A report of the Comptroller and Auditor General (CAG) has blamed defence PSU Bharat Electronics Ltd (BEL) and the role played by an MoD official for BEL entering into a contract for procurement with foreign vendor Rheinmetall Air Defence (RAD), Zurich, “despite the fact that the CBI was investigating the (foreign) firm’s deals for alleged corrupt practices in earlier contracts which had a risk of the firm being blacklisted,” thereby leading to the blocking of a whopping `502 crore of BEL’s funds when the foreign firm was eventually blacklisted.
The contracts were inked by BEL with RAD in 2009 and 2010 that included purchase of data packages. The contracts were worth a total of about `502 crore.
The way was paved for clinching of the deal after the ministry of defence’s (MoD) joint secretary (Electronic System-ES) working in the Department of Defence Production (DDP) informed BEL on September 6, 2010, “that it was not legally valid to blacklist a company in anticipation of actual blacklisting”. The CAG report noted that this communication was “inappropriate”. The BEL CMD then cleared placing of the purchase orders.
The CAG report also noted that BEL placed purchase orders in 2010 for `556 crore even before obtaining approval of the board. At a board meeting on October 29, 2010, the subject of the procurement decisions were not even listed on the agenda and were taken up as an unlisted item. Therefore, the background papers were not circulated among the directors before the board meeting.
After advice of the MoD in July, 2012, BEL wrote to RAD in August, 2012, about the intention to cancel the contract. RAD then petitioned the Courts.
The CAG report noted: “As the initial systems were still under integration and evaluation, most of the materials and documents received against the purchase orders became unusable.”