Culpability for Wastage of Funds by the Army Commanders

Reference: Army chief, top generals wasted crores, shows defence ministry audit
Response
Culpability for Wastage of Funds by the Army Commanders by Major General Mrinal Suman
Elements inimical to the services are at it once again. Senior army commanders are being accused of wasting crores of rupees through improper purchases made under Special Financial Powers of the Army Commanders. As per the press reports, a post-audit has been carried out of 55 transactions pertaining to financial years 2009-10 and 2010-11 by the Controller of Defence Accounts. The audit report has estimated the total loss to be to the tune of Rupees 103.11 crores. It is a serious indictment and deserves elaboration.
With a view to impart enhanced autonomy in administrative and operational functioning, various financial powers have been delegated to the Army Commanders. As per the recommendations of the Committee on Defence Expenditure, the Ministry of Defence decided in November 1991 that exercise of such delegated financial powers should be with the concurrence of local financial advisors. It implies that such delegated financial powers are neither absolute nor discretionary, and can be exercised by the Army Commanders only with the prior consent of their Integrated Financial Advisor (IFA).
The system of IFA aims to reduce delays and provide pre-contract expert advice to the executives for ensuring financial prudence and prevent irregularities.
Role of Financial Advisors
Commanders have to obtain prior financial concurrence of their IFA before incurring any expenditure as there is no provision for ex-post facto acquiescence.
IFAs are tasked to carry out a careful and intelligent scrutiny of all proposals involving expenditure from the public funds to ensure economy, efficiency and propriety in public finance. Before according financial concurrence, it is their duty to seek complete and comprehensive justification for the proposals. They are authorised to even challenge the necessity for incurring projected expenditure for a given purchase.
Unless IFA accords Acceptance of Necessity and approves the quantity to be procured, no proposal can be progressed. He questions the proposed mode of tendering and checks the list of prospective vendors. All tender documents are vetted by IFA prior to their issuance.
Most importantly, IFA is always a member of the Commercial Negotiation Committee and participates in the following functions:

Appraisal of bids as regards commercial terms, delivery schedule, performance warranty, guarantee terms and acceptance criteria.

Determination of fair and reasonable price of the product. Preparation of a ‘Comparative Statement of Tenders’ to determine lowest bidder. Undertaking negotiations with the lowest bidder to obtain best possible terms. Diligent drafting of contract to safeguard Government’s interests.

Post-contract management to monitor adherence to the terms of the deal and timely invocation of penalty provisions in case of default.

As is obvious, IFA exercises total and all-encompassing oversight over the complete procurement process. He can stall any procurement proposal if not convinced of its financial propriety.
The Question of Culpability
The said audit report faults the Army Commanders for disregarding guideline while buying foreign equipment, procuring equipment from Indian agents, accepting equipment rejected by another army entity and purchase of Chinese products which may have been embedded with malignant software.
As seen above, IFAs guide commanders at every stage of the procurement process and keep a close oversight. If that be so, onus for rendering faulty financial advice or clearing faulty cases rests on them. They should be asked to explain alleged irregularities and infirmities. How can an Army Commander be blamed for adhering to the advice of his IFA? If that be so, why have IFAs at all?
Most outrageously, the audit report states that the local financial advisors are intimidated by military officers in command. One has not come across a more preposterous and bizarre statement. No IFA ever gets intimidated. On the contrary, they are overbearing, domineering and suffer from an acute ‘rank-equivalence-complex’. They keep comparing their pay scales with those of the service officers to draw equations with different ranks. This complex manifests itself in their condescending attitude as they tend to assume the role of dispenser of favours while according financial concurrence. Therefore, the question of their getting intimidated is all baloney.
Inadequacies of the Current Dispensation
It is incongruous that a duly pre-audited procurement process is found to be flawed in post-audit. Interestingly, both pre-audit and post-audit are carried out by the officials of the Defence Finance and their roles are inter-changeable.
Unfortunately, the prime reason for the current weakness of the system is the failure of the Defence Finance officials to deliver. They are expected to act as defence financial advisors but are ill-equipped for the task.
They know nothing about the armed forces, their equipment and functioning. Worse, most are equally ignorant of financial management tools. During a survey of the educational qualifications of the top 50 Defence Finance officers, it was seen that most of them did not possess even elementary knowledge of finance/economics – only 8 percent had studied economics at the post-graduate level. Most were post-graduates in subjects like Political Science, English, Sociology and Sanskrit. Such officials cannot be expected to grasp minutiae of financial imperatives and perform defence economic advisory functions.
Finally
Let us look at the unenviable position of the Army Commanders. They have been asked to follow the advice of their IFAs while exercising their delegated financial powers. They are justified in assuming that all procurement proposals vetted and cleared by IFAs are in consonance with the Government rules and regulations. Therefore, it is absurd that the Army Commanders be held responsible for any alleged irregularities or omissions.
It should be for IFAs to justify the procedure followed. They and they alone should be held accountable for faulty advice and oversight. Quite appallingly, IFAs disown any responsibility under the plea that decision making is the prerogative of the executives and they cannot be held accountable for the same. It is a most ludicrous excuse.
The fact of the matter is that the armed forces are a soft target. The said audit report is a part of the well-orchestrated campaign to denigrate them through planted selective leaks.
Comment: No Army Commander will sign a purchase order unless the FA certifies that every thing is in order. The media has lost all perspective and is out to make headlines even at the cost of reputation of senior army generals. The nexus of IFA Officers and dealers/ spurious vendors need to be investigated.
Of Matters Military - Probity and Formation Commanders
Of the last dozen cases of corruption that we heard about, how many involved officers from the EME, ASC or Ord? It is common knowledge in formations today that the 'meat' lies in op wks, S&S Imprest, ACG/ATG, MI Fund and CHT Fund. Rations and spares are passe.
Probity and Formation Commanders

