|Railway||Workshop||Number of wagons modified||Amount incurred on modification
(Rs. in crore)
In this connection, the following audit observations arise:
No test/ trial of BRN wagons manufactured with welded underframe as per design approved in April 1989 was conducted, before going for bulk production of modified wagons. The newly modified wagons had started showing signs of distress and were sent for special repairs. Failure to conduct trials rendered subsequent modifications on these BRN wagons necessary to overcome the problems of premature bending, sagging of head stock and underframe.
Thus induction of change from rivetted to welded underframe without conducting any test/ trial resulted in infructuous expenditure of Rs.12 crore on subsequent modification works on 1708 wagons. The loss on account of modification works yet to be carried out on such wagons would be extra. Besides, Railway also suffered a loss of Rs.1.51 crore due to premature condemnation of 94 underaged BRN wagons on South Eastern Railway.
When the matter was taken up (February 2002), South Eastern Railway contended (April 2002) that modification in any new design after service trial was also an essential step in validation of design and improving the reliability. This constituted an ongoing process of research and design wherein some experiments are imperative to translate the ideas into practice. Any loss assumed or real on this account could not be called ‘loss’ in real terms.
The above argument is not tenable because no service test/ trial was conducted on some prototypes of such modified wagons. Had test/ trial of the wagons been conducted prior to placement of orders for bulk production, the subsequent modification works could have been avoided.
The matter was brought to the notice of Railway Administration and Railway Board in April 2002 and November 2002 respectively and their reply has not been received.
Failure on the part of Electric Loco Shed, Gomoh to use the Gas Chromatograph as well as inadequate provision of fire fighting arrangement in loco led to severe damages to electric loco No.27223 leading to its premature condemnation, which resulted in loss of an asset worth Rs.3.69 crore
Fire in Electric Locomotive is an extremely serious and undesired feature. Often major fire in the Electric Locomotives has resulted in virtually writing off of complete locomotive. Therefore, all out efforts are necessary at all levels to eliminate even the smallest chance of fire accident by following proper maintenance practices/ modifications/ special maintenance instructions. Research Design and Standards Organisation (RDSO) had issued guidelines for prevention of fire on Electric Locomotives in 1993. One of the guidelines was for condition monitoring of transformers by Dissolved Gas Analysis (DGA) for which detailed instructions were issued as per special maintenance instruction No.138.
Thereafter some more areas were identified as a potential cause of fire. As a result, RDSO reviewed its earlier instructions of 1993 and issued revised guidelines in 1998. The fire fighting arrangements had now included provision of two, 22.5 Kg CO2 cylinder along with associated pipe line.
Electric Locomotive Shed, Gomoh received (24 September 1993) “Micro Processor Controlled Gas Chromatograph” to monitor the condition of Power Transformers. DGA of Loco transformers for all locos of Eastern Railway was to be carried out centrally at Gomoh with this equipment. However, this equipment was not commissioned and no such tests were being carried out.
On 1 July 1999, one Electric Loco No.27223 of Electric Loco Shed, Gomoh caught fire which could not be controlled even with the use of all the 4 DCP type fire extinguishers available in the loco. The loco was extensively damaged before the fire could be controlled by the Fire Brigade demanded for the purpose. The prime responsibility for the fire was the failure of its transformer.
Chief Electrical Loco Engineer in August 2000 informed the Senior Divisional Electrical Engineers/ TRS of Asansol, Gomoh and Mughalsarai that DGA test equipment was very essential equipment for knowing health of the transformer as well as to avoid fire in electric loco. They were also advised to go for Annual Maintenance contract of this equipment in order to avoid any chances of breakdown of this very essential equipment. Thereafter, efforts to commission the equipment received in 1993 were made by the Electric Loco Shed, Gomoh. The equipment had been working satisfactorily since January 2001 and regular testing of transformers was being done.
It was further noticed that fire fighting equipments as per RDSO’s guidelines were installed (June 2002) only in 29 locomotives out of overall holding of 407 Electric Locomotives in the year 2001. Modification was in progress in other locomotives.
In this connection, following observations are made:
Thus failure on the part of Electric Loco Shed, Gomoh to use the Gas Chromatograph as well as inadequate provision of fire fighting arrangement in loco led to severe damages to electric loco No.27223 leading to its premature condemnation, which resulted in loss of an asset worth Rs.3.69 crore.
The matter was brought to the notice of Railway Administration and Railway Board in May 2002 and August 2002 and their reply has not been received (December 2002).
Railway Board’s failure to analyse the rate quoted for complete Cartridge Taper Roller Bearings and individual accessories required therefor resulted in placement of contract on rates higher than the rates quoted by the firms leading to extra expenditure of Rs.4.54 crore on their procurement. Besides this, less interest of Rs.0.44 crore per annum was charged on advances granted to the firms
Cartridge Taper Roller Bearings (CTRBs) are required in wagon production as well as for maintenance requirements of Zonal Railways. CTRBs are provided as a free supply item to wagon manufacturers. In order to meet the requirement for the year 1996-97, a limited tender for procurement of 1,13,000 CTRBs was floated on 8 November 1995. Tender notices were sent to 6 firms and they were requested to quote rates separately for CTRB (complete) and individual accessories namely Side frame, Backing ring and Narrow jaw adapter. The firms were required to supply accessories also at the option of the Railways. In response, two firms i.e. M/s National Engineering Industries Limited (NEI) and M/s Tata Timken Limited (TTL) submitted their offers. The rates offered by these firms were as under:
|Sl. No.||Description of component/ accessories||Rates offered by M/s NEI excluding taxes etc.||Rates offered by M/s TTL excluding taxes etc.|
|(i)||Association of American Railroads (AAR) approved CTRB complete 6x11 consisting of Cup, Cones, Rollers, Retainers, Spacer, Seal Wear Rings, Grease Seals, Grease||8,500||9,140|
|(ii)||Side Frame Key Bolt, Washer & Nut with Split Pin , Axle End Cap,||430||460
(combined for ii & iii)
|(iii)||Axle End Cap Screws and Locking Plate Backing Ring||270|
|(iv)||Narrow Jaw Adapter||890||840|
|(v)||Labour charges for mounting||60||60|
The quantity was revised to 1,27,465 after opening of the tender. The Last Purchase Rate (Rs.9750) of a CTRB alongwith accessories was updated to Rs.10,353. The Tender Committee, therefore, considered M/s NEI’s quoted rate of Rs.10,150 as reasonable. However, it did not analyse the difference in the rates of accessories offered by the two firms. An order for 88,000 CTRBs (alongwith accessories) was recommended on M/s NEI at their quoted rate of Rs.10,150 and the rate was also recommended for counter offering to M/s TTL for the balance quantity i.e. 39,465 CTRBs. The Competent Authority- Minister of State (Railways) accepted the recommendations. Advance acceptance letters for supply of CTRBs at Rs.10,150 each including average foreign exchange content of US $ 38 per CTRB, were sent to both the firms on 27 February 1996. The firms conveyed their acceptance with the request to grant advances for financing import of inputs, raw material etc. The Tender Committee agreed for grant of advance of Rs.10 crore to M/s NEI and Rs.4.50 crore to M/s TTL with interest at the rate of 20 per cent per annum on reducing balances to be recovered/ adjusted at the rate of Rs.1,136 per bearing from the firms’ bill. Interest was to be recovered every quarter from the payments due. The Board, however, accepted the Tender Committee’s recommendation for the advance with interest at a reduced rate of 17 per cent against the 20 per cent recommended. The contracts were placed on the firms M/s TTL and M/s NEI on 8 and 29 March 1996 respectively.
