CHAPTER - 4
Store And Assets Management

4.1    Import

4.1.1    Railway Board and : Non-utilisation of imported Metre Northeast Frontier Railway Gauge Wheelsets

Failure to comply with the assurance given to Public Accounts Committee on proper utilisation or suitable disposal of imported Metre Gauge Wheel sets resulted in loss of Rs.16.73 crore

Mention was made in Audit Para No.3.1 (ii) of Railway Audit Report for the year ended 31 March 1993 about wasteful import of 2000 Metre Gauge (MG) wheel sets at a cost of Rs. 9.98 crore during 1992-93. Ministry of Railways (Railway Board) in their reply to Public Accounts Committee’s (PAC) question stated (December 1994) that these 2000 wheel sets would be used to upgrade the existing MG Rolling Stock (12T to 14T pay load) by retro fitment of 500 MG wagons on Lumding-Badarpur-Silchar section of Northeast Frontier (NF) Railway within 2 years of approval of retro fitment work.

The retro fitment work of the MG wagons was sanctioned in 1995-96 Rolling Stock Programme (RSP) with provision of funds of Rs.3.76 crore and retro fitment of 67 MG wagons was taken up in Dibrugarh workshop. Till August 1996, the workshop retrofitted 48 wagons, when Railways sanctioned gauge conversion of Lumbding-Silchar section through the Railway Budget 1996-97. Railway Board, therefore, decided to retrofit only 60 MG wagons against 67 MG wagons originally sanctioned.

In the Action Taken Note on the Audit Para, the Board stated (December 1996) that they did not intend to invest further in upgradation of MG freight wagon stock on this section and that possibility to sell the surplus wheel sets to other countries where MG system was still available, would be explored.

Audit scrutiny revealed that:

1. Against their commitment (December 1994) of upgrading 500 wagons within two years of approval of retro fitment work, the Railway Board retrofitted the 14T wheel sets only in 60 wagons up to August 1996. Even these 60 MG wagons retrofitted with 14T wheel sets are being used with ordinary payload of 12 tonnes. Thus, even the expenditure of about Rs.20 lakh incurred on retro fitment was rendered infructuous.
2. Out of 2133 MG wheel sets (including 133 from the old stock), at Dibrugarh Workshop (DBWS), Railway Administration could use only 240 MG wheel sets (retrofitting 60 MG wagons). The remaining 1,893 MG wheel sets (worth Rs.9.45 crore) were still (September 2003) lying in stock at DBWS. No action to sell the wheelsets to other countries as assured by the Board to the PAC, has been taken so far.
3. Normal codal life of 14 T wheelsets is 12 years. About 90 per cent life (11 out of 12 years) of these wheelsets has already expired without their being put to use. Since these wheelsets have been kept in an open space, they would have deteriorated due to vagary of weather. No survey has been conducted to testify the condition of these wheelsets.
4. Dividend at the rate of 7 per cent per annum of Rs.7.28 crore has also been paid to General Revenues for the period 1992 to 2003.

Thus, Railway Board failed to use the wheelsets imported or to sell them to other countries as per the assurance given to the PAC.

The matter was taken up with the Railway Board in October 2002. The Board stated (January 2003) that the efforts were being made to sell these wheelsets to other countries. The reply is not tenable because:

• The assurance is only a reiteration of what they had stated in 1996.
• The wheelsets due to normal wear and tear and exposure to vagary of weather have almost completed their codal life. There is, therefore, no prospect of any of the wheelsets being sold to any other country.

Poor performance rendered as unproductive an investment of Rs.9.29 crore on procurement of a Rail Track Vacuum Suction Cleaning machine

The track maintenance, being done manually in Mumbai Suburban section, was proving to be extremely difficult due to collection of night soil and garbage on the track. Further, existence of highly congested hutments along the track was causing drainage problems. To overcome these problems, Central Railway proposed (July 1997) to procure one Vacuum Suction Machine so as to mechanise the track maintenance activity on this section. The Board approved the proposal through the Rolling Stock Programme 1998-99.

Railways after finalising specifications of the machine, invited a global tender and opened it on 10 May 1999. Offers from two firms- M/s Plasser and Theurer, Austria and M/s DISAB, Sweden were received. The offer from M/s Plasser was both for fully imported and for partly imported/partly indigenous machine. The lowest technically acceptable offer of M/s. Plasser and Theurer for partly imported/partly indigenous machine was recommended by the Tender Committee (TC) and the contract was placed on 12 October 1999. The cost of procurement excluding spare parts was Rs.9.29 crore.

The machine was received on 11 April 2001. It was to handle a minimum of 40 M 3 materials (including garbage silt and foul/caked ballast) per hour. In the actual site condition, it was to handle a minimum of 25 M3 per hour (gross time) material over 2 hours of working period. The performance of the machine after commissioning was, however, far from satisfactory. The performance report sent by the Central Railway recorded garbage handled as 3.88 M3 per hour, which was far below the minimum stipulated in actual site condition. The matter was taken up with the firm and the machine was sent (December 2001) to Plasser and Theurer (India), Faridabad for design modification. Even after design modification, many problems are continuing.

Review in audit revealed that the machine had never given the required out put of garbage cleaning as specified by the supplier or as stipulated in the contract. Thus, the procurement of the above machine at a cost of Rs.9.29 crore is not justified and only resulted in unproductive expenditure.

The matter was taken up with the Board in May 2003 and September 2003. The Railway Board stated in June 2003 that the output has improved to about 10 M3 per hour after modification. Later, in October 2003 , the Board stated that an output of 25 M3 per effective hour of working was being achieved.

The reply is not tenable. The figure of 25 M3 furnished by the Railway Board was with reference to effective working hours and not gross time, the measurement unit stipulated in the contract. Test check of working of the machine for the month of September 2003 revealed that the output of the machine per hour (gross time) was only 12 M3 against the stipulated 25 M3.

Deviation from the original terms and conditions for escalation and advance payment resulted in extra expenditure of Rs.0.41 crore and financial accommodation of Rs.2.74 crore to a firm supplying DTMs

Global tender for manufacture and supply of 11 DTMs was invited in October 1999 and opened in December 1999. Offers were received from M/S. BHEL, New Delhi and M/s. Plasser & Theurer, Austria.

The offer of M/s. BHEL, New Delhi was not considered as it did not conform to the technical specification. The competent authority (Minister for Railways) approved procurement of partly imported and partly indigenous machine from M/s Plasser & Theurer, Austria for the entire quantity of 11 DTMs ( 5 February 2001) at a cost of Rs.39.11 crore.

Tender conditions stipulated that the price quoted should be firm without any provision for variation on any account. Payment terms stipulated that for foreign supplies, 80 per cent payment would be made on proof of inspection and the balance 20 per cent within 90 days of satisfactory commissioning of the machines. For indigenous portion, no advance payment was included in the tender conditions.

As against these terms, the firm had quoted 100 per cent payment of FOB price of imported component and 50 per cent of the payment for the indigenous portion within one month of formal acceptance of contract and the balance 50 per cent within one month of issuing commissioning certificate and the escalation benefits for both imported as well as indigenous portion. The TC recommended the firms demand for escalation for indigenous portion. The Minister for Railways (MR) agreed to the firm’s request for advance payment and recorded (February 2001) that “we should not permit escalation as this was not the part of the original tender conditions”. The MR directed that “henceforth, the condition of tender should be drafted clearly and expressly and no change should be brought in at any stage subsequently”.

Another tender for manufacture and supply of 5 DTMs was invited in May 2001 and opened in August 2001. Only one offer was received from M/s. Plasser & Theurer, Austria. This offer of partly imported and partly indigenous machine was considered technically suitable by the TC and recommended for acceptance. The firms were required to quote firm prices without any provision for variation on any account. Against this, the firm quoted the price for both imported and indigenous components subject to escalation as per the formula submitted by them. TC recommended escalation as per the formula quoted by the party for indigenous portion.

Further, for imported components the payment terms stipulated 80 per cent payment on proof of inspection and shipment within 30 days of receipt of shipping documents and the balance 20 per cent after commissioning of machines. Against this M/s. Plasser & Theurer had asked for 100 per cent payment for imported components on presentation of shipping documents and advance payment equivalent to 50 per cent price of indigenous portion. As against this, the TC recommended 25 per cent payment within one month and next instalment of 25 per cent within 9 months of formal acceptance of contract. The Competent Authority approved (15 February 2002) the proposal of the TC. The value of the contract was Rs.20.40 crore.

In this connection, the following observations on tender No.0108 of 2000 are made:

1. Despite the directives (February 2001) of the MR, Railways deviated from the tender conditions and agreed for payment of escalation on the indigenous portion. This resulted in an additional burden of Rs.0.41 crore.
2. Railways also departed from the laid down terms and conditions and agreed for 100 per cent advance payment for imported components and 50 per cent advance payment for the indigenous portion thereby giving undue financial benefit to the firm to the tune of Rs.2.74 crore.

The matter was brought to the notice of the Board (August/ October 2003). The Board stated (September/ October 2003) that updation of tender conditions as per MR’s directives was started immediately and that changing the tender conditions involved interaction with different directorates. Delay was thus, unavoidable. The reply is not tenable. As the tender was invited only in May 2001 - 3 months after the MR’s directives in the earlier tender file, there was ample time to introduce the changes to the tender conditions, if warranted. Moreover, the reply was silent on the issue of non-adherence to the directives of MR for not making any changes after issue of tender.