Assam Rifles funds used to shower gifts on home ministry officials

One scam after the other hits one of India's oldest paramilitary force. Recent investigations reveal that the Assam Rifles fund, meant for the welfare of the jawans, were spent on silk sarees and scotch whisky

Senior Generals in the Corruption Brew

Audit exposes Rs 100 cr row in Army
WEDNESDAY, 24 OCTOBER 2012 00:07 PNS | NEW DELHI
Grappling with scams over the last few years, the Army is now faced with another controversy involving its top commanders allegedly involved in financial mismanagement while procuring critical items like bullet proof jackets, satellite phones and other operational equipment leading to losses of over Rs 100 crore in two years.
This fact came out in the internal audit carried out by the Defence Ministry which said scrutiny of 55 items procured indicated that basic procedure of purchasing item from original equipment manufacturer was not followed and the credentials of the contracted supplier was doubtful leading to possible security risk.
The audit report on “Exercise of delegated financial powers of Army Commanders” carried out in Northern and Eastern Command for the years 2009-2010 and 2010-2011 pointed out some operational items were possibly bought from the gray market. Moreover, in most of the cases delivery schedule was not adhered to and the Army did not levy penalty for late delivery, the 115-page report said.
The Government has sanctioned Rs 125 crore to Northern Army Commander, Rs 25 crore to Eastern Army chief and Rs 10 crore each to other four Army Commanders to buy operational equipment in case of any emergency so as to cut out delay in procurement.
However, delay in delivery of most of the items defeated the very purpose for which special funds were granted to the Army Commanders, the report said, adding the Commanders who are senior functionaries should not be burdened with the procurement functions.
The report said the loss to the exchequer due to mismanagement amounted to Rs 103.11 crore while procuring items like battlefield mine carrying package, all terrain vehicle, hand held radio sets, spares for bulldozers, avalanche rescue equipment, snow mobiles, mobile EPABX, avalanche air bag, avalanche victim detector, combat free fall parachutes, GPS, three ton trucks and diesel generator sets.
The report also questioned the loss of more than Rs 30 crore worth of milk procured for troops in the Northern Command and said the mismanagement led to wasteful expenditure. The report said while some commands and units had excess milk supply, some other units and commands did not have adequate milk supply.
Expressing concern over these losses, the audit suggested steps like procurement from centralised depots to cut down lengthy supply chain, procurement only from authorised vendors, stores to be bought for a period of three months and not more and introduction of checks and balances in commands.
Incidentally, the audit had conducted similar internal review of Defence Research and Development Organisation (DRDO) and procurement of food for its troops by the Army. Following these audits, Defence Minister AK Antony last month asked all the departments of the Defence Ministry including the three Services to appoint financial advisors to oversee major procurements and prevent any legal bungling and mismanagement.
Audit exposes Rs 100 cr row in Army
Comment: The Local Purchase Powers of Formation Commanders need to be completely curbed or eliminated. The national Security is at stake when sub- standard and spurious stuff is palmed on to fighting troops. The paper work is so perfect it is difficult to catch the culprits. Remember all Generals are 9 pointers for honesty- the reason for this is because of the skewed ACR system in vogue. When dishonesty takes over the system there is no remedy!

100 crore scam exposed in Indian Army?