In this connection, the following observations are made:
Thus placement of contract on rates higher than the rates quoted and failure to counter offer the lower rates available resulted in extra expenditure of Rs.4.54 crore on procurement of 127465 CTRBs besides less charging of interest of Rs.0.44 crore per annum on advances granted to firms.
When the matter was taken up (June 2002), the Railway Board stated in November 2002 that:
The contentions of Railway Board are not tenable because:
Accumulation of 684 numbers of rejected indigenous wheel sets in the premises of 10 wagon builders with no prospective use rendered an expenditure of Rs.3.53 crore as useless
Wheel sets are supplied by Wheel and Axle Plant (WAP) Bangalore as free supply item for manufacture of wagons against Railway Board’s contracts. Chief Material Manager, Block Indents (CMM, BI), Eastern Railway coordinates and allocates wheel sets to various wagon builders and maintains the accounts for the wheel sets made available to wagon builders.
Wagon builders are entirely responsible for safe custody and protection of the wheel sets and are liable for any loss, damage or deterioration of the stores and articles while in their possession and custody. Wheel sets coming from WAP for production of wagons against Railway Board’s orders should be examined for any obvious indication of damages on receipt of consignments and later at the time of removing of protective covering and mounting. RDSO should be associated for inspection/ certifying damages and for fixing agency responsibility for the damages. No wheel set was to be returned to WAP for rectification until certified by RDSO. Sending of damaged wheel sets to WAP for rectification was discontinued from April 1996 for want of surplus capacity.
In April 2000 the Railway Board decided to entrust the work of rectification of rejected wheel sets to the nominated Railway workshops. Accordingly, CMM (BI), Eastern Railway requested (May 2000) RDSO to furnish their remarks/ certificates on the rejected wheel sets lying with wagons builders to facilitate their disposal as well as recovery of the cost of rectification.
Test check of records of 10 wagons builders revealed that 684 indigenous wheel sets (22.9 tonnes) worth Rs.3.53 crore were rejected due to damages between 1991 and 2000. The reasons for rejection were mainly heavy dent, pitting, rusting on journals due to improper storage, mishandling and defects in manufacturing like journals oversize, collar oversize etc. CMM (BI) as monitoring agency failed to take prompt action in arranging for inspection by RDSO and initiating action for rectification because of which 684 rejected wheel sets worth Rs.3.53 crore have been lying with wagon builders since their arrival and could not be put to use.
On the matter having been taken up (June 2001) the Railway Administration contended (January 2002) that damage normally occurs at the journals portion of the axle during transit, transhipments, loading and unloading and/ or in storage. The wheel centres are not susceptible to damage and could be utilised. Therefore the entire amount assessed by audit cannot be termed as loss. They also contended that actual pinpointing of responsibility is practically difficult.
Their arguments are not tenable as the wheel sets have been lying in the premises of the wagon builders for several years without any action having been taken for rectification of the wheel sets or reusing the wheel centres. The wheel sets lying in the open for several years would have deteriorated so much that the utilisation of the same appears a remote possibility. Situation of pinpointing responsibility has arisen only on account of delay in arranging inspection.
The matter was brought to the notice of Railway Board in August 2002 and their reply has not been received (December 2002).
Failure of Railway Administration to assess the workload properly before making heavy capital investment of Rs.5.83 crore and to explore the possibility of utilising the plant elsewhere has, besides rendering the investment as infructuous, also resulted in avoidable payment of Rs.4.62 crore on account of dividend to general revenues
A comment regarding unfruitful investment of Rs.5.83 crore for setting up a Rail Re-profiling plant at Sabarmati Depot over Western Railway was made vide paragraph 4.2 of the Report of Comptroller & Auditor General of India - Union Government (Railways) for the year 1991-92 as regular production in the plant had not started till March 1992. This plant was set up to re-profile released 52kg and 90lb and 75lb & 60lb rails from Broad Gauge (BG) and Metre Gauge (MG) sections and use them on BG branch lines and MG trunk routes and branch lines. The plant was justified to be financially viable by assuming the production of 12000MT rails per annum. Railway Board in October 1992 fixed some criteria for selection of rails and also decided that 52kg and 90R rails after re-profiling may also be used in gauge conversion projects and secondary renewals on BG sections.
Audit scrutiny of records of Sabarmati Rail Reclamation Depot in August 1996 had revealed that 400Nos 52kg rails weighing 252MT were received for re-profiling during 1993. Out of this 349Nos (220MT) were re-profiled up to 1994 and 38Nos(24MT) from the balance were scrapped being unsuitable. Thereafter the plant was not utilised at all. This showed that there was no workload and assessment in this regard was not made before deciding to set up the plant. On matter being taken up by Audit, Railway Administration stated in July 1997 that in view of gauge conversion on Western Railway and Board’s decision not to undertake primary renewal of MG track, effective utilisation of this plant on their zonal Railway was not possible and that Railway Board was being approached to relocate the plant on some other Railway. The reply of Railway Administration was, however, not tenable as released 52kg and 90R rails could have been re-profiled for use in Gauge conversion work which was in full swing on Western Railway. Non-utilisation of plant after 1994 is, therefore, indicative of the fact that there was no workload even to re-profile 52kg or 90R rails. It was also observed that after 1994 no serious efforts were made to relocate the plant elsewhere.
