Telangana takes arbitrariness in spending public money to new heights

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Same product, two prices; Single bid tenders

In one of the most glaring examples of misuse of power and refusal to follow well established norms of spending public money, the Telangana State Power Generation Corporation (TSGenco) recently rejected suppliers approved by BHEL without giving any reason thus forcing BHEL to place an order on a single bidder left, at a price which is 58.75 per cent more than what it had paid for the exact same product less than two months back. Whether this amounts to a scam is a decision to be arrived at by investigating agencies after probing the matter.

TSGenco had recently placed an order of six sets of 800 megawatt turbine and generator package on BHEL for its Kothagudam and Yadadiri power projects in Telangana state.elec BHEL, a central government public sector undertaking (PSU), has its own list of pre- approved vendors for various items that are required to execute the orders it receives. These approved vendors then individually bid for the job and the lowest bidder wins the contract. The BHEL vendors are selected by following technical procedures laid down from time to time by various government watchdogs such as the central vigilance commission, etc. and have been given due weightage even by the Hon’ble Supreme Court of India.

The state governments and other clients of BHEL usually trust the vendors who are technically approved by BHEL. But of late some state governments have started picking and choosing among the BHEL-approved vendors. But the government of TSGENCO-Logo-copyTelangana took things a bit too far when it disapproved all the approved vendors except one and awarded the contract to the participating single surviving bidder in violation of established norms that prohibit award of government contracts on the basis of single bid.

Here is how TSGenco went about executing its power project throwing the norms out of the window. In response to TSGenco’s order, BHEL forwarded a list of following six pre-approved vendors to TSGenco on April 4, 2015 for the supply of one of the components – casting for IP inner casing:

1) Star Wire (India) Ltd,

2) Sande Stahlguss Gmbh (Germany),

3) Sumitomo Corporation JSW (Japan),

4) Japan Casting and Forging (Japan),

5) Acciaieria Fonderia Cividale (Italy), and

6) Voestalpine Giesserei Linz (Austria)

All these vendors are highly technical companies involved in manufacturing critical components for plants. Upon receiving the above list from BHEL, TSGenco Chief Engineer gave approval for all the vendors. After receiving the approval from TSGenco, BHEL issued a tender enquiry no. T/T212/5/1431M/1 on September 12, 2015 for six sets of “casting for IP Inner casing (UH+LH) (R/M)”.

Except the Japanese company, Japan Casting and Forging and kcr2Sande Stahlguss Gmbh (Germany), all the companies submitted their technical bids and price bids in separate sealed envelopes as required. The technical bid was opened on September 28, 2015 and according to the purchase procedure of BHEL, order was to be placed on the lowest financial bidder from among the technically approved bidders.

Even as BHEL was engaged in finalizing the winner of the bid, for reasons known only to Telangana government, TSGenco withdrew approval to all bidders except two – Voestalpine Giesserei Linz (Austria) and Japan Casting and Forging. Of these two companies, Japan Casting and Forging had not participated in the tender. As a result, the financial bid of a single bidder – Voestalpine Giesserei Linz (Austria) – was opened and contract was awarded to it and a purchase order no. T5M6413 dated March 29, 2016 was handed over to the company.

Documents examined by Realpolitik indicate that TSGenco did not wish to soil its hands in the deal by giving reasons for debarring BHEL-approved vendors. File entries therefore claimed that three out of six approved vendors did not respond to the tender, and two expressed regret. That left only one participant in the tender. Ordinarily is such circumstance, one should have gone for re-tender. Sources say that the file entry claiming that only one company participated in the tender is not true. They say documents are available to prove participation by other companies. A thorough probe into the tender process by a competent authority would unravel the real number of participants in the said tender.

Documents examined by Realpolitik also revealed that winner of this single bid tender – Voestalpine Giesserei Linz – Austria has taken the order for IP Inner Casing Upper half (Rough Machined) [Material Code: W92310602337], and IP Inner Casing Lower half (Rough Machined) at the rate of Euro 3,71,100 and Euro 4,21,400, respectively. This order, totaling Euro 7,99,500 (including Euro 7,000 for sea freight), was placed on March 29, 2016. At a conversion rate of 1 Euro = Rs 74.87, the order comes to Rs 5,98,58,565. The same two products with exactly the same specifications and same material code were, however, purchased by the same company on February 22, 2016 for Rs 3,77,04360 from another approved vendor.

This gives rise to suspicions of foul play in awarding tender through a single bid while disqualifying other approved bidders without giving any reasons. There are many more projects coming up in Telangana, Andhra Pradesh and other states where similar castings will be procured.

The totally arbitrary and partisan behavior of Telangana government is giving rise to suspicions about their motives. The matter needs to be investigated to make sure that public money was being used judiciously and only for public good.

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