Decision of Railway Administration to re-fix delivery schedule resulted in extra expenditure of Rs.1.88 crore on account of exchange variation and Rs.0.03 crore on extension of Letter of Credit besides non-deduction of liquidated damages of Rs.2.52 crore

In January 1997, Railway Board awarded a contract to M/s Mannesmann Demag Forder Technik A.G. Gottwald, Germany for procurement of 8 units of 140 T Break down cranes with Match Trucks. The Letter of Credit (LC) was opened by the Indian Overseas Bank with the Dresdner Bank on 11 March 1997. As per the original delivery schedule, the inspection was to be completed at least 6 months in advance of due delivery of the first lot of cranes which was to be shipped by 11 January 1998. The remaining two lots of three cranes each were to be delivered by 11 February 1998 and 11 March 1998.

As per the terms of contract, the Railways were to recover from the contractor, the liquidated damages at the rate of 0.5 per cent of the FOB value of stores if the contractor had failed to ship according to delivery schedules.

The inspection schedule, as mutually agreed upon between the firm and Research Designs and Standards Organisation (RDSO), was fixed for 5 October 1997. As the firm sought for changes in design to conform to the required slewing angle in the cranes to be offered for inspection, revised inspection schedule was fixed by RDSO for 18 December 1997.

The firm failed to adhere to the delivery schedules and requested Railway Board (18 March 1998), after expiry of the dates of delivery, for refixation of delivery schedule because of delay in finalisation of inspection schedule and deputation of Indian Railways’ personnel for training. The Board accepted the firm’s request and re-fixed the delivery schedule for three lots as 26 February, 9 April and 9 May 1998 respectively without levy of liquidated damages. The cranes, after inspection by the Railway Adviser, Bonn, were shipped by the firm as per the revised delivery schedule.

The following audit observations arise:

1. As the delay in finalisation of inspection schedule was directly attributable to firm’s failure, Board’s decision to re-fix the delivery schedules without levy of liquidated damages was not consistent with the terms of contract.
2. The training could have been imparted by the firm on the cranes that were in process of manufacture during the period of training. The reasons for delay in finalisation of training programme by Railway Board were not on record.
3. Despite initial reservations by Finance Directorate of Railway Board, the delivery schedule was re-fixed on Railways’ account. This resulted in extra expenditure of Rs.1.88 crore on account of exchange variation and Rs.0.03 crore on extension of Letter of Credit during the period besides non-deduction of liquidated damages of Rs.2.52 crore.

The matter was brought to the notice of COFMOW and Railway Board in May 2003 and October 2003 respectively.

The Board stated (December 2003) that the firm could not adhere to the original delivery schedule due to delay in inspections by Indian Railways as per original inspection schedule fixed for 5 October 1997. Based on drawings of cranes and match trucks sent by the firm, certain modifications were incorporated in the drawings and inspection schedule re-fixed for 18 December 1997. Later, following a request from Railway Adviser, Bonn for postponing the date of inspection and delay by Railway Board in finalising the training programme, the revised date for inspection was also postponed.

The reply is not tenable. Both the revision of inspection protocol from 5 October 1997 to 18 December 1997 and later postponement of even this inspection schedule were attributable to the firm’s failure. The firm had sought for changes in designs well after finalisation of the original inspection schedule. The revised inspection schedule had to be postponed because many technical details of assemblies and sub assemblies were not available with the firm for inspection even one month (till 13 January 1998) after the revised inspection schedule.

The training programme of Railway personnel was to commence with effect from 9 February 1998. This programme would have not affected the original delivery schedule covered during 11 January 1998 to 11 March 1998.

Delay in commissioning and wrong issue of PTC led to Railway Administration’s inability to bring the two Jolt Rollover machines costing Rs.1.99 crore to working condition within warranty period and their remaining idle, even after six years of receipt

Jolt Rollover machines are required for making moulds for small castings, especially knuckle, centre pivot and traction motor items. Since two Jolt Rollover machines installed at steel foundry in the year 1967 were worn out, the Board accorded sanction to procure these machines at a cost of Rs.1.26 crore each. CLW placed Purchase Order (May 1996) for two machines along with spares on M/s. Beardsley and Piper, U.S.A., through their Indian agent M/s. Dipty Expo Private Limited, Kolkata.

As per the terms and conditions of the purchase order, the supplying firm was to provide ‘warranty’ for the machines for a period of ‘one year from the date of supply or 2000 hours of operation whichever was earlier’.

Both the machines were received on 14 March 1997. As per the Proving Test Certificate (PTC), the machines were commissioned on 20 August 1997 (i.e. after 5 months of receipt of the machines) and Proving Test carried out on 17 March 1998 (i.e. after one year of receipt of the machines).

Review by Audit revealed that the machines had not been working since their commissioning and no logbooks for their performance was being maintained.

On the matter being taken up (February 2003) with the CLW Administration it was stated (May 2003) by the Deputy Chief Mechanical Engineer, Steel Foundry that warranty had expired at the time of issue of PTC itself and that attempts were being made to recondition the machines by an ‘outside agency’.

In this connection, the following observations are made:

1. There has been delay in procurement of machines. Though the need was originally felt and procurement provided for in 1987-88 and 1988-89 Machinery and Plant (M&P) Programme, the purchase order could be placed by CLW only in May 1996, almost 8 years after the inclusion of their procurement in the M&P Programme. Further, even after the receipt of the machines in March 1997, they are still to be made operational (September 2003).
2. The CLW failed to commission and test the performance of these machines within the warranty period. Failure led to idling of these machines since their ‘so called’ commissioning.
3. By forgoing the advantage of commissioning and testing within the warranty period the CLW Administration is now compelled to go to an outside agency for renovation/ re-commissioning of these machines at an extra cost of Rs.0.07 crore.
4. Since these machines are not performing, hand moulds are resorted to. The existing machines are also being used for mould making which needs more efforts, repair and subsequent dressing/ fettling.

Thus, the two Jolt Rollover machines procured at a total cost of Rs.1.99 crore are lying idle for the last 6 years.

The matter was brought to the notice of CLW Administration and Railway Board in June 2003 and October 2003 respectively and their reply has not been received (February 2004).

Failure of Chittaranjan Locomotive Works to take notice of the problems in quality of the pipe fittings for locomotives and the spurious documents produced by the supplier in support of his distributorship rights for a foreign firm resulted in supply of spurious material worth Rs.0.73 crore

Chittaranjan Locomotive Works (CLW) placed a development order (March 1998) for purchase of pipe fittings for 15 loco sets at the rate of Rs.3,08,694 per set on M/s. Swastik Udyog, Kolkata, an authorised distributor of M/s. Parker Hannifim Corporation, USA/ Germany. To ensure genuineness of the materials, the firm was to submit a certificate of the ‘country of origin’ and the packing slip of their principals, along with the supply of materials.

During the period March 1998 to January 2000, CLW placed 6 more purchase orders on this firm. In total, the seven purchase orders were placed for procurement of Pipe fittings for 68 loco sets for Rs.1.72 crore.

Audit scrutiny of the seven purchase orders revealed the following:

1. The order of 19 March 1998 for Pipe fittings for 15 loco sets was a development order. The firm completed this order in August 1999. Before the development order could be completed and the competency of the supplier proved, CLW placed two more orders in March and May 1998 on the same firm for 22 loco sets worth Rs.0.28 crore.
2. In February 1999, inconsistencies in the quality/ standard of the Pipe fittings were reported by the user unit. TCs that met after this development failed to get performance reports before recommending further procurement from the firm. Failure of TCs in this regard resulted in more purchases for Rs.0.95 crore, of which Pipe fittings worth Rs.0.73 crore were substandard and lying idle (September 2003).
3. The TC recommended against placing orders on this firm due to complaints about its quality. In spite of this, the Chief Material Manager (CMM) recommended procurement of Pipe fittings for 5 loco sets from this firm and 2 loco sets from another firm - M/s Fluid Controls Private Limited, Mumbai by counter offering the total unit rate of M/s Swastik Udyog, Kolkata.
4. In August 2001, the TC recommended further orders for 9 loco sets on this firm. It was only in September 2001 that the Chief Electrical Engineer, CLW, while accepting these recommendations, drew attention to the problems, which had been noticed earlier in February 1999. A Committee appointed to look into the matter met in November 2001 and found that the quality of materials supplied by the firm was very poor. It was, therefore, decided (December 2001) to pass over the offer of this firm.

Meanwhile, in reply to a reference made by CLW (September 2001), the principals, M/s Parker Hannifin India Private Ltd., Mumbai, had intimated (October 2001) that they had discontinued the distributorship of M/s Swastik Udyong, Kolkata over 15 months ago and that some of the samples sent to them by CLW were not manufactured by them and were spurious. The representative of the firm, who was present during the proceedings of the Committee, had also admitted the defects in the fittings and offered to replace them. The defective materials were not replaced (September 2003).

In this connection, the following audit comments arise:

1. CLW failed to take note of the problems pointed out by the user unit in 1999 and investigate the matter, with the result CLW continued to place orders on a firm which was supplying spurious materials.
2. The inspecting authorities failed to detect problems during inspection.
3. CLW failed to process the matter for filing a money suit against the firm as advised by the Stores Department in July 2002.
4. The firm agreed in November 2001 to replace the defective materials, but CLW has not been able to pursue the firm for replacement. This resulted in CLW holding spurious materials worth Rs.0.73 crore.
5. CLW is still to issue any formal rejection memo to the firm. The firm, therefore, protested when CLW withheld payment of Rs.0.35 crore due to the firm against some other purchase orders.

The matter was brought to the notice of CLW Administration and Railway Board in May 2003 and October 2003 respectively and their reply has not been received (February 2004).