Thus initial failure of Railway Administration to assess the workload of re-profiling rails for use in MG trunk routes or BG branch lines compounded with subsequent failure to make efforts to re-profile 52kg or 90R rails for use in Gauge conversion projects led to rendering huge capital investment of Rs.5.83 crore as infructuous. As Railway has to pay dividend to general revenues at specified rates on entire capital investment, they have also incurred avoidable liability of Rs.4.62 crore since commissioning of the plant in 1990 till March 2002. The liability at the rate of Rs.0.41 crore per annum on this account will continue till the plant is finally disposed of.
The matter was again brought to the notice of Railway Administration in May 2002. Railway Administration in their reply (August 2002) reiterated that due to gauge conversion work on Western Railway and other Railways the plant could neither be used nor decision to relocate the same could be taken. They further stated that 90R rails existing in the track were retained on condition basis and as re-profiling the same could have rendered them unserviceable, the difficult task of selecting such rails for re-profiling was not considered logical being time consuming and costly affair. The reply is not acceptable because all such factors, which led to non-utilisation of plant, could have been considered before taking a decision for making such huge investment.
The matter was brought to the notice of Railway Board in September 2002 and their reply has not been received (December 2002).
Improper assessment of production capacity resulted in infructuous expenditure on procurement of two machines valuing Rs.3.70 crore
In order to meet the shortfall in manufacturing capacity of locomotives during VIIIth Plan, Diesel Locomotive Works (DLW) proposed (August 1988) to the Railway Board for augmentation of production capacity from a level of 140 locos and 150 engines (based on outturn of 1989-90) to 150 locos and 170 engines. It was further enhanced to 155 locos (including 105 WDM-2 locos) and 170 engines instead of 150 locos and 170 engines and a detailed estimate was sanctioned (October 1991) amounting to Rs.15.21 crore. The project was determined for completion by 31 October 1993. This was later revised to 31 March 1994 during Works Programme meeting (October 1992).
In November 1993 during the Works Programme meeting for 1994-95, the Railway Board directed to review the scope and cost of the work in view of reduced requirement of Diesel locos as per production plans. In the interim period, there was a change in the requirement profile of Diesel locos, due to factors like ‘unigauge’ policy, thus necessitating a corresponding change in the product mix of locos. As desired, a complete review of the on-going project was undertaken (April 1994) by DLW. The highlights of the review report were as under:
Subsequently, after an Adviser’s meeting held on 16 September 1994 on the works programme for 1995-96, the Board directed DLW to review the work to see whether further reduction in scope could be made and project completed earlier.
On a further review of the project as per direction, DLW decided (November 1994) to drop the procurement of Truck Frame Milling Machine. However, it went ahead with its procurement plan of other two machines. The purchase orders for CNC Turning Centre and Planner were finalised in November 1994 and January 1995 with anticipated delivery dates in August 1995 and March 1996 respectively. The target date for the completion of the project was also extended upto March 1996. These two machines were commissioned in August 1997 and February 1999 respectively.
Audit scrutiny has revealed that DLW had already acquired production capacity to produce 150 locomotives by the year 1994-95 when a review was directed to be conducted by Railway Board to reduce the scope and complete the project early. However, DLW decided to go ahead with the procurement of the remaining two machines. The production performance of locomotives in terms of Cylinder Units from 1994-95 onwards is as under:
|Year||Locomotive manufactured with||Production in
|16 Cylinder||12 Cylinder||6 Cylinder||Total|
* Partially Knocked Down WDG4 locomotives received from General Motors, USA.
** 3 Power packs (Engine) received from General Motors, USA.
It would be evident from the above that DLW was already equipped with the production capacity to produce the targeted number of locos in terms of Cylinder Units. As against the 2280 Cylinder Units that were expected for requirement in foreseeable future they were able to produce 2336 by 1996-97 even prior to commissioning of two machines. Further, actual production of locomotives as also outturn in terms of Cylinder Units has steeply come down from 1999-2000 after the commissioning of these two machines.
Thus improper assessment of production capacity and tapering down of actual production resulted in infructuous expenditure on these two machines valuing Rs.3.70 crore.
The matter was brought to the notice of Railway Administration and Railway Board in May 2002 and November 2002 respectively and their reply has not been received.
Procurement of machines in piece-meal fashion over 3 years and non-working of Pep set machine resulted in non-commissioning of mechanised system of core making process and idling of machines worth Rs.2.23 crore
A mention was made in Chapter II-Reviews [para 14.5.1(ii)] of the Report of the Comptroller and Auditor General of India for the year ended 31 March 1990, No.10 of 1991, Union Government (Railways) about ‘Unsuccessful transfer of technology’ in connection with the import of 150 Three Axle Coco cast steel bogies frames and bolsters by Chittranjan Locomotive Works (CLW) to overcome the technical inadequacy in the process of manufacture of cast steel bogies in the steel foundry.
In reply to Public Accounts Committee (PAC)’s questionnaire on this, the Railway Board had stated (December 1992) that all basic inputs and infrastructural facilities were available with CLW. The series production of bogies with new Rockwell technology had already been established. It was, however, claimed that quality would further improve if mechanisation of the core making process was undertaken. Therefore, a decision was taken to mechanise the core shop and the equipments required were under procurement. Sanction for procurement of equipments for mechanisation of the system was accorded by Railway Board in August 1992.
For manufacturing different components of Locomotives, casting is required. Mould and Core making are basic process for casting. Mechanised system of core making process involves conveying dry sand through a Pneumatic Dry Sand Conveyor Pipe Line (Core Conveyor Line) to the Continuous Sand Mixer (Pep Set) for mixing dry sand with Pepset resin to prepare ‘Pepset Sand’. Thereafter, ‘Pepset Sand’ compacted in the core boxes is transferred mechanically through Roller Conveyor System to the Roll Over Machine for rolling/ turning over the core boxes so as to manufacture quality core.
A review of the purchase and installation of the system by CLW for mechanisation revealed the following:
In this connection, the following Audit observations are made:
Thus procurement of machines in piece-meal fashion over 3 years and non-working of Pep set machine resulted in non-commissioning of mechanised system of core making process and idling of machines worth Rs.2.23 crore.
