CAG raps defence PSU for deal with blacklisted firm

The CAG today pulled up defence PSU Bharat Electronics Limited (BEL) for signing a procurement contract with a foreign vendor facing the risk of being blacklisted by the government.
In its report tabled in Parliament, the Comptroller and Auditor General also termed as "inappropriate" the actions of a Joint Secretary to let BEL enter into the contract with Zurich-based 'Rheinmetall Air Defence' even after it was named in a CBI report for paying kickbacks in the Ordnance Factory scam and the Defence Ministry had frozen its ties with it.
Rheinmetall was eventually blacklisted for 10 years by the Defence Ministry in April 2012 after the final CBI report in the case.

"BEL entered into a contract for procurement with Rheinmetall Air Defence, Zurich, despite the fact that CBI was investigating the firm's deals for alleged corrupt practices in earlier contracts which had a risk of the firm being blacklisted," the report said.
"The signing of a contract with a firm whose credibility was under examination for alleged corrupt practices and placing purchase orders committing heavy liability was hasty and without adequate assessment of associated risks. This resulted in blocking of company funds of Rs 502 crore for an indefinite period," it said.
The report said the Joint Secretary (Electronic System) had told BEL that it was not legally valid to blacklist a company in anticipation of actual blacklisting and advised the PSU to take a decision as appropriate.

The communication was sent by him on September 2010, over a year after the Defence Ministry froze all its business with Rheinmetall in May 2009 after it was named by the CBI report.