of the Army Staff, Gen. V.P. Malik. The Army, he said, had earlier come to the conclusion that the price quoted for the coffins was prohibitive. Gen. Malik refuted Fernandes' claims, saying that the deal was negotiated by the Defence Ministry and the procurement was approved by the then Defence Secretary.
The CAG's office has reiterated that its report was based solely on Defence Ministry documents. Fernandes had said that the original price of $172 a casket quoted in 1994 was based on hearsay. CAG officials, however, said that a Defence Ministry file contains a 1995 proposal by the Army's Western Command suggesting the purchase of aluminum caskets that cost around $170 each. The Western Command had noted that the U.N. mission in Somalia had paid this price for similar coffins.
According to reports, the price negotiating committee which approved the 1999 casket deal was headed by Joint Secretary (Ordnance) L.M. Mehta, with Maj-Gen. S.P. Murgai as a member. Both the names figure prominently in the Tehelka tapes. They allegedly succumbed to monetary and material inducements from Tehelka journalists masquerading as arms dealers.
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