The matter was brought to the notice of Railway Administration and Railway Board in May 2002 and October 2002 respectively and their reply has not been received (December 2002).
Procurement of an AJTB Lathe machine of erroneous specification led to unfruitful expenditure of Rs.0.97 crore
Railway Board sanctioned (December 1997) an AJTB Lathe for Mancheshwar Workshop (MCSW) to be provided to the wheel shop so as to improve the performance of coaches. The justification made as a special requirement on emergency basis had indicated that in the absence of such a machine it was not possible to machine the journal of the axle in an assembled state. The financial justification had also envisaged a saving of Rs.3.36 crore per annum.
A demand for an AJTB lathe was sent to Central Organisation for Moderanisation of Workshop (COFMOW) mentioning the specification number of a lathe which was already under procurement for Kharagpur workshop with the request to club the demand of MCSW with the tender in process for the procurement of lathe for Kharagpur workshop. COFMOW placed an order (October 1998) for supply of two AJTB lathes, one each for Kharagpur workshop and MCSW.
During the visit to MCSW, the Executive Director Mechanical Engineering (EDME), pointed out (September 1999) that AJTB lathe being procured for MCSW should be transferred to other unit/ Railway. In October 1999, Chief Workshop Manager (CWM), Mancheswar intimated Chief Mechanical Engineer (CME), Planning, South Eastern Railway that AJTB lathe would be least useful at MCSW.
CME, during his visit to MCSW ordered (18 November 1999) that AJTB lathe may be commissioned at Raipur Workshop to deal with the electric loco wheels instead of MCSW. Later on he informed (13 December 1999) CWM/ MCSW of his revised decision to retain and commission the AJTB lathe at MCSW.
The AJTB lathe costing Rs.0.97 crore installed on 31 March 2001 at MCSW could neither be commissioned nor put to use as yet (July 2002) since the same was capable of turning and burnishing wheel sets of Locos and Electric Multiple Unit only.
Thus South Eastern Railway failed in scrutinising the technical suitability of the lathe before sending the demand to COFMOW. The erroneous specification mentioned by the South Eastern Railway on the demand was for the lathe capable of turning and burnishing wheel sets of Locos and Electric Multiple Units and not that of coaches. This resulted in an unfruitful expenditure of Rs.0.97 crore. The Railway Administration could also not achieve anticipated saving of Rs.3.36 crore per annum.
The matter was brought to the notice of Railway Administration and Railway Board in April 2002 and September 2002 respectively and their reply has not been received (December 2002).
Improper planning and lack of coordination in inducting a new technology resulted in avoidable idling of costly equipment worth Rs.22.60 crore from one year to seven years. Thick Web Switches worth Rs.16.67 crore were yet to be installed as on 31 March 2002
Based on the report of Planning Group on Technology for Railway (PGTR) of 1986, the Railway Board had imported 396 sets of Thick Web Switches (TWS) for use with 1 in 12 - 52 kg and 60kg turnouts. These TWS were installed on selected stretches of trunk routes and trials were conducted by using local as well as Siemen's make point machines. Though the trials conducted with local point machines were not of desired level, the results of trials with Siemen's make point machines were successful. The results showed that by using of TWS, the renewal of tongue rails was not required even after four years whereas on stretches where tongue rails were laid without TWS, the renewal was necessary once in every six months. Thus keeping in view the increased life and reduction in maintenance cost, Railway Board had decided to extend the use of TWS and made provision in the Works Programmes of Railways for laying 1538 TWS during the years 1989-90 and 1990-91. However, due to non-availability of TWS these works were not executed.
The indigenous development of TWS was started in 1995 when some Indian firms approached Railway Board and developmental orders for manufacture of TWS were placed on them. The firms started supply of TWS from June 1995. In February 1997 RDSO had informed Railway Board that M/s Siemens (India) Ltd. has offered imported point machine which was capable of operating TWS and accordingly in March 1997 instruction were issued by Railway Board to five zonal Railways, viz. Central, Eastern, Northern, South Eastern and Western Railways, to initiate urgent action to procure Siemen's make point machines and lay the TWS in the track. As the Siemen's point machines were to be imported from Germany and its cost was high, Zonal Railways could not procure these machines. This situation led to RDSO taking up a project for indigenous development and placement of a developmental order for 20 machines on M/s Crompton Greaves Ltd (CGL). In February 2000, RDSO apprised Railway Board that they had type tested the newly developed point machine and 20 of such machines received were being despatched to four Zonal Railways for installation and trial. The CGL make point machines were finally cleared by RDSO in March 2000.
A review of records of all the five Zonal Railways revealed that 450 TWS costing Rs.22.60 crore were received by them between June 1995 and August 2001. The actual installation was, however, delayed from one year to seven years as suitable point machines required to operate these TWS were not available. The position of TWS laid on various Zonal Railways till March 2002 (given below) indicates that TWS ranging from 24 per cent to 96 per cent were yet to be laid:
|Period during which
TWS were received
|Quantity laid Up
|Cost of TWS to
be laid as on
31 March 2002
|Western||December 1998 to May 1999||100||25 (25)||4,05,70,450||3,04,27,837|
|Northern||December 1996 to April 1997||50||8 (16)||2,57,91,538||2,16,64,891|
|South Eastern||June 1995 to August 1996||100||4 (4)||5,43,38,935||5,21,65,377|
|Central||January 1999 to
June 2000 and
Thus improper planning by Railway Board to place development orders for procurement of TWS without ensuring the availability of suitable point machines required to operate them or to take simultaneous action for indigenous development of Point Machines resulted in idling of TWS worth Rs.22.60 crore. TWS worth Rs.16.67 crore were yet to be installed (March 2002).
The matter regarding non-installation of TWS on Western Railway was brought to the notice of Railway Administration in April 2002. In their reply (August 2002) they stated that TWS being a new technology required extensive testing by Railway and RDSO. It was also contended that procurement of TWS and ancillary items was undertaken on experimental basis. Being a costly proposition, Railway had to process the procurement cautiously because of which the time lag was inevitable. The reply is not tenable because Railway Administration went ahead procuring TWS at a huge investment of Rs.22.60 crore without initiating simultaneous action to develop/procure suitable point machines leading to idling of TWS.
The matter was brought to the notice of Railway Board in November 2002 and their reply has not been received.