4.2    Rolling stock and related stores

Improper assessment and distribution of steel by Director Railway Stores (DRS), Kolkata led to excess procurement of steel worth Rs.147.22 crore and avoidable market purchase of steel worth Rs.11.16 crore

Audit undertook a review of 57 (Rolling stock and related stores) wagon building contracts completed during the year 2001-02 and 2002-03 to examine whether the assessment, procurement and distribution of steel to wagon builders is being carried out and monitored by the Railways effectively. The following points indicating improper assessment, procurement and supply were noticed:

1. The requirement of steel as per the norms prescribed by the RDSO for execution of the 57 contracts worked out to173,891.609 MT. The stock available with the wagon manufacturers for execution of these contracts was 1,10,901.420 MT. The net quantity of steel thus required for execution of these 57 contracts worked out to 62,990.189 MT. The Railways, however, procured 1,59,311.268 MT steel through Railway Board contracts. Further, they permitted wagon builders to procure 7,301.09 MT valued at Rs.11.16 crore from open market resulting in excess procurement of 1,03,622.169 MT steel worth to Rs.158.38 crore.
2. DRS, Kolkata allowed wagon builders to retain balance steel of certain specifications from earlier contracts and transferred the same against 31 new contracts, even though steel of such specifications was not required in these new contracts. Further, due to change of design/wagon specifications, some of the steel items transferred cannot actually be used for the current contract and or any contracts.
3. In 7 contracts, 774.381 MT of steel items, of specifications not required in terms of the contract, were procured and issued to the contractors. These items valued at Rs.1.18 crore thus remained unused and were transferred to other works on completion of these contracts.
4. Excess allotment of steel of a certain specification in one contract led to less allotment of the same specification in another contract. Thus, shortfall of steel of some specifications led the wagon builders to approach DRS for procurement of steel from the open market.
5. In 33 contracts, certain specifications of steel were made available in enough quantity. Yet, DRS, Kolkata permitted procurement from the open market. This suggests that either these quantities of steel were not physically available with the wagon builders or were not made available to the wagon builders on time.
6. In 15 contracts, the wagon builders were allowed to purchase steel from the market more than required as per norms. In some cases, steel purchased was more than double the quantity required.

Railway Board stated (January 2004) that the stock available with the wagon manufacturers for the 57 contracts was not 1,10,901.42 MT as commented by Audit. Railway Board also stated that the actual steel holding as on 1 April 2002 was only 7,302 MT. Certain Buffer was purposely planned to maintain continuity in production. Some excess quantity was inevitable as procurement was planned in indentable tonnage keeping in view the constraints of rolling and transportation.

The reply is not tenable in view of the following:

Procurement of steel is to be planned by Railways considering the wagon production programme and steel available on hand. Out of the 57 contracts reviewed by audit, 28 contracts were completed during 2001-02 and the remaining 29 contracts were completed during 2002-03. In the 28 contracts completed during 2001-02, a quantity of 61,452.011 MT was in excess of requirement and transferred to other contracts. The steel holding as on 1 April 2002 should, therefore, not be less than 61,452.01 MT. Railways, however, stated that the actual holding as on 1 April 2002 as only 7,302 MT which clearly indicates that the Railway system of arriving at the steel holding was defective.

The justification given regarding maintaining the buffer stock is an after thought as the purchase proposals did not provide for any quantities for buffer stock. An analysis of the quantities of steel lying in excess does not support the argument putforth regarding rolling and transportation constraints.

Thus, failure to assess the requirement correctly led to excess procurement of steel worth Rs.147.22 crore besides an avoidable market purchase worth Rs.11.16 crore.

Failure on the part of the Railway Board to release supply order of 7,168 MTs Z section steel during the pendency of the contract resulted in avoidable extra expenditure of Rs.1.46 crore

Z Section steel is one of the vital sections of steel used in fabrication of almost all types of wagons. Therefore, a regular and uninterrupted supply of Z section steel is crucial for manufacture of wagons.

The Railway Board entered into a contract (December 2000) with M/s. Indian Iron and Steel Corporation Ltd. (IISCO) for supply of 9,556 MTs Z section steel at the rate of Rs.17,200/- per MT covering the requirement of 2001-2002. The contract was valid up to 31 December 2001.

Against a total quantity of 9,556 MTs Z section steel, the Director Railway Stores (DRS), Kolkata placed release orders only for 3,655 MTs. Meanwhile, another tender for various types of steel (including Z section steel) required for 2002-03 was opened on 31 July 2001. The rates for Z type steel received in this tender was Rs.18,890/- per MT. The requirement of wagons and product mix for 2002-2003 was also finalised by the Railway Board in October 2001 and DRS, Kolkata, had communicated to the Board the requirement of Z section steel for these wagons on 7 December 2001.

On 20 December 2001, the IISCO requested DRS, Kolkata, for the release of supply order for the balance quantity before 31 December 2001 at the old contracted rate of Rs.17,200/- per MT. In February 2002, the Railway Board decided to cover the entire requirement of Z section steel along with the requirement of other 18 items for 2002-2003 by issuing release orders against previous year (December 2000) contract, which was valid up to 31 December 2001. Release orders for 7,233 MTs of Z section steel (including 30 per cent option clause) were issued by DRS, Kolkata only on 22 March 2002 and procurement of this item against new tender (2002-2003) was dropped.

IISCO, however, stated that in view of the increase in steel rates, they would be able to supply only 1,600 MTs of Z section steel at the contracted rate of Rs.17,200/- per MT valid up to 31 December 2001. The Board, therefore, invited and opened a special limited tender on 28 June 2002 to meet the requirement of balance quantity of Z section during 2002-03 and procured 5,633 MTs. of Z section steel at a rate of Rs.18,890 per MT, the lowest quoted rate by M/s.IISCO in the limited tender in question. Later, 1,690 MTs (in addition to 5,633 MTs) of Z section steel was procured under 30 per cent option clause. A development order was also placed on Steel Authority of India Limited (SAIL) for 1,500 MTs outside the tender quantity at the counter-offered rate of Rs.18,890 per MT. The total value of the purchase including quantity covered under option clause worked out to Rs.16.66 crore.

In this connection, the following observations are made: -

1. Though the Board had enough time, it advised DRS, Kolkata only in February 2002, well after the expiry of delivery period on 31 December 2001 to place orders on IISCO for steel against December 2000 contract. DRS, Kolkata also in turn delayed the matter and placed a supply order for 7,233 MTs only on 22 March 2002. Failure on the part of the Board/ DRS, Kolkata to take timely action resulted in avoidable extra expenditure of Rs.1.46 crore on procurement of 7,168 MTs. of Z section steel at the rates higher by Rs.1,690 per MT.
2. A development order for 1500 MTs was also placed on M/s.SAIL by counter-offering the lowest rate quoted by M/s IISCO. M/s.SAIL accepted the counter-offer and agreed to supply the items through a conversion agent. As SAIL was to act only as a trader in this case, the objective of developing new sources was not achieved.

When the matter was taken up (October 2003), the Board stated (October 2003) that the requirement of wagons and product-mix for 2002-03 finalised in October 2001 was tentative for planning inputs and issue of wagon tenders etc. The actual requirement was finalised only in (February/ March 2002).

The reply is not tenable. As per directives of the Board, Product Mix is to be finalised at least 15 months in advance. As such, wagon mix for the year 2002-03 ought to have been finalised in December 2000/January 2001. The requirement for 2002-03 of 14,000 wagons was approved by the competent authority on 9 October 2001 and was communicated to the concerned on 10 October 2001 for tender etc. The tender was opened on 31 July 2001. TC meeting was held only in February 2002, after over 6 months. Further, the DRS, Kolkata had also conveyed requirement of Z section steel on 7 December 2001. Thus, despite delays at all levels, there was enough time for the Board to place orders at LPR that was valid till 31 December 2001.

Avoidable delay in finalising the wagon mix and the requirement of steel, especially when M/s.IISCO was reminding them to issue release orders on the existing contract and it was in Board’s knowledge that higher rates were received in the subsequent tender, led to extra expenditure of Rs.1.46 crore.

Inclusion of a price variation clause without a well defined formula led to irregular revision of prices and resulted in extra expenditure to the tune of Rs.30 crore

Before 1998, procurement of Branded Crank Case Lube Oil was effected through limited tender basis from these three Public Sector Oil companies. Thereafter, the system of open tender was introduced as per instructions (28 March 1997) of the then Minister for Railways.

1. Accordingly, Open Tender for procurement of 29,080 KLs Crank Case Lube Oil for the year 1998 was invited and opened on 22 July 1997. Against this tender, 4 offers were received. The lowest offer of M/S. Gulf Oil India (an unapproved source) was rejected by the Tender Committee (TC). The competent authority approved placement of order on three Public Sector Oil companies at the second lowest offered rate of M/s HPCL viz Rs.39.50 and Rs.42.88 per litre for Bulk and packed respectively with Price Variation Clause (PVC).
2. Tender for 27,071 KLs Crank Case Oil for the year 1999 was invited and opened on 20 May 1998. In response, quotations were received only from M/s. IOC, HPCL and BPCL. The TC recommended the lowest rate of Rs.41.23 per litre - Bulk and Rs.45.20 per litre - Packed of M/s. IOC. The Competent Authority approved (14 October 1999) the recommendation. The tender was finalised with PVC.
3. Open Tender for procurement of 30,560 KLs. Crank Case Oil to meet the requirement for the year 2000 was invited and opened on 28 May 1999. All the three Oil companies had quoted the identical rates of Rs.50.69 per litre for Bulk and Rs.54.52 per litre for Packed. Orders were placed on firm price basis without PVC.

