How lakhs were made: a zero was slipped in and Russian language was blamed

The report, a copy of which has been obtained by The Sunday Express, confirms all the seven allegations of irregularities made by former Navy logistics chief Rear Admiral (Retd) S V Purohit.

It was after Purohit and former Rajya Sabha MP Jayant Malhoutra’s allegations that the Defence Ministry (MoD) was being fleeced of crores that the NDA Government commissioned then CVC N Vittal to prepare the report in February 2000. It looked into all defence purchases above Rs 75 crore made after 1989.

Caught in the cross-fire between the then NDA government and Naval Chief Vishnu Bhagwat, Purohit was denied promotion and the matter was taken up by Congress and Left parties in 1999. Even though the CVC report has substantiated all of Purohit’s allegation, the UPA government has said it will not make the report public.

Here are the key findings of the Vittal report:

• Allegation: Same items purchased at different rates from same trader, at the same time—in some cases, in the same order.

CVC: This relates to the purchase of Air Mannal Throttle and Pneumatic Manipulator. M/s Machine Sales Corporation was asked to supply the throttle on January 24, 1995 for Rs 36,704 but exactly ten days later the Navy placed another order for the same equipment at Rs 36,7004. ‘‘One zero was inserted and order placed at almost 10 times the rates’’ within 10 days.

In another case, Pneumatic Manipulator was bought from the same company in January 1994 but at different prices. The first purchase was for Rs 76,160 and the second set for Rs 94,982. The MoD’s explanation: mismatch is because different people handled purchases.

• Allegation: Difference in pronunciation in Russian and English was used to order same item at different rates.

CVC: This relates to purchases of ‘‘Thermocouple compressor’’ from M/s Machinery Sales Corporation. On January 24, 1995, orders were placed for Thermocuple compressors for Rs 3552 a piece. The second order was placed with the same company for ‘‘Thermo Couple compressor’’ for Rs 19,906 a piece. The MoD accepted that ‘‘divergence in pronunciation in Russian and English C or S has been exploited for ordering the same items at different rates in the same order.

• Allegation: Cost of spare more than equipment cost.

CVC: Twelve pumps were bought in 1994 from M/s Machinery Sales Corporation for Rs 2.13 lakh each but spares for these pumps cost the Navy Rs 68.34 lakh which works out to about Rs 5.69 lakh each. The MoD argued that the total number of pumps were 40 and the purchases were based on factors like ‘‘past consumption pattern, stock held, residual life and shelf life of spares.’’ Said the CVC: ‘‘There is no justification in the records to show the reasonableness of the accepted prices.’’

• Allegation: Cartel formation was clear as in most of the tender inquires only one or two firms quoted. Real competition was effectively excluded.

CVC: These relate to purchases made at Vizag. Tender inquiries were routinely issued to only five out of 31 suppliers. In most cases, only two traders quoted rates and in some cases ‘‘the difference in price was even up to 900 times.’’ For instance, for ‘‘Crank Shaft Revolution Micro Switches,’’ purchased in December 1994, M/s H C Supplies quoted a price of Rs 65,652 per unit while M/s Machinery Sales Corporation quoted Rs 686.70. ‘‘This leads to a suspicion if the cases were stage-managed leaving out only one offer for consideration.’’

Incidentally, in the first part of this series, The Indian Express had reported on May 12 how the CVC had confirmed that the ban on middlemen and agents was a joke.

The second part detailed the 12 of the 20 allegations made by Malhoutra and substantiated by the CVC. These included faulty radars that were bought despite prior knowledge of their condition, parachutes that were never delivered and how fake airway bills were used to collect the payment.