Inclusion of Price Variation Clause in contract having delivery period of 12 months and incorrect placement of developmental/ educational orders resulted in extra expenditure of Rs.24.31 crore
Spheriodal Graphite Cast Iron (SGCI) Inserts are categorised as safety items. These are used in the manufacturing of Pre-Stressed Concrete (PSC) sleepers for fixing track fittings.
(a) Open tender No. CS-.129/98 for manufacture and supply of 2.75 crore of SGCI Inserts covering the requirement of 1999-2000 was invited on 6 May 1998 with firm rates. The date of opening of the tender was 12 June 1998. The delivery period being 12 months, no Price Variation Clause (PVC) was included in the tender. The opening of the tender was, however, postponed thrice in view of representations received from the All India Railway Track Items Manufacturer Association (AIRTIMA) on various issues. Of these issues, one for inclusion of PVC was agreed to by the Railway Board (31 August 1998). A corrigendum was issued on 1 September 1998 in this regard.
The tender was opened on 8 October 1998. The Tender Committee (TC) recommended the lowest rate of Rs.31.95 per Insert quoted by an approved firm to be counter offered to other approved firms for a quantity of 2.75 crore SGCI Inserts. In addition to above, a quantity of 5 lakh Inserts was also given to five firms as educational orders. This quantity was outside the tendered quantity. The competent authority approved (February 1999) the recommendations.
(b) Tender (CS-139/1999) covering the requirement of 2000-2001 was invited on 21 October 1999 and opened on 21 January 2000. The TC while considering the rates stated that there was a downward trend in the rates of Inserts and the financial saving on this account would be to the extent of Rs.12.75 crore when compared with the last updated purchase rates. The rate of Rs.29.40 each, the lowest quoted by an approved firm was counter-offered to other firms and the tender was finalised for a quantity of 2.75 crore of Inserts at the rate of Rs.29.40 per Insert with PVC. The Competent Authority accepted the recommendations of the TC in May 2000.
In this connection, following points arise:
(i) Tender (CS-129/1998) was invited with firm rates and PVC was incorporated through a corrigendum afterwards in view of the representation of AIRTIMA. As a general rule, PVC is not provided in contracts having delivery period of 12 months. In the instant case as per established practice, tenders were invited with ‘firm rates'. As such the firms while quoting fixed rates, were fully aware of the events to come and would have taken into account all risk factors and quoted a rate providing for all eventualities. Therefore, inclusion of PVC especially after inviting the tender with firm rates at the request of the AIRTIMA was not justified.
While vetting the subsequent tender (CS-139/1999), Finance agreed to the incorporation of the PVC as was done in the previous occasion. The rates of Inserts in 1995 tender (invited to meet 3 years requirement) were finalised at Rs.32.03 each and after updating with PVC formula, the rate worked out to Rs.36.33 each at the time of finalisation of subsequent tender. However, the rate received and accepted in the subsequent tender (CS-129/1998) was Rs.31.95 each. This indicated that there was downward trend in the price of Inserts and therefore, inclusion of PVC was against the interest of the Railways. Also there was no justification for inclusion of PVC.
A review of contracts relating to these tenders revealed that incorporation of the PVC caused huge financial burden of Rs.21.84 crore (approx.) to the Railways by way of escalation which was avoidable.
(ii) The rate of Rs.29.40 per Insert obtained in 1999 tender was lower than the updated rate of Rs.34.55 and even from the initial rate of Rs.31.95 quoted and accepted in the previous tender. Apart from the indication that inclusion of PVC clause was not justified, it also indicated that PVC formula adopted was faulty.
(iii) There was undue delay in finalisation/ issuance of tenders/contracts. Tender No. CS-129/1998 covering the requirement of 1999-2000 invited on 6 May 1998 was finalised and orders were placed only in August 1999. Similarly, tender No. CS-139/1999 invited in October 1999 covering the requirement of 2000-2001 was finalised and orders were placed only in October 2000, almost after six months of the commencement of requirement period.
(iv) Over and above the tendered quantity of 2.75 crore, orders for 5 lakh SGCI Inserts were also placed on five new firms as educational order valuing Rs.1.57 crore. Similarly, 3 lakh SGCI inserts were placed as developmental order in the case of second tender over and above the tendered quantity of 2.75 crore valuing Rs.0.90 crore. In accordance with the Railway Board orders, placement of development order should be considered only where the approved sources are not adequate and it is desirable to develop more sources to bring in competition or improvement in quality. But, here adequate production capacity was already available (1836 lakh and 1559 lakh in the respective tenders as against the annual requirement of 275 lakh). Thus placement of further developmental/ educational order was not justified and resulted in excess/ advance procurement and blocking of capital to the extent of Rs.2.47 crore.
When the matter was taken up (September 2002), the Railway Board stated (December 2002) that the PVC was included in view of the past experience and request by AIRTIMA and that the formula was not faulty. They further stated that the falling trend in rates quoted in subsequent tenders was due to unhealthy competition among the participating firms.
These arguments of Railway Board are not acceptable because, as a general rule, PVC is not provided in contracts having delivery period of 12 months. Moreover, the falling trend in rates was due to falling prices of steel as a result of overall recession in the steel industry, a fact which was known to the Railway Board.
Incorrect decision to exercise 30 per cent option clause in advance coupled with subsequent fall in prices resulted in excess procurement leading to blocking up of funds to the tune of Rs.8.03 crore besides a loss of Rs.1.40 crore
To afford better resistance to wear, reduce the cost of maintenance and frequent renewals, Cast Manganese Steel (CMS), crossings have been developed. CMS crossings are particularly useful in continuous welding of rails.
(a) Railway Board had invited (19 August 1999) open tender No.Track-2 of 1999 for procurement of 3200 CMS crossings covering the requirement for 1999-2000. At the time of finalisation of tender (November 1999), 30 per cent option clause was exercised in advance and an additional quantity (960) was added to the originally tendered quantity (3200) on the plea that the rates received were lower than the previous tender and to accommodate some more indents received subsequent to calling of tender. The quantity was further increased by 150 CMS crossings by the supplementary Tender Committee to accommodate a specific representation from a Kolkata based firm. The Committee also recommended for placement of developmental order for 50 CMS crossings on one new firm. Thus the quantity finally approved (February 2000) by the Competent Authority [Minister of Railways (MR)] was 4310 from regular suppliers and 50 from a new firm.