In this connection, following observations are made:

1. The tender notice required the tenderers to provide a well-defined formula for price variation. The terms and conditions of the contracts governing price variations indicated only the documents that would be required for considering price variation without a well-defined formula. On the plea that the formulations of their products were a trade secret and that the PV factors could not be disclosed to Railways, the oil companies failed to provide a well-defined formula, which eventually led to Railways allowing exorbitant price revision without having a basis for assessing the reasonableness of their claims.
2. In terms of Para 440 of the Stores Code, any changes to the contract, which includes a PVC, the rates might be varied only by the authority that approves the original procurement with the concurrence of the Financial Adviser. In terms of the conditions of the contract, PV was to be paid only as a result of increase in cost of the ingredients forming part of the formulation. The claim made by the oil companies were not about the increase in the cost of ingredients alone and therefore acceptance of such claim amounted to change in the terms and conditions of the contract that required the approval of the competent authority. As MR was the competent authority that had approved the procurement, any changes to the terms and conditions of the contract should have been made only with the approval of MR. Allowing the price revision by EDFS was thus without authority and irregular.
3. The price revision claims of oil companies included effect of rupee value erosion and increase in cost of additives based on the last price revision in December 1995. As these factors should have formed part of the rates quoted against the tender in July 1997 and May 1998, admitting these factors for price escalation was irregular.
4. The MR had emphasised the need for transparency and competitiveness in procurement through open tenders and putting an end to single/ limited tenders or repeated orders. The Railways are still dependent on three oil companies, thus defeating the very purpose of MR’s instruction.

Thus, inclusion of price variation clause without a well-defined formula and acceptance of the claims of suppliers for price variation without having any basis for reasonableness of their claims resulted in extra expenditure of Rs.30 crore to Indian Railways on procurement of Crank Case Lube Oil.

The matter was brought to the notice of Railway Board (June 2003 and September 2003). In reply, the Board stated (October 2003) that the claims made by various oil companies were due to direct or indirect increase in cost of the ingredients. The Board held that acceptance of PVC claims did not amount to change in the terms and conditions of the contract and therefore did not require the approval of competent authority.

The argument of the Board is not tenable. The terms and conditions provided that the Companies should provide documentary evidence regarding increase in prices of ingredients based on which the Railway Board would consider acceptance of revised rates. The Companies did not provide any such evidence. On the other hand, they provided a working sheet indicating elements necessitating revision, which should have been taken into account at the time of quoting against the tenders. As the escalation claims were at variance with terms of the contract, fresh approval of competent authority was necessary. Approval of the claims by EDFS, that too incorrectly by considering developments prior to the dates of inviting tenders, was irregular.

Railway Board’s failure in analysing the reasonableness of rates and availing the benefit of lower rates resulted in extra expenditure of Rs.7.10 crore on procurement of Composite Brake Blocks

With a view to developing capacity for Composite Brake Blocks (CBBs), a limited tender enquiry for development and supply of CBBs (50,000 units annually for three years) for freight and coaching stocks was issued in June 1993. On the basis of tender, contracts were placed in July 1994 on M/s.Stone India Ltd. at their rate of Rs.540 for the first year (1994-95) and at the counter offered rate of Rs.567 for the second year and Rs.595 for the third year.

During the currency of this contract, another tender was opened (June 1995) and order placed at the lowest rate of Rs.450 per unit of CBB for freight stock.

Later, another tender for procurement of 2.50 lakh CBBs for freight and 50,000 units for coaching stock was opened on 31 December 1998 in which 12 firms had offered their rates. TC considered that the Last Purchase Rate (LPR) of Rs.450 per unit of CBB was reasonable and recommended to counter offer this rate to all technically suitable firms. TC also considered the lowest rate of Rs.380 per unit of CBB for coaching stock as reasonable and recommended to place order on M/s Rane Brake Lining Ltd. and counter offer this rate to three firms. The firms accepted the counter offered rates.

Again, a tender for procurement of 8 lakh CBB for freight stock and 2 lakh CBBs for coaching stock was opened on 12 January 2000. The TC recommended counter offering the last purchase rate (Rs.450 per unit) to the approved firms and Rs.438 per unit for development order for freight stock.

For coaching stock, TC, considering the increase in thickness of CBBs, recommended to counter offer rate of Rs.393 to the firms. The lowest rate of Rs.354 per unit of CBB, received from M/s Industrial Laminates, a technically suitable firm, was considered for placement of development orders. TC’s recommendations were accepted by the Competent Authority (Minister for Railways) and orders were placed on the firms accordingly.

In this connection, the following observations are made:

1. Against tender invited in June 1993, the Railways awarded assured business to the suppliers for 3 years on the initial stages at high rates without safeguarding Railways’ financial interests by way of provision of a suitable clause in the contract to the effect that ‘In case, lower rates are finalised/ accepted on any subsequent tender opened during the currency of the contract, the same shall be applicable for all supplies made on or after the opening of the tender’. It has been noticed in audit that lower rate of Rs.450 per unit was obtained in another tender opened within one year of entering into this contract. Non-provision of such a clause in the contract resulted in extra expenditure of Rs.1.70 crore on procurement of 1.00 lakh CBBs made during second and third year.
2. TC did not consider the lowest rate of Rs.425 per unit for freight stock offered by M/s Balabestos India Ltd. against the tender opened in December 1998, as the firm had not furnished the required Earnest Money or any proof for exemption from payment of Earnest Money. However, as per RDSO’s technical evaluation report, this firm’s offer was technically acceptable. M/s Balabestos could have been passed over for any order on them for failure to deposit Earnest Money but their lowest offer, which was otherwise technically suitable and valid, should have been counter offered to other firms. Failure to do so resulted in extra expenditure of Rs.0.92 crore on procurement of 3 lakh CBBs. Apart from a saving of Rs.0.92 crore, this rate would have formed an LPR for future orders.
3. The TC, while considering reasonableness of rates in tender opened in January 2000 for 8 lakh CBBs for freight stock and 2 lakh CBBs for coaching stock, duly observed the benefit of economics of large-scale production by the supplier and recommended an order at LPR of Rs.450 per unit for freight stock. Had Rs.425 per unit offered by M/s Balabestos in their tender of 1998 been accepted, this rate, and not Rs.450, would have formed the basis as the LPR for the next tender of January 2000. TC also did not counter offer the lowest rate of Rs.354 for coaching stock of a technically suitable firm. These failures resulted in extra expenditure of Rs.4.48 crore on procurement of CBBs in the second tender.

Thus, Railways incurred extra expenditure of Rs.7.10 crore on procurement of CBBs.

The matter was taken up (September 2003). The Board contended (October 2003) that:

1. Whenever a new technology is developed initial rates are generally high as Research and Development cost had to be amortised on the product cost for a particular duration. In view of large investment, it is generally not possible to make reputed companies to agree to do business without commitment for assured business.
2. Normally, the lowest rate from amongst established/ regular suppliers is counter offered to the approved suppliers. Rs.425 were not a valid rate for counter offering as this firm had never supplied the item.

The Board’s reply is not tenable because:

1. no cost analysis to arrive at the reasonable cost of CBB and the amount of investment on infrastructure required to be amortised had been carried out by Railway. The fact that many firms participated in the subsequent tender at competitive rates indicates that the Research and Development investment on the product was not very high necessitating commitment of assured business at higher rate; and
2. as the lowest offer of Rs.425 per unit was found technically acceptable by RDSO, Railways should have counter offered this rate to other firms.

Failure to take remedial action against high level rejections and premature condemnation of axles on account of mismatch in the size of the axles vis-à-vis the size of the new bearings led to loss of Rs.1.51 crore

Direct Mounted Roller Bearings (BG) (SKF-22326) are centrally procured by Integral Coach Factory (ICF), after consolidating indents from various Production Units/ Zonal Railways. While ICF and Rail Coach Factory (RCF), Kapurthala use new axles and new bearings in the manufacture of coaches, the Zonal Railways, during maintenance use the new bearings on axles subjected to wear and tear. ICF, while placing orders for the above bearings, specified 129.075 mm to 130.000 mm as the range within which the bore size of the bearings supplied should fall. Though the bore size of the bearings supplied by the firm to the workshops were within the specified range (83 per cent to 93 per cent) bearings were with the upper tolerance limit.

Since the axles in the open line are subjected to wear and tear, the journal size gets reduced slightly, resulting in mismatch of axles and new bearings with the upper tolerance limit. The maintenance workshops of Southern Railway were rejecting the axle itself in such cases, resulting in premature condemnation of axles. Though the Southern Railway had taken up (September 2001) the matter with Research, Designs and Standards Organisation (RDSO), no remedial measures have been taken so far (August 2003).

Audit observed that during 2000-01 to 2002-03, 832 axles aged about 8 to 9 years, against the codal life of 30 years, were rejected on this account and disposed of as scrap, resulting in net loss of Rs.1.51 crore.

Till such time a decision is taken, in consultation with the RDSO, axles with high residual codal life will continue to be rejected.

The matter was brought to the notice of Railway Administration and Railway Board in April 2003 and September 2003 respectively. Railway Administration, with the approval of Railway Board replied (November 2003) that an analysis of larger samples of axles supplied revealed a normal distribution of the bore size within the specified tolerance limits. They stated further that no codal life was prescribed for axles and that the weighted average life of axles works out to 10.8 years.

The reply is not tenable as in the larger sample of 87 referred to by the Railway Administration, 51 axles had specifications closer to the upper tolerance limit. Moreover, the correspondence of Railway Administration with RDSO seeking revision of specifications indicates the existence of a problem. Further, though no codal life has been prescribed, Railway Board based on a ‘Report of the Committee for fixing life of Rolling Stock Components’ had circulated a letter indicating their life as 35 to 40 years and so condemnation of axles with average life of 10.8 years still involves considerable money value.

4.2.6    Railway Board and: Extra expenditure due to non- Eastern Railway operation of Option Clause and non- counter offering the lowest rate

Railway Board awarded contracts on M/s National Engineering Industries Limited (NEI) and M/s Tata Timken Limited (TTL) on 26 September 1997 for supply of 59,500 and 25,500 CTRBs respectively at unit rate of Rs.9,650 with delivery period 30 September 1998.