100 crore scam exposed in Indian Army?
23 Oct 2012, 5:06PM IST| Duration: 08:02

Comment: Local Purchase Powers are misused by Generals who are assured of 20% commission by the spurious dealers and vendors. The purchases are mired in paper work conducive for syphoning off funds. Some of these generals get employed by these dubious firms. This is a route to money and re- employment too.

Outsourcing the best option for the Military to reduce corruption

'Private sector can ease Indian Army's maintenance burden'
New Delhi,Business/Economy,Defence/Security, Tue, 02 Oct 2012 IANS
New Delhi, Oct 2 (IANS) MRO (maintenance, repair, overhaul) is a concept hitherto confined to the civilian aviation sector. Now, an industry lobby is promoting this as a means by which the Indian Army can cut down its maintenance costs and improve its operational preparedness.
"A modern army's equipment readiness has to be sustained at high levels to meet the demands of a complex and uncertain operating environment. This becomes crucial since the Indian Army is looking at capabilities for quick deployment, reducing repair cycle time, inventory overhang and repair costs," an official of the Federation of Indian Chambers of Commerce and Industry (FICCI) explained.
"The Indian Army's modernisation strategy is focused on acquiring capabilities that will enable it to succeed in any operation today or in the future. Operational sustainment of weapon systems aims to retain these capabilities throughout its lifecycle.
"The proliferation of land weapon systems across the complete spectrum in the military necessitates effective implementation and integration of an MRO environment so as to keep the user in a state of mission readiness 24x7," the official said. Toward this end, FICCI and the Indian Army's Corps of Electronics and Mechanical Engineers (EME) Monday announced that the first international seminar on MRO in Land Systems would be held in New Delhi on Dec 3-4.
The seminar aims to institutionalise measures for the Indian Army adopting MRO for its land systems "through forging strong public private partnerships, so as to ensure military equipment meets operational requirements in a cost effective manner", the official said.
The seminar will bring together MRO domain experts, IT solution providers and stakeholders from industry, including policymakers, regulators and manufacturers, to deliberate on and help evolve the MRO policy systems for land systems that will achieve the stated objectives of mission readiness.
Private sector can ease Indian Army's maintenance burden
Comment: The Local Purchase in the Military is resorted due to NA (non availability) of stores. Generally this cycle of operation is meant to defraud the exchequer- inflated bills, bribes, commissions- resulting in poor quality or substandard products or stores with 100% failure rate within a few months. Encouraging this practise is anti- national and let down of our troops. There are numerous scandals like tents, boots, blankets, motor vehicle parts, spurious stationery, defence stores, the list is endless. Even grants for training is fudged. The prime reason for failing and falling standards of troops.

Army Officers assets will be in public domain: Army setting national standards

Army to get vigilance wing to curb scams: Gen VK Singh
New Delhi: Stung by a series of land scams and corruption cases, the Indian Army is now planning to set up an internal vigilance wing to keep a tab on its men and prevent such instances from recurring.

Army Chief General V.K. Singh said at the annual Army Day-eve press conference on Friday that one of his thrust areas since he took over office on March 31 last year was 'improving the internal health' of the force to stop corruption among its personnel.

"Though this (internal health) is a very vast subject, what we are looking for is a vigilance mechanism. We do not have this (vigilance) in the Army. We now looking at having one. Of course, we do take suo motu action on a lot of issues (corruption and scams) that come up," Singh said.

He was replying to a question on the numerous land scams and the action he had taken in the last nine months as army chief on improving the internal health of the force.

On the action against his predecessor, Gen. Deepak Kapoor, whose name figures in the last three land scams that the Army has faced, the army chief said that the former being a retired officer, the cases have been handed over to the defence ministry for appropriate action.

Kapoor's name figures in the Sukna episode in West Bengal, the Adarsh Housing Society in Colaba and and land adjacent to the Central Ordnance Depot Kandivali being handed over to a private developer. The last two cases are in Mumbai.

"We (the Army) do not have the means to do investigation on these matters, such as checking out some bank accounts. The defence ministry will decide on the action needed in these cases," Singh said.

With regard to serving officers involved in the Adarsh Housing Society episode, he said the Army would initiate action against them as per the service rules and the army law. "We have a legal system in the army which will take care of this," he added.

To a query if he would be the first army chief to declare his assets in the public domain and set a precedent for others to follow, Singh said there existed an internal system under which officers filed their movable and immovable property returns every year and on all occasions when they bought or sold property.

"I am sure at some point in time, the assets details of serving officers will come into the public domain," he said indicating he would not mind such open declaration of his property details.

In the last two years, the Army has been hit by a series of land scams beginning with the Sukna military station in West Bengal, Adarsh Housing Society in Colaba in 2009 and Central Ordnance Depot land in Kandivalli.

