Thursday, 25 October 2012

Army chief, top generals wasted crores, shows defence ministry audit

Army chief General Bikram Singh, his predecessor General VK Singh and other top generals wasted over Rs. 100 crore of public money in just two years, an internal audit of the Ministry of Defence (MoD) has revealed.

Defence Minister AK Antony, taking a grim view of the profligacy, has come down hard and has ordered that spending of the commanders must now be cleared by the MoD.

Not just has the money been wasted, but the audit also finds that guidelines to buy foreign equipment have repeatedly been disregarded, and equipment rejected by one part of the Army has been bought by another.

In one example that goes beyond just the wastage of money, the auditor points to Chinese-origin communications equipment which was bought by the Generals, when they were commanders-in-charge of their regions, armed with special financial powers to make emergency purchases. In this case, the auditor found that even the Chinese-origin equipment was bought from agents rather than directly from the manufacturer as required, and despite the fact that similar Indian equipment would have been cheaper.

"There is an apprehension that the stores have actually been purchased from the grey market and perhaps are of Chinese origin," the report says.

Chinese-made communication equipment has been found to be embedded with malignant software. In a few cases detected in the past, it was found that Chinese and other foreign security agencies were exploiting these chinks in critical equipment to gather secret information.

The Military Intelligence (MI) and the Director General of Information Services have issued exhaustive guidelines on equipment purchase and checks. The audit, however, found these have been completely violated. "This would be a major security risk apart from being a serious financial irregularity," the auditors observe.

The auditors also found that despite clear guidelines to source directly from manufacturers, most foreign-origin equipment have been purchased from Indian agents. In some cases, middlemen were used even though the original equipment manufacturer was present in India.

The report points out that High Resolution Binoculars were purchased by the Eastern Command at higher cost from an Indian agent when the original manufacturer was selling the same equipment at a lower cost.

In yet another major lapse, the auditors say that while the Army Headquarters rejected a certain make of bullet-proof jackets for troops because they were of a low quality, the same were purchased by the Northern Command.

The Comptroller of Defence Accounts (CDA), under instructions from Mr Antony, carried out an audit of Special Financial Powers of the Army Commanders for two years - 2009-10 and 2010-2011 - and just looked at 55 transactions across six of the seven commands of the Indian Army. The audit report observes the total estimated losses were to the tune of Rs. 103.11 crore. 55 transactions were sampled during the audit and in most cases, the auditors weren't able to establish the amount of loss due to the manner in which financial records were kept, and the lack of complete information made available, the report has said. It suggests that future audits should try to quantify the loss.


Perhaps, most worrying is the fact that "none of the Army commanders have furnished complete data" of the purchases made by them to the auditors. The auditors noted that purchases took over a year to reach the Army and in some cases, the delivery took as long as three years. The report says that "the delay in utilisation" suggests that "operational urgency for which stores" were acquired "could not either be addressed or there was no real operational urgency for the purchase of stores." The report also observed that although auditors are posted in the commands, they are intimidated by military officers in command, who are also their reviewing officers.

The auditors have told the ministry that there is need for complete audit of all purchases made using the special financial powers of the Army Commanders, and have also suggested that "it would not be advisable to consider any proposal for enhancing the existing delegated (financial) powers. Whole system of delegated powers available to the Army Commanders needs to be reviewed."

Army refutes allegations

The Indian Army, in a written response to the NDTV report on the mishandling of funds by Army Commanders, said that the report was "based on half-truths." NDTV would like to clarify that it has not come with any facts on its own but is only reporting the findings of an internal audit conducted by the Comptroller of Defence Accounts. The Army, however, does not contradict that an additional layer of oversight mechanism has been introduced by the Ministry of Defence.

The Army says that Financial Advisors (FA) attached to individual commands play a vital role in all purchases made by the commands and therefore the questions of mishandling does not arise. The Army hasn't commented on the observations of the audit that FAs post in the command are intimidated and unable to perform their duties at the command.

On the audit observations that of Chinese-made communication equipment may have been purchased in violation of the cyber security guidelines compromising security, the Army said transaction was "under arbitration as the vendor was not able to reveal" who had manufactured the equipment.

The Army also says it is ensured that all procured items reach the units and even reserves are not maintained. "Delays" are, Army says, "due to terrain and weather conditions." The Army does not comment on audit findings that tetra pack milk procured by Eastern and Northern Commands were wasted and several stations did not receive any milk.

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