New Delhi: In its latest report on the telecommunications sector, the comptroller and auditor general of India, or CAG, has observed several irregularities in the purchase of telecom equipment by phone firms Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd amounting to more than Rs1,000 crore, even as these state-run companies continue to lose market share to private rivals such as Bharti Airtel Ltd.
CAG is responsible for auditing all receipts and expenditure of the Indian government, including organizations that it has an equity stake in.
The CAG report for year ended March 2007, for instance, has pointed out excess procurement at BSNL, as India’s largest phone firm by revenues is also referred to. At BSNL, even as the fixed-line subscribers declined from 35.4 million in March 2003 to 33.5 million in January 2007, the net switching capacity was increased from 45 million to 47.3 million, resulting in excess procurement and poor capacity utilization that CAG valued at Rs794.3 crore, said the report, which was released earlier this month.
The audit also mentioned several irregularities at MTNL, the name in short for the phone firm in Delhi and Mumbai, in procuring equipment for the so-called wireless in local loop, or WLL, phone services. “Audit observed that the spare capacity of WLL in Delhi and Mumbai increased from 0.47 lakh in 2002 to 9.12 lakh in 2007,” the report said. “This resulted in non-utilization of the equipment and consequent infructuous expenditure of Rs219 crore.”
A senior MTNL executive, who did not wish to be named, said WLL equipment was ordered based on a demand assessment by the executive council of the Delhi-head-quartered company. State-owned units have executive councils to decide on procurement of equipment or approve large spending decisions, besides the board of directors.
CAG, however, “did not come across any plan document which deliberated on the right product mix and forecasting of demand for WLL services,” the auditor general’s office noted in its 138-page report. Moreover, MTNL also lost around Rs10.76 crore towards cost of WLL handsets, as many WLL users did not pay back.
The CAG report also blamed BSNL for expanding capacity of around 63 telephone exchanges in Gujarat, Kerala, Uttar Pradesh and Chennai at an estimated cost of about Rs62.42 crore, even when the fixed-line subscribers were declining. “A further test check revealed that 48 new exchanges were installed at a cost of Rs29.43 crore during 2003 to 2007, without taking into account the declining trend.”
A senior BSNL executive said his firm had “estimated a pickup (in demand for fixed-line services business) because of new applications such as broadband but that did not happen”. The executive did want to be identified.
However, telecom experts such as Varadharajan Sridhar at the Management Development Institute in Gurgaon say these state-run phone firms should be given more autonomy instead of being criticized for such executive decisions.
“While MTNL has some freedom since it is partly public, BSNL managers still have to cope with long, slow processes of procurement,” he said. “You cannot expect them to compete effectively and also (when they) have a ministry dictating terms of procurement.”