In all these cases, army officers had given No-Objection Certificates (NOCs) to private builders to construct educational institution or highrise housing complex.

Taking note of these instances, Defence Minister A.K. Antony had announced Thursday that his ministry would make stricter rules for NOCs so that lower level officers could not misuse it and that the Defence Estates land would be computerised for maintaining proper records.
Army to get vigilance wing to curb scams: Gen VK Singh

PAC calls for reduction of wholesale corruption in ASC and CSD(I)

Military chiefs quizzed on canteen, ration irregularities
Gen VK Singh and AM PV Naik come out after appearing before PAC
The chiefs of the army and air force as well as the vice chief of the navy were Wednesday questioned by parliament’s Public Accounts Committee (PAC) over alleged irregularities in defence-run canteens as pointed out by the government auditor last year, but the meetings remained inconclusive.

PAC chairman Murli Manohar Joshi said the armed forces’ chiefs would be called again on certain issues they could not answer in Wednesday’s meeting.

This was the first time that the army and air force chiefs have appeared before the PAC, which oversees government spending. The meetings are usually attended by the defence secretary and vice chiefs of the services.

General V.K. Singh and Air Chief Marshal P.V. Naik deposed separately before the PAC, which is chaired by senior Bharatiya Janata Party (BJP) leader Murli Manohar Joshi.

The naval chief, Admiral Nirmal Verma, is on a ‘pre-scheduled’ four-day visit to Indonesia and was represented by his deputy, Vice Admiral D.K. Deewan.

Army officials, who accompanied their chief, made a presentation on how the services manage canteens and distribute rations to their personnel. The air force chief, Air Chief Marshal Naik, also made a presentation before the PAC.

The service chiefs, according to sources, maintained their stand that unit-run canteens (URC) were beyond the purview of the committee because they have their own internal audit mechanisms to keep a watch on them.

But Joshi denied this point was raised. ‘We didn’t discuss it. We are seeking their cooperation and want that public funds should be used properly and in a transparent manner. We are overseeing if the rules are being followed in spending the money from the consolidated fund of India.’

He said the service chiefs were satisfied with the meeting and denied that there was a rift between armed forces and the PAC over the CAG report.

Asked if they chiefs have accepted the CAG findings, Joshi said: ‘We cannot say that. PAC will come with its own report.’

The committee had called the services chiefs for a hearing after a Comptroller and Auditor General (CAG) report pointed out irregularities in the supply chain management of rations by the Canteen Stores Department (CSD).

The CAG, in its report in August last year, had criticised the services over the way the CSD and its unit-run canteens (URCs) function and the lack of transparency in their accounting methods.

The PAC later sought answers from the defence ministry, which in turn wrote to the service chiefs on the alleged irregularities.

Air Chief Marshal Naik told reporters here Tuesday that the URC is ‘beyond the purview’ of the PAC. ‘We have given our replies to them,’ he said.

He, however, maintained: ‘We all must remember one thing that we all are subject to parliament. That is the system of our governance. Nobody is exempt.’

There are some 3,600 unit-run canteens, which operate on soft loans extended by the military and operate from military premises. The CAG report said the concessions given to the canteens resulted in a loss of Rs.441 crore to the government from 2002-03 to 2008-09.

The CAG report had criticised the existing methods of ration procurement by canteens and castigated the military, saying there were ‘systemic deficiencies’ in running the canteens.

It said existing procedures were not enough to ‘realistically’ assess the requirements of dry rations. -via Sify

PAC to grill service chiefs
Miffed over norms violation in buying ration, attempt to thwart CAG probe. J Gopikrishnan.
The Public Accounts Committee (PAC) has summoned the three service chiefs on January 12 in the wake of Comptroller and Auditor General (CAG) findings about “gross nationwide irregularities” in the supply of ration by the Canteen Stores Department (CSD).

The Government auditor had criticised the forces for not providing information and relevant papers for audit of the rationing supply chain of forces. The information was not provided even to the Defence Secretary when CAG sought information through him. “This attitude has forced PAC to summon the Army, Air Force and Navy service chiefs,” said sources.

The CAG report, tabled in Parliament on August 2009, squarely blames the armed forces for “gross irregularities” and “blatant violation of procedures” in procurement of ration for armed forces. The report also blames the forces for non-cooperating with the auditors by not providing documents. “They did not furnish details to even the Defence Secretary when CAG sought details through the Government,” the sources added.

Finding a series of irregularities in the purchase of essential commodities for the forces and noting the “non-cooperation” by the forces in auditing, the CAG recommended that the Ministry of Defence (MoD) and forces’ headquarters should intervene to plug the huge losses. Sources said the forces were reluctant to implement the CAG report recommendations.