Tender for procurement of 74,000 CTRBs (later revised to 73,622 nos.) for the year 1998-99 was opened on 27 May 1998. In response, 3 firms had submitted their offers. The lowest rate was received from M/s NEI at a unit rate of Rs.9,525 for less than 80 per cent of tendered quantity, Rs.9,425 for 80 per cent and above of tendered quantity and Rs.9,375 for 100 per cent of tendered quantity. Railways decided to distribute the quantity between M/s NEI and M/s TTL in 70:30 ratio at the rate of Rs. 9,425.

In this connection, the following observations are made:

(i)    As per clause 3.5 of the contract, the purchaser reserves the right to increase/ decrease the ordered quantity by 30 per cent within the currency of the contract on the same price and terms and conditions.

Till opening of the tender in May 1998, both the firms had supplied a total 59,388 CTRBs leaving a balance of 25,612 CTRBs, which were supplied later during June 1998 to September 1998. Despite lower rate (Rs.9,425) finalised in tender (during the currency of contract), the Board did not exercise minus 30 per cent Option clause to reduce the quantity by 25,500 CTRBs under Option clause (17,200-M/s NEI + 7,650-M/s TTL) so as to purchase them at the lower rate in the present tender. Failure to do so resulted in extra expenditure of Rs.0.69 crore.

(ii)    M/s NEI had quoted quantity discount of Rs.9,425 for 80 per cent and Rs.9,375 for 100 per cent of the ordered quantity. The Board, however, counter offered Rs.9,425 to M/s NEI for supply of 70 per cent quantity (against conditional 80 per cent quantity). These rates were also counter offered to M/s TTL for 30 per cent quantity. The Board should have counter offered the lowest rate of Rs.9,375 to both the firms to discourage the firms from quoting conditional rates to corner the entire order or to create an artificial monopoly by offering the lowest rate for the entire ordered quantity. Review of records further revealed that a still lower rate (Rs.8,965 from M/s TTL) was received in the next tender also for the year 1999-2000 (opened on 28 December 1998). Railway Board, by exercising minus 30 per cent option clause, reduced the ordered quantity by 22,067 CTRBs. However, the firms requested the Board not to reduce the quantity and offered to supply these quantities at the lower rates (Rs.8,965). The Board accepted the firms’ requests and restored the quantity. This amply suggests that there was enough scope for reduction in rates of CTRBs and acceptance by the firms of even the lowest rate of Rs.9,375 per unit for the quantity offered in the tender opened in May 1998. Failure to do so resulted in extra expenditure of Rs.0.47 crore.

The matter was taken up (September 2003). The Board stated (October 2003) that:

1. Option clause in the contract was to take care of any contingencies arising out of requirements during the currency of the contract and not meant to take advantage of the higher/ lower rates received in the subsequent tender.
2. The rates were not exactly comparable as purchases were being made to two different specifications.
3. The recommended rate of Rs.9,425 was cheaper by Rs.225 than the last purchase rate of Rs.9,650 and, thus, considered reasonable.

Railway Board’s remarks are not tenable because:

1. The Board issued instructions (November 1990) that in cases where it is decided not to exercise the option clause, full facts should be placed on record. TC while finalising the tender (May 1998) neither considered exercising option clause in view of the lower rate in the subsequent tender nor recorded the reasons for the same. In the very next tender for the same item, the Board exercised the option clause and reduced the quantity to take advantage of lower rate received later. Thus, the Board’s remark that option clause is not meant to take advantage of the higher/ lower rates received in the subsequent tender is not tenable.
2. No discussions on different specifications were held by the TC while arriving at the reasonableness of the rate in the tender (opened on 27 May 1998). The TC compared the rate with the last purchase rate. Thus, the Board’s remark that rate of CTRBs of two different specifications were not comparable is not tenable.
3. Merely because the rate of Rs.9,425 was lower than the last purchase rate, the Board have concluded that the rate was reasonable. No attempt was made to counter offer the still lower rate of Rs.9,375 offered by M/s. NEI for supply of 100 per cent of the quantity.

Thus, Board’s failure to exercise option clause and counter offer the lowest rate resulted in extra expenditure of Rs.1.16 crore on procurement of CTRBs.

4.3    Plant and machinery

The Railway Board accorded sanction to CLW for the procurement of one 15 tonne Direct Arc Melting Furnace for Steel Foundry in January 2000, after rejecting several proposals made earlier. Tender for procurement of the furnace was floated by Central Organisation for Modernisation of Workshops (COFMOW) and the offer of M/s GA Danieli India Ltd. Kolkata was accepted in October 2000 at a cost of Rs.4.56 crore.

The 15 tonne furnace was received by the CLW on piece meal basis from the firm during the period from February 2001 to April 2001. Since then the furnace has been lying without being commissioned for want of necessary infrastructure like Cooling Tower for Fume Extraction system and provision of 11 KV high tension power connection.

When the matter was taken up (May 2002), the CLW Administration accepted the Audit contention regarding delay in commissioning and stated that the furnace was likely to be commissioned by the end of August 2002.

Audit review, however, revealed that as on May 2003 also the 15 Tonne Arc Melting Furnace procured at the total cost of Rs.4.60 crore (including the cost of augmentation of 11 KV high tension power lines) was yet to be commissioned as the statutory permission from the Chief Electrical Inspector for 11 KV high tension power connection was yet to be received and the order for the cooling tower for the Fume Extraction system had just been placed.

Thus, failure on the part of CLW to anticipate, plan and execute all the necessary infrastructure requirements resulted in non-commissioning of the 15 tonne Arc Melting Furnace and blocking up of funds to the tune of Rs.4.60 crore for more than 2 years.

The matter was brought to the notice of Railway Administration and Railway Board in June 2003 and September 2003 respectively and their reply has not been received (February 2004).

In April 1988, Jagadhari Workshop authorities placed an indent on Central Organisation for Modernisation of Workshops (COFMOW) for 2 new heavy duty AJTB lathes on replacement account. At that time, it was well known to the workshop authorities that the stock of IRS wheels was declining.

In November 1988, Chief Engineer/ COFMOW, during his visit to Jagadhari Workshop, felt that the workshop authorities could reduce the requirement of new lathes from two to one. In December 1988, Chief Project Manager was again requested by COFMOW to confirm that the second lathe was actually required. No review for the exact requirement was done by the workshop.

COFMOW procured one AJTB lathe (WL 18) in April 1990 and another (WL 21) in October 1990 for Jagadhari Workshop from M/s. Heavy Engineering Corporation, Ranchi at a cost of Rs.2.73 crore. These lathes were commissioned in April 1991 and December 1992 respectively. The percentage of utilisation of three lathes - one old (WL 17) and two new (WL 18 and WL 21) during 1994-2000 ranged from 18.44 to 24.28, 16.34 to 25.18 and 9.11 to 13.54 respectively. The total number of wheels turned out by these three lathes during this period ranged from 8,845 to 10,360-per annum. Thus the combined utilisation of these three lathes constituted 49 to 58 per cent of the rated capacity of only one lathe (18,000 wheels per annum). The work could be managed with one lathe only against three.

The matter was taken up in June 2000. The Chief Works Manager, Jagadhari Workshop admitted (October 2000) decreased utilisation of these three lathes and that one of these lathes could be declared surplus. One lathe declared surplus (March 2001) was still lying with Jagadhari Workshop (June 2003).

A further review in audit revealed that:

1. During 2000-01 to 2001-02, the total outturn by these three lathes against their total annual capacity of 54,000 units was 5,997 and 3,116 units respectively.
2. During April 1995 to June 2003, 7 AJTB lathes with the same functions were procured by COFMOW for 7 other workshops on Indian Railways. Had there been proper co-ordination, the lathe declared surplus by Jagadhari Workshop in March 2001 could have been transferred and purchase of one lathe avoided.

Thus failure of Jagadhari Workshop authorities to assess properly the requirement despite repeated requests by COFMOW to review the position, resulted in avoidable investment of Rs.2.73 crore since 1990.

When the matter was brought to the notice of Railway Administration in June 2003, the Administration stated (October 2003) that:

1. The AJTB lathes were procured on replacement account after reviewing the recommendations of RITES.
2. As per shop’s allowed timing, the utilisation of two new AJTB lathes consistently increased during 1991-99. In anticipation of this increasing load, two new lathes were procured and the old lathe, which had passed its codal life, was kept as a standby. The two new lathes in question were used one each in Wagon Shop and Coach Shop. Thus, all the three lathes were required for smooth functioning.

During discussion in October 2003, Railway Administration reiterated more or less the same arguments.

The reply of Railway Administration is not tenable because:

1. The key documents produced by Railway Administration in support, that the position had been reviewed in the light of recommendation of RITES, did not indicate any detailed quantitative analysis of justification for two new AJTB lathes.
2. The utilisation of these lathes is based on working hours of two shifts but the lathes actually worked in three shifts a day. In fact, the basis adopted by Railway Administration to work out utilisation with reference to hours of shifts is not correct. The utilisation of a machine is worked out with reference to its rated capacity. During 1994-2000, the combined annual workload (8,845 to 10,360 wheels) done by three lathes was less than the rated capacity of even one lathe (18,000 wheels). This amply suggests that only one lathe was enough especially when the work consistently decreased from 2000-2001 onwards. The contention that one lathe each was dedicated in Wagon Shop and Coach Shop is not supported by any documentary evidence.

The matter was brought to the notice of Railway Board in October 2003 and their reply has not been received (February 2004).