(b) In July 2000, the Railway Board invited another tender No. Track-2 of 2000 for procurement of 6200 CMS crossings for the year 2000-2001. The tender was opened on 31 August 2000. In all 10 offers were received, 7 from approved firms, 1 from a firm who was given a developmental order in the previous tender and 2 from new firms. To accommodate the urgent demand of 537 CMS crossings, option clause was exercised on an existing contract of 1998-1999 and the tendered quantity was reduced to 6,137. The orders were placed on five firms.
The rates received for different types of CMS crossings against tender No.Track 2 of 1999 ranged between Rs.77,900 and Rs.60,500 and for tender No.Track 2 of 2000 ranged between Rs.67,800 and Rs.46,300.
In this connection, following observations are made:1. As per instructions issued (January 1999) by the then MR, 30 per cent option clause was to be exercised after ensuring that:
The assessment of requirement was highly exaggerated and sufficient balance of CMS crossings was available had been pointed out in Paragraph 4.3.4 of Report No.9 of 2002 of the Comptroller and Auditor General of India. As such, exercising of option clause in advance was not warranted. Further at the time of finalisation of tender, the Railway Board was aware of the falling trend in prices of steel due to overall recession in the steel industry. The falling prices were borne out by the rates received in the tender No.Track 2 of 2000. Since option clause was exercised in advance and quantity included in the initial order itself, the condition of sizeable percentage of the supply of existing contracts having been completed before option was exercised, was also violated.
Thus none of the three conditions was satisfied in the instant case. Exercising of the 30 per cent option clause in advance, therefore, proved imprudent which led to excess procurement and blocking up of funds to the tune of Rs.6.95 crore.
For the same reasons, increasing the quantity by 150 to accommodate the representation of a firm was also not in order leading to blocking up of funds by further amount of Rs.1.08 crore.
Since the option clause was executed in advance and ordered quantity was increased further by 150, the Railways could not avail of the benefit in procuring these at the lower rate obtained in the subsequent tender. There was thus a clear loss of Rs.1.40 crore.
When the matter was taken up (August 2002), the Railway Board stated (October 2002) that the standard tender conditions permit exercise of 30 per cent option which was done in this case. It was further mentioned that out of the tendered quantity of 4310 Nos. (1999-2000), 2057 Nos. CMS crossings were balance quantity as on 31 August 2000 and the lower rates received in the subsequent tender were applied for that quantity.
The reply was not tenable in audit due to the fact that there was sufficient balance of CMS crossings available to meet the indents received subsequent to calling of this tender for 1999 as already pointed out in paragraph No. 4.3.4 of Report No.9 of 2002 of the Railway Audit Report. Thus exercising option clause in advance in contravention of the instructions of the Competent authority in this regard was not warranted and led to blocking of funds as indicated above.
Non-implementation of the orders of the Railway Board resulted in purchasing sleepers at an extra expenditure of Rs.4.19 crore, besides, unnecessary litigation
M/s Kottukulam Engineers Private Ltd. and M/s Maruthi Builders were two of the six firms supplying Pre-Stressed Concrete (PSC) sleepers required by Southern Railway. Since the currency of the agreements with these two firms was expiring, the Railway Administration approached Railway Board (August 1995 and January 1996) for approval to place repeat orders.
While conveying approval (May 1996), the Railway Board directed certain terms and conditions to be included in the contracts. One of the conditions was that 'in case any open tender for manufacture and supply of PSC sleepers on Southern Railway, during the currency of this Repeat Order, was floated and low rates were accepted, the lower rates would also be applicable in this repeat order from the date of acceptance of such rate'. The Railway Administration made counter offers to the two firms including this condition. The firms, however, refused to accept the condition. The Board was apprised (September 1996) of this who directed (October 1996) that failing acceptance of this condition, the Railway might have to consider the option of closing the contract. However, in spite of these specific and unambiguous directions, the Railway Administration failed to take action either to get the condition accepted or to close the contracts. Instead, they continued to accept the supply from these two firms at the original rates.
Subsequently, Railway Board finalised (8 November 1997), an open tender at the rate of Rs.570 per sleeper. The Zonal Railways were directed to ensure (December 1997) that the firms could continue their supplies provided they agreed that the supply thus made would be as per Rates, Terms and conditions of the Counter Offer issued to them vide Railway Board's letter of November 1997.
The two firms were intimated only in April 1999 (after a delay of more than one year) that in view of the tender finalised by the Board at the rate of Rs.570, the recoverable amount would be deducted from their running bills.
These firms, however, resorted to petitioning before the Courts of law, who disposed of with a direction to the parties to refer the dispute (subject matter of the proceedings) to the arbitration by sole Arbitrator to be appointed by the Railway Board.
In this case, the following points arise:
Failure to take timely action in pursuance of directives of the Railway Board, thus, resulted in extra expenditure of Rs.4.19 crore in the two cases.
When the matter was taken up (April 2002), the Railway Administration stated (July 2002) that the imposition of the fall clause was subject to acceptance by the firm and legally it was not possible for the Railways to force the firm to accept the fall clause. According to Administration, the only option available for the Railways was to withdraw the counter offer, which would have resulted in non-availability of PSC sleepers affecting the gauge conversion works.
These arguments are not tenable. While this may be true of an existing running contract, in respect of repeat order, the decision to introduce fall clause was taken by the Railway Board with the conscious idea of safeguarding the Railway's interests. However, the Railway Administration failed to implement the Board's directives.
The matter was brought to the notice of Railway Board in October 2002 and their reply has not been received (December 2002).
Delay in finalisation of tender for procurement of optical fibre cable resulted in avoidable extra expenditure of Rs.5.05 crore
Delay by Railway Board in finalising a centralised tender for procurement of optical fibre cable resulted in extra expenditure as brought out below:
A global tender for procurement of 1898 kms of optical fibre cable was opened on 1 December 1999. The status of the 8 firms along with Ex-factory price per km quoted by them was as follows:
|Name of the firms (M/s)||Ex-factory price
|(1)||Aksh India Ltd., New Delhi||64,971||Part II|
|(2)||ARM Ltd., New Delhi||73,698||-do-|
|(3)||Sudarshan Telecom, New Delhi||76,000||-do-|
|(4)||Sterlite Industries, New Delhi||81,990||Part I|
|(5)||Birla Ericsson Ltd., Rewa||82,070||-do-|
|(6)||RPG cables Ltd., New Delhi||82,125||Part I Approval expired in September 1999|
|(7)||Pirelli Cables, Italy||73,328 (FOB)||Un-approved|
|(8)||Zhong Xing Telecom Ltd., China||95,790 (FOB)||-do-|
The offers of the firms were valid up to 28 April 2000. Railway Board did not consider offers of the unapproved firms being higher than those of the approved firms.