According to sources, the PAC decided to summon the three service chiefs after the Army, Navy and Air Force did not submit a satisfactory reply to its queries on the steps initiated in the light of CAG recommendations.

“Public Accounts Committee chairman Murli Manohar Joshi has decided to summon the three service chiefs for seeking their response to the Comptroller and Auditor General’s report and reasons for not implementing the (CAG) recommendations. In their past responses, the forces had cited practical difficulties in coordinating with private vendors due to large network,” said the sources.

“So PAC took the stand that the forces should be made accountable for the leak of public money in purchase of rations for units,” they added.

“The MoD and Army Headquarters should take urgent steps to strengthen the procurement procedure so that wide variations between provisioning and procurement are avoided. The Ministry and APO should consider introduction of such risk-purchase clauses in central procurement contracts that cover local purchases made by supply depots in case of non-performance of central contract,” CAG had recommended.

The detailed CAG report — which studied the rationing system from 2005 to 2008 — found that there was always a single vendor in most high-value purchases. “There exists a case for expanding the vendor base for supply of fresh rations. The risk of existence of cartels affecting the quantity and quality of rations is too serious to be ignored. The MoD should set clear targets regarding expansion of vendor base and (the) progress should be closely monitored. The list of vendors should be put up on ASC website,” said one of the main recommendations by CAG.

Finding “abnormal variations in rates” of vegetables, fresh fruits and meat, CAG recommended that the MoD should investigate and provide an assurance that these variations “do not arise from any fraud or corrupt practices” in the procurement of fresh rations in Army. The report suggested that the last purchase price of these rations be also displayed on the ASC website, which could be accessed by the supply depots.

“The Ministry should develop a set of guidelines containing the dos and don’ts in such negotiations and hold procurement officers — including financial advisers — accountable for any significant deviation from the laid-down norms of tendering,” said the report, blaming the corrupt style of buying rations.

Putting the responsibility on MoD and headquarters if foul play continued in the purchase of ration, CAG stated: “It is strongly recommended that the Ministry and Army Headquarters should immediately draw up a detailed plan to computerise the management of supply chain of both dry and fresh rations. The power of IT should be leveraged to create a networked system connecting all supply depots and supply points. Issues, receipts, inventory management, procurement and other aspects of supply chain management should be brought under this system. Contracted prices of various items should be published on the dedicated website to be created for this purpose.” -via The Pioneer
Corruption in the Indian Armed Forces
CSD(I)Demystified

Anti-Corruption hotline Machine

PIB: Thursday, December 02, 2010 17:04 IST
In order to provide assurance to the citizens to the effect that prompt deterrent action would be taken against the delinquents and to devise strategies for public awareness, the Central Vigilance Commission on the occasion of Vigilance Awareness Week has started a toll free hotline number 1800-11-1180. For this purpose, 10 dedicated phone lines have been installed in the Commission for lodging complaints by citizens. These complaints are forwarded to the Chief Vigilance Officer/Competent Authority concerned for taking necessary action and report.

The Central Vigilance Commission’s toll free number accessible to all citizens in all the States/UTs of the country. There is no proposal to install separate facility in the States/UTs.

This was stated by the Minister of State Shri V.Narayanasamy in written reply to a question in Rajya Sabha today. ***VBA/SR
Anti-Corruption hotline Machine: Toll Free 1800-11-1180

MOD asks Deepak Kapoor to Manage his own Disaster

With his appointment to head the National Disaster Management Authority (NDMA) stuck due to the controversy over Mumbai’s Adarsh housing society, former Army Chief General Deepak Kapoor on Thursday met Defence Minister A K Antony to explain his position on the matter.

The meeting took place even as Army Chief General V K Singh said on Thursday that the Army had been shamed and its image had taken a beating due to the controversy surrounding senior serving and retired army officers who acquired flats in the housing society.

Sources said Kapoor told Antony that he returned the flat allotted to him by the society — along with former Army Chief Gen N C Vij and former Navy Chief Admiral Madhavendra Singh — and that he used his personal savings and loans to acquire it .

While Kapoor’s appointment with Antony was fixed earlier, the meeting came on a day when it was revealed that the government was not keen on his appointment to head the NDMA.
Scam has shamed Army, says Chief
Read more:
(Greedy) General Deepak Kapoor PVSM, AVSM, SM, VSM, ADC (b. 1948) was the 25th Chief of Army Staff of the Indian Army, appointed on 30 September 2007 and Chairman, Chiefs of Staffs Committee(COSC) appointed on 31 August 2009