The Comptroller and Auditor General of India (CAG) in its report on State Public Sector Enterprises (SPSEs) has cited violations by Karnataka State Electronics Development Corporation Ltd. (KEONICS) in procurement and supply of materials.

In the report on SPSE’s for the period that ended in March, 2023, which was tabled in the ongoing session legislative session it was pointed out that the procuring departments and KEONICS violated the exemption graded by the State government under the Karnataka Transparency in Public Procurements Act (KTPP Act) by procuring non-IT equipment.

The report states that there was no transparency in enrolment of Business Associates (BAs) and KEONICS did not enroll Original Equipment Manufacturers (OEMs) or authorised dealers of OEMs as BA’s.

Inflated rates

It said that KEONICS procured and supplied equipment worth ₹75.81 crore to three user departments and institutions at highly inflated rates than the prevailing market price of ₹27.84 crore causing extra financial burden of ₹47.97 crore to the public exchequer.

“Three hundred and forty seven purchase orders amounting to ₹240.25 crore (of the six selected procuring entities) revealed that 18 orders of four procuring entities valuing ₹154.44 croe were split into 195 purchase orders of less than ₹ 1 crore to avail 4(g) exemption and to entrust supply orders directly to KEONICS,” the report highlighted.

It further said that payments aggregating to ₹9.36 core were made to BAs without ensuring actual delivery of equipment to the user department and institutions.

“While BAs themselves appointed third parties to verify delivery of equipment, there were no clear directions, guidelines to Third Party Verification (TPV) personnel from KEONICS etc. In 155 of the 347 test checked cases, payments of ₹85.98 crore were made without TPV,” the report said.

Fake challans

It also pointed out that the audit observed instances where payments were made to BAs on fake delivery challans and fake, forged TPV reports.

In some instances TPV was shown to be conducted even before the actual date of delivery.