Incorrect action of Diesel Locomotive Works in giving clearance for despatch and issuing proving certificate for a machine which was not as per the specifications resulted in unfruitful investment of Rs.1.02 crore

The Ministry of Railways (Railway Board) accorded sanction (September 1996) for procurement of one Honing Machine at a cost of Rs.1.07 crore to replace one existing machine that had completed its codal life. A purchase order was placed by Diesel Locomotive Works (DLW) in November 1996 on a firm (M/s Nagel Special Machine Private Limited, Bangalore) for supply of the machine at a cost of Rs.1.02 crore. The firm was to supply the machine within nine months from the date of issue of purchase order i.e. by July 1997.

The machine as per drawing was to be capable of wet honing of alloy cast iron diesel loco cylinder liners both before and after hard chrome plating. Rough honing operations (for cast iron unplated liners) and finish honing (of plated liners) were to be carried out to surface finish of 25 to 32 Root Means Square (RMS) within a cycle time of 12 minutes.

The machine was to be inspected by representative of Chief Mechanical Engineer at firm’s premises. During three inspections of the machine between August 1997 and January 1998 at firm’s premises, the machines could not match the laid down specifications of the required cycle time and surface finish. Though the required surface finish was not obtained and the required cycle time had not been achieved, DLW cleared the machine for despatch (January 1998).

The machine was received at DLW in February 1998. As the firm failed to prove out the machine in regard to required cycle time for honing of a cylinder liner and surface finish of 25 to 32 RMS, a special trial was conducted in June 2000. The machine could not be proved out to the satisfaction of the DLW.

On the basis of certain assurance to rectify the deficiency noticed in the machine the final ‘proved out certificate’ was given to the firm by the DLW on 28 September 2000.

The deficiency noticed in the machine during trials persisted and the machine never achieved the desired level of performance since its commissioning. Despite unsatisfactory performance of the machine, DLW took no initiative to extend the bank guarantee received from the firm that expired on 3 February 2002. Further, defects in the machine led to several breakdowns of the machine during rough honing of cylinder liners. During the period from July 2000 to November 2002 the machine remained in breakdown condition for 482 days out of the total workable period of 870 days.

Thus, the machine was grossly underutilised due to its inability to perform both rough and finish honing and also due to its frequent breakdowns. The purpose for which it was procured viz. replacement of an old machine, stood defeated. Incorrect action of DLW in clearing the machine for despatch and issuing the proving certificate when it was evident that the machine was not able to perform as per laid down specifications led to an investment of Rs.1.02 crore proving unfruitful.

The matter was brought to the notice of DLW Administration and Railway Board in May 2003 and October 2003 respectively and their reply has not been received (February 2004).

Incorrect specification in tender document for three Tup Hammers procured in early 2000 at a cost of Rs.3.12 crore resulted in incurring of avoidable extra cost of Rs.0.92 crore on account of modifications to specifications. The machines are yet to be commissioned even after carrying out the changes leading to their idling

COFMOW finalised tenders (May/ August 1999) for procurement of three Tup Hammers (one each for workshops at Kota, Jagadhari and Guntupalli) at a cost of Rs.3.12 crore and awarded a contract to M/s New Standard Engineering Co. Ltd. The terms and conditions of the contract required the supplier to ensure correctness of foundation and to commission the machines successfully within 60 days of dates of supply.

The contractor supplied the machines to workshops in February 2000, May 2000 and June 2000 at Kota, Jagadhari and Guntupalli respectively. The foundation and installation work was completed in Kota and Jagadhari. The machines could not be commissioned because of certain serious errors in the specifications stipulated in the tender document. COFMOW, therefore, had to revise the specifications. This involved uprooting of Hammers from the existing foundation including the foundation in Kota and Jagadhari and changing of load cells in all the three workshops and foundation in Guntupalli at a total cost of Rs.0.92 crore (Kota-Rs.0.31 crore, Jagadhari-Rs.0.31 crore and Guntupalli-Rs.0.30 crore). Despite these changes, the machines were yet to be commissioned and made operational (September 2003).

Incorrect specifications in the tender document resulted in extra expenditure of Rs.0.92 crore on rectification of errors. The Tup Hammer received in Jagadhari Workshop in May 2000 was commissioned only in May 2003, after a delay of three years. The other two Tup Hammers received in Kota and Guntupalli in February 2000 and June 2000 are yet to be commissioned.

The matter was brought to the notice of South Central Railway (March 2003), Western and Northern Railways (May 2003) and the Board (August 2003).

In a tripartite meeting held on 1 October 2003 in Western Railway, Western Railway Administration stated that the error in technical specification had been admitted (August 2003) by COFMOW, which is an expert body for procurement of such specialised equipments.

When the matter was taken up (August 2003), the South Central Administration (December 2003) and COFMOW (January 2004), with the approval of the Railway Board stated that the specification was not upgraded but only the typographical/ printing error were corrected.

These arguments are not tenable because Amendment No.5 issued by COFMOW (May 2002) stipulate construction of foundation of a new size and change of load cells for which, the Railway Administration had to incur additional expenditure.

4.4    Permanent way stores and others

Non-finalisation of improved design of PSC concrete sleepers and resultant extra expenditure of Rs.72.90 crore on consumption of Steel and Cement

Research Design and Standards Organisation (RDSO) had been working on the new design for the Pre-stressed Concrete Sleepers (PSC) since 1994-95 to improve the existing design of sleepers developed 26 years ago. In September 1997, one of the private firms came up with a new design. The sleepers developed by the private firm were expected to reduce the consumption of High Tensile Steel (HTS) wire from 9 Kg to 6.8 Kg, a saving of Rs.45 per sleeper. RDSO after undertaking scrutiny of adequacy of the design, static bending test etc. of the sleepers, accorded (July 1999) technical clearance for conducting field trials. In December 1999, the Board directed RDSO to give a detailed report after evaluation of the designs under development by them after examining all the aspects of the proposal of the private firm.

In February 2000, it was decided that the new design/ technology should be finalised before inviting tenders for procurement of sleepers. RDSO suggested (April 2000) that the new economic design of the PSC sleeper could be discussed at length in the next Track Standard Committee meeting proposed to be held in November 2000 and till such time the existing design could be continued. RDSO also suggested that it would be worthwhile to wait for the result of the Union of International Railways (UIC) Research project that also included research in optimizing concrete sleeper design.

In December 2000, tender for supply of 137.02 lakh PSC sleepers as per the existing design and orders for supply of 125 lakh sleepers with 30 per cent option clause was finalised.

Audit observed that:

1. UIC project was only concerned about doing away the need for curing technology in the process of manufacture of sleepers, painting the end of sleepers etc. and not with design of economical sleepers by reducing the consumption of HTS wires/cement etc. Therefore, postponement of finalisation of design for new concrete sleeper on the premise that UIC project was likely to provide a new design was against the financial interests of Railways.
2. Even though RDSO had given technical clearance for field trials of the sleeper design developed by a private firm in July 1999, the Board is still in the process of finalising modalities for field trials.

Thus, due to inability of the Board to develop its own design or to conduct field trials on the new design developed by the private firm to ascertain its suitability for large scale adoption in Indian Railways, the contract for supply of sleepers for 2001-02 had to be finalised with the existing design.

The quantity ordered based on tender invited in December 2000 for 2001 and 2002 alone was 125 lakh sleepers. Considering the projected savings of about Rs.45/- per sleeper due to reduced consumption of HTS wire by 22 per cent, it was possible for Railways to achieve direct savings of approximately Rs.72.90 crore on this tender alone. Considering the resource crunch, timely efforts in finalising an economical design should have been made.

Tenders for procurement of sleepers for 2004 have also been invited with the existing design. Any further delay in finalising the new design would only result in recurring avoidable expenditure.

The matter was brought to the notice of Railway Board in June 2003/ September 2003. The Board stated (August 2003/ October 2003) that improvement to the existing design was a time consuming process and unless the results were technically satisfactory for mass production, specific target date for adoption of new design cannot be given. It was further stated that the new design of PSC concrete sleepers developed by one firm and a design developed by RDSO had been recommended for field trials and switching over to the new design from the existing design would depend upon the outcome of the field trials. The reply is not acceptable as the firm had submitted the improved design in July 1999 and RDSO had given the technical clearance for field trials in July 1999 itself. Delay in carrying out the field trials had deprived the Railways of a possible saving of Rs.72.90 crore on reduced consumption of steel and cement.

Based on directives of Railway Board, an open tender was invited in 1997 for supply of pre-stressd concrete sleepers (PSC) covering the requirements for a period of 3 years. The rate finalised in this tender was Rs.570/- per sleeper, including Rs.66/- as MODVAT benefit. As enough quantity was available on South Central Railway, the demand of all the Zonal Railways, except South Central Railway was included in this tender.

Due to acceptance of lower rates in the above tender, the reduction clause was applied by South Central Railway and the quantities were reduced by 30 per cent from all the existing contracts on their Railway. As a result, shortfall of 1.5 lakh sleepers was assessed for 1999-2000. Open tender was floated in March 1999 and opened in April 1999 for meeting the requirement of South Central Railway. The Tender Committee (TC) recommended placement of order at the updated cost of sleepers and the rates finalised in this tender was Rs.539/- per sleeper including Rs.62/- as MODVAT benefit.

To meet the requirement for the next two years April 2001 to March 2003, another open tender for supply of 137.02 lakh sleepers was floated in September 2000 and opened on 12 December 2000. Out of the 87 offers received, 65 offers were considered by the TC for placement of orders. The rates quoted by the approved firms ranged from Rs.563/- to Rs.595/- per sleeper, in addition to the MODVAT benefit of Rs.66/- per sleeper. To arrive at a reasonable rate, TC carried out rate analysis by updating the rate of Rs.570/- per sleeper accepted for tender No.CS-120/1997 and a fresh rate analysis, taking into account the prevailing input cost viz. HTS wire, Special Cement, labour, power and fuel, interest and depreciation, profit and credit for scrap. TC had, thus, the following alternative rates available for consideration:

The TC recommended the rate of Rs.608/- per sleeper including Rs.66/- as modvat benefit for a quantity of 125.40 lakh sleepers with 30 percent option clause. TC’s recommendations were approved by the competent authority i.e. Minister for Railways (MR) on 31 July 2001.