M/s Aksh India Limited, a Part-II firm had quoted the lowest rate of Rs.64,971 i.e. the same rate at which it had secured a preceding order (May 1999). Taking this in view, the Tender Committee (TC) considered them to be competitive and reasonable. Amongst the Part-I firms, M/s Sterlite Industries quoted a basic rate of Rs.81,990 per km. (19.29 per cent) higher than their last accepted rate of Rs.68,728 per km against May 1999 order). Since M/s Aksh India Limited had quoted the lowest rate of Rs.64,971 (the rate on which a preceding order was awarded to them in May 1999), the TC recommended (May 2000) to counter offer the rate of Rs.64,971 to part II firms. Similarly, the last accepted rate of Rs.68,728 per km. by M/s Sterlite Industries (Part I firm) against May 1999 order, was recommended for counter offering to part I firms. It also recommended for seeking extension of validity period of offers from the firms which had expired on 28 April 2000. The TC recommended (June 2000) for discharging the tender and floating a fresh one since all the firms refused to extend the validity period beyond 28 April 2000.
A fresh tender was floated in August 2000. It was opened on 12 September 2000 and the rates received were as follows:
|Name of the firms
|Status of the firm||Ex-factory price
|Rates quoted in
by T.C in discharged
tender (Rs.per. Km)
|(1)||Aksh optifibre Limited||Pt.I||91,081||64,971||64,971|
|(7)||Vindhya Tele Links||Pt.II||1,06,935||-||-|
The TC recommended following rates and quantities:
|Name of the firms (M/s)||Status of the firm||Quantity (km.)||Rate(Rs.per km)|
|(1)||Aksh optifibre Limited||Pt. I||1608||91,081|
|(2)||Sudarshan Telecom||Pt. II||241||91,000|
|(3)||ARM, New Delhi||Pt. II||101||91,000|
|(4)||Vindhya Tele Links||Pt. II||60||91,000|
In view of high quotations from M/s Sterlite Industries, Birla Ericssons and RPG cables, the TC did not recommend any order on them. The Competent Authority (MOSR), accepted the Tender Committee’s recommendations on 23 January 2001.
Advance acceptance/counter offers were issued to the four firms mentioned in Table III. Only one firm viz. M/s Aksh Optifibre Ltd. accepted the offer and an order was placed in April 2001 for 1608 kms of cable. The quantity was subsequently reduced to 1126 Kms (by decreasing 482 kms under 30 per cent option clause) because of lower rate (Rs.66,395 per km.) obtained against a tender issued (October 2001) by Central Organisation for Railway Electrification (CORE), Allahabad.
In this connection, the following comments arise:
Thus the delay by Railway Board in finalising the tender and procurement by CORE at exorbitant rate instead of approaching the Railway Board for supplies from their supply order led to a loss of Rs.5.05 crore
Further audit scrutiny of procurement action of CORE revealed that:
CORE invited and opened the tender on 8 August 2000 for procurement of optical fibre cable. The rates obtained (Rs. 90,128 and 87,069 per km.) were very much higher than the last purchase price (Rs. 68,728 per kms.) and hence the Tender Committee recommended negotiations, which eventually failed. The rate of Rs. 87,069 per km. was, therefore, offered/ counter-offered to the tenderers. None of them accepted the offers. By that time, Railway Board’s tender had also been finalised in January 2001. In February 2001, the TC (CORE) while recommending discharge of the tender due to refusal by firms to supply at the offered /counter offered rates, indicated that the Railway Board had already finalised its tender and that there was no need for making emergent purchase locally. However, the General Manager, CORE, observed (March 2001) that Railway Board's bulk supply order would not meet the CORE's requirement and ordered issuance of fresh emergent tender.
Accordingly, in June 2001, CORE approached Railway Board for permission to make a direct purchase of cable on the plea that supplies against Railway Board’s tender expected to start in April 2001 were not forthcoming. Railway Board approved the proposal. CORE invited and opened the tender (2 July 2001). The TC, while considering the tender, noticed (12 July 2001) from a newspaper clipping of Economic Times of 10 July 2001 that the prices of optical fibre had fallen drastically and that Bharat Sanchar Nigam Limited (BSNL) was considering cancellation of orders worth Rs.700 crore. In view of this, T.C recommended negotiations with the tenderers. Unable to obtain reduction in prices despite negotiations with the tenderers, TC recommended much higher rate (Rs.1,23,707 per km.) for procurement of 333 kms of cable. Subsequently, when procurement of optical fibre cable was decentralised, CORE itself awarded two more contracts to M/s ARM Ltd. & M/s Sterlite Optical Technologies Limited at a much lower rate of Rs.66,396 per km. and Rs.57,236 per km. respectively.
As the tender for meeting the requirement of field units for OFC had already been finalised by Railway Board in January 2001 at Rs.91,081 per km. and supply order including 418 Kms. for CORE placed in April 2001, the CORE, instead of inviting fresh tender and finalising it in July 2001 at an exorbitant rate of Rs.1,23,707 per km. (higher by Rs.32,626 per km.), could have approached Railway Board and the supplier for expediting the supplies from the centralised supply order of April 2001 especially when the TC also had recommended not to invite fresh tender.
The matter was brought to the notice of Northern Railway Administration in May 2002 and Railway Board in August/October 2002; their replies have not been received (December 2002).
Failure to evaluate the suitability of the Hydraulic Clamp Lock Point machines before their procurement/ installation resulted in premature dismantlement of 80 machines installed and unfruitful expenditure of Rs.1.13 crore on the balance 93 machines lying in store for more than 14 years
The work of replacement of existing Electric Point machines in Route Relay Interlocking (RRI), Howrah on age -cum-condition basis was included in the final works programme of 1989-90. Since water logging during rainy season causing failure of point machines was a chronic problem in Howrah yard, Hydraulic Clamp Lock Point machines having their oil tank fitted at a higher level were proposed to be used for replacement. These were not likely to be damaged unlike other point machines in case of water logging in the point zone area.
