Is It A Systems Error?

Granted that some of this decrease could be due to improvements in technology, the question is that even if ITI and HTL could match these prices (which they are doing now and making losses), would their capacities be adequate to service DoT with the kind of quantities it now requires? Would DoT be able to expand its network at the pace in which it is doing today (some 10 per cent in capacity terms)? Given the choice between protecting some PSUs and the enormous economic benefits that come along with a higher telephone density (particularly, in the rural areas that critics like to believe they represent) it should not take much reflection on whether the 1991 decision was a wise one. Except perhaps for the fact that some form of protection for the successful domestic R&D institution, Centre for Development of Telematics, was in order.

 

Where did things go wrong then? The snowballing telecom scandal could well be a case study of what goes wrong when a sector is opened up without adequate safeguards and mechanisms. For the first time in the history of the department, the minister's office became a focal point of decisions on procurement of equipment. What was until 1991 purely the job of DoT's material management section and the member (production) of the telecom commission, shifted as a matter of routine to the powerful first floor of Sanchar Bhavan (DoT headquarters).

This is not to say that tender guidelines or rules were violated. In fact, the beauty of the last few years has been that the tender has always been awarded to the lowest bidder though there have been allegations that concessions have been made regarding type approvals which were late. (DoT insists on type approvals from the telecom engineering centre for all equipment it procures.) The innocence or guilt of former communications minister Sukh Ram and others who have been and are likely to be arrested will be proved in the course of time, but the investigating agencies will find it difficult to link the assets seized in raids with tender files. Senior DoT officials say, hints of wrongdoing on tender files are likely to be virtually zero.

At the root of the present scandal and allegations of corruption is processes (which some would rather term loopholes) provided in the tendering system which allow DoT some flexibility in procurement. Called repeat orders, these are designed to procure equipment without going through the tender route which takes anything between three months to a year to finalise. Repeat orders are placed on companies based on the price of the previous tender. But, prima facie the repeat orders appear to have been misused. For instance, in a 1992-93 tender, DoT placed an order for supply of 3,500 sets of 2 GHz radios, more than half of which went to some companies including HFCL and ARM based on the low prices they had quoted. Then early in 1995, DoT decided to place a repeat order of 1,500 sets of the same equipment at the price of the last tender on HFCL, ARM and another company. Why did DoT use the repeat order route and not the tender route almost three years after the last tender? If the requirement was of a contingent nature, is it a failure on the part of DoT's planning section?

Further, just before the elections in April this year, Sukh Ram sought to place repeat orders for optical fibre cables (OF cable), multi-access rural radio (MARR) systems and 2 Ghz radio sets totalling over Rs 600 crore. The former minister's decision on OF cable raised several eyebrows because he wanted to scrap a tender that was open at the time while doing so. His note said processing the tender would take time which could result in loss of crores of rupees to DoT. In the case of MARR systems (worth about Rs 250 crore), this came a few months after the last order was placed in January. How did a sudden requirement of the equipment arise hardly three months after the last order was placed? In a rare display of courage, the telecom commission ignored Sukh Ram's directive. It has since gone ahead with the OF cable tender which the former minister sought to scrap, decided that there is no requirement for MARR systems this year and has announced a tender for 1,500 sets for 2 GHz radios.

Not surprisingly, firms like HFCL, ARM, etc. have grown phenomenally in the last few years and many more have jumped on to the lucrative telecom vendor bandwagon. There is some truth in the claim that one cannot compare their turnover today with that of five years ago because a market for their products never existed then and today the market is worth more than Rs 6,500 crore (DoT's procurement budget in 1995-96). But what needs to be probed is the dynamics of the repeat orders. That is, what was the rationale for placing (and trying to place in the case of OF cables, MARR systems and 2 GHz radio sets) repeat orders when there was enough time to have floated a fresh tender or when there didn't seem to be immediate requirement for the equipment?

Some other non-tender decisions also seem shady. Primary among them are a revision of paging service tariffs from Rs 150 a month to Rs 250. This decision was opposed by the outgoing chairman of the Telecom Commission, R K Takkar and notings to the effect had been made on the file concerned. Still, the tariff revision went through before the elections. Another example was the appointment of Navin Kapila, an officer-on-special duty, at the former minister's office. In his forties, Mr Kapila was appointed chief general manager