In this connection following points arise:

Rules provide that the last purchase rate should be considered in checking the rate of the contract. The updated rate of the Last Purchase rate of 1999 would come to Rs.593 per sleeper, which is the same as the updated LPR of 1997 taken by the TC. The TC should, therefore, have adopted the updated rate of Rs.593/- instead of Rs.608/- arrived at after carrying out a fresh analysis taking all input costs into account. Failure to counter offer the updated rate had resulted in extra expenditure of Rs.30.97 crore. As Rs.608 per sleeper would be the LPR for future procurement, acceptance of this rate would also have the effect of pegging the price of the sleeper to a higher level and thus unjustifiably increasing the price of the sleeper for future procurements.

The matter was brought to the notice of Railway Board (April 2003/ October 2003). The Board stated (July 2003/ November 2003) that:

1. The rate counter offered on the basis of input analysis was realistic and therefore did not result in extra expenditure.
2. The accepted rate which was higher by Rs.38 than that of CS-120/97, was comparable with the overall price increase.

The arguments of the Railway Board are not tenable because:

1. The rate analysis worked out in 1997 was higher than the lowest rate obtained in the last tender which indicated that the input analysis does not always help arrive at a reasonable rate. Besides, the updated LPR was considered reasonable while finalising the Tender in 1999. It would, therefore, have been prudent to analyse the different options and counter offer the lowest rate, which was the updated LPR in this case.
2. The accepted rate of Rs.608 is higher by Rs.69 per sleeper than the accepted rate of Tender-136/99, an annual increase of 7.31 per cent. This is much higher than the comparable over all price rise.

Thus, failure to counter offer the updated rate led to procurement of sleepers at higher rates resulting in huge financial burden to the Railways. The LPR for future requirements was also pegged at a higher level, which would result in additional financial burden in all future procurements.

Railway Board’s failure in counter offering the lowest rates resulted in extra expenditure of Rs.24.66 crore

During audit of tenders, it was noticed that in the cases listed below, the Tender Committees (TC) recommended procurement from regular Part I suppliers by counter offering the lowest rates of Part II/ unapproved firms:

In these cases, the counter offered rates were accepted by the Part I firms also and orders were placed.

Some TCs, on the other hand, recommended counter offering of the lowest rate of Part I firms to other Part I firms and the lowest rate of Part II firms to other Part II firms, even if the rates offered by the Part I firms were much higher than those offered by Part II firms.

Due to counter offering of higher rates to Part I firms, Railways lost an opportunity of achieving a possible saving of Rs.24.66 crore as shown below:

The Board justified the purchase at higher rates on the following grounds:

• Lower rates offered by the firms do not cover even the cost of inputs/ raw material and are not indicative of market rates and therefore, cannot form the basis for counter offering to the firms approved for bulk ordering.
• Part II/ unapproved firms had quoted lower rates to gain entry into the business with Railways.
• As a matter of practice, lower rates of Part II firms were not counter offered to Part I firms.
• Delivery performance of the firm in case of electric point machines was not satisfactory

Reasons put forth by the Railway Board are not tenable in view of the following:

• The reasonableness of rates of the firms is examined by the TCs by updating the LPR. No established costing techniques for analysing the elements of cost of the product were adopted by the TC in the instant cases to support their claim that lower rates offered by the firms did not cover even the cost of inputs/ raw material and were not indicative of market rates.

Director General of Supplies and Disposals, in a study conducted in February 1994 opined that the market forces should be allowed to operate and there was no need to enquire even where the manufacturers were supplying below the cost, as long as there was no complaint about quality of stores. It would, therefore, have been in the interest of Railways to counter offer the lower rates received from the Part II/ unregistered firms.

• The objective of assessing the capacity and technical capability of vendors and according them Part II status is to increase the sources of supply. Thus there is an implicit assurance to the Part II suppliers that development orders will be placed on them and that they would be upgraded to Part I on their satisfactory execution of supply orders. There is, thus, no strength in the argument that the Part II suppliers quote lower prices to gain entry into the business with Railways. As already stated above, in the absence of adequate mechanism to analyse and arrive at the cost price, Railways have no evidence to suggest that rates quoted by Part II firms are lower than the market prices and was done to gain an entry.

On the contrary, by virtue of the capacity and volume of the orders, Part I firms have the advantage of economy of scale and therefore can offer to supply at rates lower than the Part II firms. Therefore, there was no justification in placing orders at higher rates on Part I firms.

• There have been instances of benefits both in terms of lower cost and in terms of breaking the cartels formed by the regular suppliers, accruing to the Railways due to counter offering the lowest rates. It would thus have been in the interest of Railways to counter offer the lowest rates.
• Poor delivery performance of Part II firm does not prevent Railways from counter offering the lowest rates obtained in the tender to other Part I firms. Ignoring the lowest rate for counter offering on this ground was not in the financial interests of Railways.

Audit has been pointing out cases of avoidable extra expenditure due to acceptance of higher rates of the Part I/ approved sources. Railways, however, continue to place orders at higher rates ignoring lower rates of Part II firms.

In the context of liberalised industrial environment and emphasis on Railways to function on commercial principles, it is necessary that Railways review their stand and let procurement decisions be driven by the market forces.

In the absence of clear-cut guidelines and directives, the TCs failed to counter offer the lowest rates, even if they were of Part II firms. Failure of Railway Board in this regard has made the entire process of calling open tenders meaningless and resulting in Railways forgoing the opportunity to achieve a possible saving of Rs.24.66 crore.

The matter was taken up with the Railway Board (October 2003). Railway Board in their reply (January 2004) stated that the low rates of Part-II firms, which were not cleared for bulk orders, cannot be counter-offered to Part-I firms. It was also stated that the TC examines the reasonableness of rates keeping in view the updated LPR and also the other factors like power, market trends, variations in raw material costs etc. Railway Board further stated that it was not practically possible to undertake detailed costing before finalising each and every purchase proposal.

The reply is not tenable. The very fact that the Part-II firms were placed orders for the 15 per cent quantity at rates much lower than the rates of Part-I firms suggests that these rates were workable. In the absence of a well laid down mechanism like rate analysis/ detailed costing, the rates finalised by the Railways cannot be claimed as reasonable.

Carriage and Wagon workshop, Matunga, Central Railway manufactures certain items to meet the requirement for repair and maintenance carried out in the Workshop and other units. Audit scrutiny of records of the Workshop revealed (February 2002) that some items being manufactured by workshop were also purchased from the market. A comparison of the manufacturing cost with the cost of purchase revealed that the purchase from market was much cheaper. When the matter was taken up with the workshop authorities (February 2002), they stated (July 2002) that the Controller of Stores has been advised to purchase items instead of manufacturing items.

Further Scrutiny by Audit (March 2003) revealed that Workshop Accounts Officer had advised Chief Workshop Manager's office during the period July 1999 to February 2003 to purchase 14 items from market and stop their manufacture in workshop. However, no action was taken to stop the manufacture of these items and avoidable extra expenditure of Rs.0.41 crore was incurred due to manufacture of these items after the date of advice till March 2003. In 31 more cases of purchases made between July 1995 and August 2002 it was found that though the market price was much less, no action was taken to stop manufacturing of these items in favour of purchasing them. Thus, the Workshop authorities continued to manufacture about 45 items at avoidable extra expenditure of Rs.2.64 crore.

The matter was brought to the notice of Railway Administration in May 2003. The Railway Administration stated in July 2003/ August 2003 that decision to 'make or buy' is not taken solely on cost basis but also keeping in view the quality, reliability and assurance of supplies. For vital and safety items, it is desirable to retain alternative source of shop manufacture in case of failure of procurement from trade. It has also been stated that out of 43 items pointed by Audit, 15 are being off-loaded immediately and 22 will be off-loaded in the year 2003-04. The reply is not tenable because, delayed action has put the Railway Administration to a loss of Rs.2.64 crore.

The matter was brought to the notice of Railway Board in August 2003. The Railway Administration with the approval of Board reiterated, in November 2003, their earlier stance which is not tenable.

Gauge conversion of Gorakhpur-Khadda, Metre Gauge Section into Broad Gauge was included in the Works Programme of 1995-96 with the target date of completion as December 1998. The detailed estimate was sanctioned by Railway Board in August 1997. The target date of completion was, however, preponed to September 1998. The entire Section was to be provided with Standard III Multiple Aspects Colour Light (MACL) signalling.

The signalling work of the aforesaid project was sanctioned by the Board in August 1997. Construction Authorities, considering that the purchase of cables through the Board and through Controller of Stores (COS) would take not less than one year’s time, decided (April 1998) to procure cables through Works Contracts to meet the target of completion of project by September 1998. The Associated Finance objected to the procurement of cables through Works Contract and suggested that this item should be procured through COS.

Railway Administration, however, entered into four Works Contracts (October 1998) with different agencies for execution of signalling works including part supply of cables of 489.50 Kms. The purchase of cable through Works Contract was justified on the basis of urgency and the assessment that the rates compared favourably with last supply rates of the Works Contracts. The project was opened in April 1999, against the target date of September 1998 and the work of signalling was completed in September 1999.