The sanctioned estimate (September 1989), included replacement of existing point machines by 148 Hydraulic Clamp Lock Point machines and 21 Electric Point machines (Siemen type) in double slip points where it was difficult to equip Hydraulic Clamp Lock Point machines. The work was completed on 31 January 1995.
Audit scrutiny of the above work revealed the following:
In December 2000, Railway Administration decided to replace entire 80 Hydraulic Clamp Lock Point machines by Electric Point machines (Siemen type) even before completion of half of their scheduled life time. The work was in progress and 47 machines had since been replaced as of 9 January 2002.
Thus failure to evaluate the suitability of the Hydraulic Clamp Lock Point machines before their procurement/ installation resulted in premature dismantlement of 80 machines installed in RRI, Howrah and extra expenditure on account of this. Further, the expenditure of Rs.1.13 crore on the balance 93 machines lying in stores for more than 14 years was also rendered unfruitful.
The matter was brought to the notice of Railway Administration and Railway Board in April 2002 and September 2002 respectively and their reply has not been received (December 2002).
Railway Administration's failure in maintaining the accounts properly in respect of seven projects resulted in non-accountal of materials worth Rs.24.70 crore even after 3 to 9 years of commissioning of the projects
All materials specifically obtained for a particular work should, so long as they are not consumed on the work, be borne under a suspense head Material-At-Site (MAS) opened under the head to which the cost of that work as a whole is allocated. All materials released from a work should also be borne under the same suspense head. The adjustment from the MAS suspense to the relevant final detailed heads should be carried out as soon as the materials are drawn and shown in the monthly return as having been issued to the work. The responsibility for ensuring that the monthly report is prepared devolves on authority in executive charge of the works. The Accounts Officer who maintains the Works Register is responsible for the final adjustment of all MAS transactions. The authority in executive charge of works for which MAS accounts are maintained should arrange for a periodical verification of the materials. At the end of every financial year the Accounts Officer should prepare a schedule of MAS balances on the various works and should review it in consultation with the Executive. If the 'excess materials' cannot be utilised on some other works, they should either be returned to Stores Depot or taken to Engineering Stores Surplus.
The Construction Organisation of Southern Railway at Bangalore executed seven gauge conversion/ new line projects between 1992 and 1998. On completion of these projects, as at the end of October 1998, there was a balance of Rs.73.71 crore under the MAS account. When this was pointed out (December 1998), the Administration attributed (October 2000) the heavy outstanding to the delayed acceptance of debit, transfer of field staff (after completion of the project), custodians having materials of different projects under their custody etc.
After carrying out a number of adjustments, an amount of Rs.41.66 crore was cleared and the balance was brought down to Rs.32.05 crore [Rs.73.71 crore (-) Rs.41.66 crore] as of July 2000. However, there were no proper records in support of the amount cleared (Rs.41.66 crore).
Due to the failure of the Railway Administration to adhere to the codal provisions in conducting periodical verification of the materials and returning the 'excess materials' immediately after completion of the projects, materials worth Rs.7.35 crore only could be accounted for as follows:
|Particulars||Value (Rs. in crore)|
|1.||Materials lying with custodians||4.50|
|2.||Shortages detected with custodians||2.29|
|3.||Materials issued to contractors but not returned||0.38|
|4.||Materials lost due to theft||0.18|
Out of the materials with the custodians (Rs.4.50 crore), Class I materials valued at Rs.0.53 crore and Class II materials valued at Rs.1.76 crore (total Rs.2.29 crore) had to be reclassified as Class III as they had become obsolete or unusable.
Thus major balance of Rs.24.70 crore [Rs.32.05 crore (-) Rs.7.35 crore] still (July 2002) remains unaccounted for.
When the matter was brought to the notice of Railway Administration (May 2002) and Railway Board (October 2002), Railways stated (December 2002) that the MAS Book Balance as of now (November 2002) stood at Rs.6.69 crore.
However, the claim of the Administration about the reduction in the MAS account balance could not be substantiated, as records for all the projects were not made available for Audit scrutiny.
Failure to conduct prescribed checks led to loss of Rs.0.23 crore in respect of 71 Purchase Orders test checked
The powers delegated to the Executive Officer under Chief Administrative Officer, Construction (Const.), Garden Reach (GRC) in respect of local purchases for stores items other than Rate Contract/ Running Contract items is as under:
|Delegated power||Limit per item||Purchase Particulars|
|1.||Chief Engineer (CE), (Const.), GRC||Rs.10000||Stock and Non-stock item|
|2.||Deputy Chief Engineer (Dy. CE), GRC||Rs.5000||Stock and Non-stock item|
The procedure as under is to be followed in local purchase of stores in the Office of CE (Const.), GRC:
The financial scrutiny of the proposals for expenditure and sanctions therefor accorded by any authority is a part of functions of Accounts office viz. Finance Branch. All POs valuing more than Rs.10,000 each are vetted by the Finance branch vide Para 1515 of Indian Railway code for the Accounts Department Vol.I. The scrutiny is to be exercised in all respects particularly in respect of quantities, rates etc. After vetting, Accounts copy of the POs duly signed by the Finance Officer is to be supplied to the Accounts Officer entrusted with the duties of check and payment of the bills for the stores supplied. The internal check of sanctions by Accounts to the proposals already examined in the Finance Branch is to be confined to the verification of concurrence thereto by the Finance.
During inspection of office of the CE (Const.) GRC, the records viz. case files, PO Registers, Daily Material Transaction Register (DMTR) were not made available for audit scrutiny. As such a test check was exercised (January and February 2002) after obtaining collateral records viz. copy of purchase orders and paid vouchers from the Office of the Financial Adviser and Chief Accounts Officer (Const.), GRC. The following irregularities were noticed:
Further enquiry made in this regard revealed that the materials worth Rs.0.23 crore procured against 71 POs were also not received.
On the matter taken up through special letter by Audit (April 2002), the FA&CAO (Const.), GRC admitted (May 2002) the serious irregularities committed in the procurement of stores through POs of value less than Rs.40,000. He further stated that the matter had been taken up by the Vigilance Department for thorough investigation. During discussion on the draft paragraph (5 September 2002), FA&CAO (Const.), GRC disclosed that the fraud had been committed by an employee who has been placed under suspension.
Thus failure to conduct prescribed checks led to loss of Rs.0.23 crore in respect of 71 POs test checked.
The matter was brought to the notice of Railway Administration and Railway Board in May 2002 and November 2002 respectively and their reply has not been received.