Friday, 18 July, 2008

डी एल डबल्यू का कमीशन घोटाला

"DLW paid heavy commission years together without even demanding the copy of agreement"

"DLW top administration and Railway Board are trying to hush up the matter"

It may be recollected that the Rajiv Gandhi government struck $ 1.3 billion defence deal with A B Bofors of Sweden in 1986 but the deal of the Bofors howitzers quickly became the most controversial when allegations of huge kickbacks began pouring in 1987. It may be recollected that this issue is so important that it has caused fall of an elected government.

With that deal The Quattrochhi issue as an great to get agency commission in the deal came up and rocked Lok Sabha many times.

As such the importance of the matter of agency commission and its potential to be siphoned as kick back is to be considered with due care in the purchase though import.

In this regard as per the existing safeguards the Public Accounts Committee, in a series of reports in 1974-75, 1975-76 and 1976-77, examined the involvement of Indian agents and payment of agency commission to them. In a follow up of the recommendations made in the 160th Report of PAC (1974-75), an Inter-Ministerial Working Group was set up by the Government in June, 1975, with the Director General, Revenue Intelligence as the convener, to study the matter in depth. The recommendations of the Working Group were, by and large, accepted, by the Government and reported to PAC, which are incorporated in the 185th Report of the PAC (1975-76). These recommendations were also communicated to the concerned purchasing Departments; vide Department of Supply No.P.III-3(5)/76 dated the 19th July, 1976.

Probably in the wake up of above references of 1986 Finance Ministry has issued an office memorandum vide No. F-23(1)-E.II(A)/89 dated 31st January, 1989. in regard to policy of Indian Agents of Foreign Suppliers.

The Main Provisions given under para 4 to 6 of the memorandum are as under.

The Policy has been that involvement of Indian agents may be allowed where they have to render after-sales-service; the quantum of agency commission would be determined on the merits of each case and the commission would be paid in Indian Rupees. Following a further recommendation made by the PAC, in the 231st Report (5th Lok Sabha 1976-77) on procurement of oil, the Department of Supply prepared and adopted standardized clauses requiring inter alia disclosure of the details of their principals by the Indian agents and of agency commission payable by the foreign suppliers. The said clause are contained in DGS&D Form-237.

Briefly, the instructions governing Indian agents of foreign suppliers in matters of Government purchases are restated below:-

It is not the policy of Government Per Se to look for, encourage or engage agents.

Wherever it is possible to secure supplies and ensure after-sales-service etc., on reasonable terms without the intercession of agents, there is no need for engaging any such agent. In all other cases the employment of Indian agents by Foreign supplies, as mat be found necessary, on a case to case basis, shall be regulated by the following:-

(i) There shall be compulsory registration of agents. Pending enactment of necessary legislation in this regard, this will immediately be achieved by issue of appropriate administrative instruction by the purchasing Departments by making compulsory registration a condition in the Tender Inquiry/Contract.

(ii) All cases of agency arrangements and the amount of commission payable should be brought on record and made explicit so as to ensure compliance tan laws and prevent leakage of foreign exchange. A photostat copy of the Agency Agreement should also be mandatory filed by the registered agent while bringing on record the agency arrangements. All purchasing organisations should continue and ensure that the commissions payable are paid in Indian rupees only in compliance with the existing provisions of FERA, 1973, and the Handbook on Import/Export Procedure.

(iii) For the above, a set of model clauses on the lines already prepared and adopted by the Department of Supply may be adopted with suitable modifications, wherever found necessary.

(iv) As a part of the standardized clauses, a suitable clause for enforcement of the disclosure provision should be incorporated to provide in the contract that, in the vent of India, there would be a penalty of banning business dealings with the Government or damages or payment of a named sum. This clause will be formulated by the Department of Supply, in consultation with the Ministry of Law and forwarded to all concerned Departments thereafter for appropriate necessary action.

(v) All particulars relating to agency commission should be reported to the Enforcement Directorate. The Enforcement Directorate will send this information also to the CBDT, CBEC and RBI to prevent leakage of foreign exchange and tax evasion on agency commission.

The above guidelines will be applicable to all the civil purchases of imported stores by all Government Departments and public sector enterprises under the administrative control of different Ministries/ Departments. A review mechanism is being separately set up to ensure compliance with the guidelines, as aforesaid and orders in this regard ensure meticulous compliance of these instructions. Supplementary instructions in regard to defence purchases will be issued by the Ministry of Defence.

All above with backgrounds, rules and regulations are given here in the light of a BIG COMMISSION SCAM, which is near about 400 Crores and which is continued from last 10 to 15 years in the DLW.

That commission scams some facts are here as under.

Railway Board vide letter No. 89 RS (G)/779/6 dated 26-04-89 circulated the ministry of finance memorandum for implementation. Accordingly DLW in the bid document is asking firms to provide details of the agent, percentage of agency commission in a very exhaustive manner.

This is followed in import contracts. However, in case of purchases made from EMD/ USA DLW is paying 5% agency commission to M/s NEI as their Indian agent in a routine manner.

Although the import from EMD is started since 1995 but with the passage of time its volume has grown manifold with a mindset of importing from OEM. As such it has reached to a level where more than Rs. 500 Crores material is to be imported an its agency commission exceeds Rs. 25 Crores per year to a single source and single Indian agent M/s NEI.

This has been found to be paid without required scrutiny and justification as due in terms of policy of Government of India to be followed by every government department and confirmed in Railway Board's instruction as enumerated above.

While consideration of such an important issue DLW has not cared even to bother if there is a valid contract between M/s EMD and NEI India as required.

This went on for years. In 2008 when EMD has been asked to produce agreement with their agent for payment of agency commission only for following products:-

1. Complete diesel locomotives manufactured by EMD.
2. Partially Knocked down locomotives manufactured by EMD.
3. Spare parts and components on or in connection with such products.

The relevant portion of agreement is reproduced below.

" Subject too terms and conditions here of, EMD hereby appoints Representative as a sale representative to act, and representative hereby agrees to act, in promoting the sale by EMD to purchase in India, of complete diesel locomotives and partially knocked down locomotives manufactured by EMD for use extensively in India, ( herein referred as 'Products') and spare parts and components on or in connection with such products, ( herein referred as 'Parts')"

From the above agreement it is crystal clear that no agency commission is payable for components imported for production of locomotives to be produced by DLW as agreement is for locomotives manufactured by EMD and for parts required for those locomotives only.

But M/s EMD has concealed the legal agreement. EMD went on charging 5% illegal agency commission for over 10 years. The cumulative amount of all these years will exceed 100s of Crores of Rupees. Now it has been realised that is required to be retrieved by filing proper complaint and following the legal action.

DLW paid all these years without even demanding the copy of agreement/ registration of agent with DGS&D under compulsory registration scheme of Govt. of India.
DLW did not examine even the quantum of commission and paid excessive commission of 5% which is a very heavy amount when considered with value of orders placed on a single source and single event. Even in case of normal import cases finalised by DLW the agency commission paid is only 1 to 2% even with work involving erection and commissioning of machines.

Now even when full facts have come to light DLW top administration and Railway Board is trying to hush up the matter.

That indicates that all this could not have happened but for ulterior motives and serious conspiracy.

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