In this connection, the following observations are made:

1. The signalling work of the aforesaid project was sanctioned by the Railway Board in August 1997. In April 1998, the Railway Administration decided to procure cables locally. Railway Board’s centralised tender (No. RS (Cab)/59/SCU/97-98/0703/4) for procurement of 10,840 Kms. signalling cables (for the contract period 1997-98) was opened in May 1997 with 30 per cent option clause and supply orders were placed in October 1998. The quantity of cables (489.50 Kms) required for this project could have been covered in the Railway Board’s tender normally or through 30 per cent option clause. However, Railway Administration neither approached Railway Board for coverage of signalling cable in the centralised tender nor inquired about the rates finalised by the Railway Board.
2. The rates of signalling cable finalised by Railway Administration through Works Contracts (September/October 1998) were significantly higher, ranging from 32 per cent to 65 per cent in comparison to Railway Board’s purchase rates (after allowing 21.84 per cent increase on account of freight charges, taxes and duties etc) during the same period. The extra expenditure incurred in this purchase worked out to Rs.1.91 crore.

When the matter was taken up with Railway Administration in November 2002 and Railway Board in October 2003, the Railway Administration with the approval of Railway Board stated (July 2003/ February 2004) that considering the urgency cables were procured through works contracts at rates slightly higher than the rates in Board’s purchase orders. The contention is not tenable as the sense of urgency in procuring the cables at higher rates was not reflected in completing the project which was delayed beyond a year from the date of scheduled commissioning. Moreover, rates were not slightly higher as stated but were substantially higher than the Railway Board’s cost of procurement.

Thus non-adherence to the existing procedure of procurement of signalling cable through Railway Board resulted in extra expenditure of Rs.1.91 crore.

As per Andhra Pradesh General Sales Tax (APGST) Act 1957, the rate of Sales Tax was between 8.99 and 10 per cent. However, according to Section 8 (1 and 4) of the Central Sales Tax (CST) Act 1956, the sales tax payable by a dealer for inter State transactions was four per cent subject to issue of a declaration by the purchaser in Form ‘D’. With effect from 1 January 2000, the rate of APGST became effective at 4 per cent on par with CST for purchases by Central and State Government Departments against supply of form-N.

The South Central Railway entered into agreements for supply of Prestressed Concrete Sleepers with four firms (during June 1988 to November 1995), which had their manufacturing plants within the State of Andhra Pradesh. As per the terms of the agreement, the sleepers were to be dispatched to different consignees based on instructions from time to time by the Chief Track Engineer (CTE). The firms supplied sleepers to various consignees in Karnataka, Maharashtra and Tamilnadu, involving inter state movement of sleepers for which the Sales Tax payable was 4 per cent, against issue of a declaration in Form ‘D’ by the Railway Administration.

A test check of payments made to M/s. Rayalaseema Concrete Sleepers Ltd., by Audit (April 2000) followed by a further review by the Administration in June 2000 revealed that for the period May 1997 to March 2000, claims of the firm under APGST Act instead of CST Act had been admitted, which had resulted in excess reimbursement of Rs.18.43 lakh towards Sales Tax. Against the above over payment, an amount of Rs.12.88 lakh was recovered by the Administration from the pending bills of the firm. The firm, however, objected (June 2000) to the recovery stating that the Sales Tax, at full rate had been charged till the declaration in Form ‘D’ was issued by the Railway Administration and the Sales Tax assessments by the Commercial Taxes department for the subject period were also complete.

In view of the objection raised by the firm, the Administration filed an appeal (August 2000) with the Commercial Tax Officer, Hyderabad for refund of the excess sales tax paid. The Sales Tax Authorities rejected (September 2000) the appeal stating that the time limit for an appeal to the Appellate Authority (30 days) and Appellate Tribunal (60 days) had already expired.

A further review of reimbursement of Sales Tax relating to the inter State transactions of the above said firm and 3 other firms revealed that the Administration had reimbursed Sales Tax under APGST Act, instead of CST Act, in respect of 235 bills relating to the period 1992-93 to 1999-2000, resulting in excess reimbursement of Rs.1.17 crore.

On this being pointed out in the audit (September 2002), the CTE had admitted (October 2002) that the firms had paid the sales tax under APGST Act, due to non supply of declaration in Form ‘D’ in advance along with the dispatch instructions to the firm. However, the Financial Adviser & Chief Accounts Officer contended (December 2002) that the concession obtained by giving Form ‘D’ was only incidental and actually not eligible even on issue of Form ‘D’ as per the interpretation given by the Deputy Commissioner (Commercial Taxes), Panjagutta Division in July 2002 in the case of an appeal filed by one of the firms viz., M/s. Mysore Structurals Private Ltd., Hafizpet.

This contention is not tenable. It is a well known fact that the Railways procure various store items from different sources and pay only 4 per cent Sales Tax on production of Form 'D', as applicable to other departments of State Government and Central Government. Moreover, the Sales Tax Appellate Tribunal (Andhra Pradesh, Hyderabad) in an identical decision, in the case of M/s. Raghavendra Prestress Products Ltd., Adoni, had set aside such interpretation in October 2002.

Thus, Railway Administration’s failure to supply declaration in Form ‘D’ coupled with failure in internal check while admitting the claims of the firms for Sales Tax resulted in excess reimbursement to the tune of Rs.1.17 crore.

When the matter was brought to the notice of the Railway Board (October 2003), the Railway Administration, with prior approval of the Railway Board reiterated (November 2003) their earlier stand.

Irregular procurement of 5 W VHF sets (walkie-talkie) at higher rate ignoring the lowest rate for a technically suitable model resulted in avoidable extra expenditure of Rs.1.04 crore

Railway Board decided (January 1998) to provide 5 W VHF sets (walkie-talkie) to Drivers and Guards on all the trains of A & B routes for emergency communication.

A technical evaluation of the VHF sets for which Director General of Supplies and Disposals rate contracts existed was done (22 March 2001) by Railway Administration. The Administration found Kenwood make model TK-2107 of the lowest rate, as not technically suitable because the frequency range did not match Railway’s specification and also the emergency siren facility was not provided in the set. All the other models except Motorola make GP-328 were also not found suitable for want of emergency siren facility.

The Railway Administration procured 1578 VHF sets (GP-328) with emergency alarm facility at the rate of Rs.11, 300 per set during March 2001 to May 2001. In a subsequent technical evaluation done by Administration in July 2001, the Administration changed their stand about the acceptability of the frequency range of TK-2107, which was earlier found unsuitable. Keeping in view also that the other Zonal Railways had been procuring this model; it was decided to procure this model. 170 sets at the lower rate of Rs.8, 200 per set were procured during August 2001 to November 2001. However, Railway Administration also continued to procure VHF sets of Motorola make GP-328, and 1,787 sets were procured during August 2001 to January 2002.

The model of GP-328, which had a higher rate than those of other models, was procured mainly on account of the emergency siren feature. Scrutiny of records, revealed that this very feature on VHF sets of model GP-328 was creating problems during train operations. False emergency alarms produced by these models were resulting in unnecessary stoppage. Recognising the siren facility in these sets as a great problem in train operations, the Administration decided (July 2002) to stop their further procurement.

The decision to procure model GP-328 with an additional feature which was not tried/ tested for use by Drivers and Guards led to avoidable extra expenditure of Rs.1.04 crore. Besides this, loss on account of untimely/ unnecessary controlling of train operations would be extra.

The matter was brought to the notice of Railway Administration and Railway Board in May 2003 and September 2003 respectively and the reply has not been received (February 2004).

During 1992-94, North Eastern Railway procured 39,047 wooden sleepers against Board’s centralised contract of February 1992 and stored them in Track Depot, Sonpur. Later, 33,856 sleepers were issued to different Railways/ Divisions and the balance 5,191 sleepers remained unused since February 1993. These were kept unstacked in Track Depot, Sonpur.

In December 1993, the Deputy Chief Engineer/ TP, Gorakhpur during inspections of Track Depot, Sonpur noted that many wooden sleepers in the depot were lying unstacked and that Sonpur Division should ensure stacking of the sleepers quickly to protect them against theft and deterioration.

In September 2001 at the time of change of incumbency, the incoming Senior Section Engineer/ Permanent Way, Track Depot, Sonpur in his ‘Charge Taking Over Note’ sent to Sr. Divisional Engineer II, Sonpur mentioned that a lot of stores (including wooden sleepers in question) had become unserviceable due to decay. In December 2001, Sr. Divisional Engineer, Sonpur directed the concerned authorities to process the case for sanction to the write-off of the decayed sleepers.

During audit inspection of Track Depot, Sonpur (March 2002), the dilapidated condition of these sleepers was pointed out to the Divisional Railway. Divisional Railway stated (July 2002/ August 2003) that disciplinary action against the staff at fault, was being taken. The action for write-off of 5,172 (19 out of 5,191 sleepers were later issued) unserviceable sleepers at depreciated cost of Rs.0.82 crore and the disciplinary action under Divisional Railway Administration were still in process (October 2003).

In this connection, the following audit observations arise:

1. In stock ledger of wooden sleepers maintained by Track Depot, Sonpur, the procurement cost of these sleepers was not found recorded. This lapse led Railway Administration to not even knowing the procurement cost of these sleepers.
2. Sanctioning write off is a procedural formality for regularising the removal of an asset. Even if the write-off sanction and disciplinary action are taken, the fact remains that 5,172 sleepers decayed and were completely lost due to bad storage. The negligence in proper storage is more serious especially when Deputy Chief Engineer/TP, Gorakhpur had pointed out (December 1993) the poor conditions in which these wooden sleepers were stacked.

Decay of 5,172 sleepers due to negligence and bad storage resulting in loss of Rs.0.90 crore was brought to the notice of Railway Administration and Railway Board in May 2003 and October 2003 and their reply has not been received (February 2004).