FORMER Finance Secretary Arvind Mayaram is in the midst of a controversy related to contracts given to suppliers who provide currency printing paper with proprietary security features. On Wednesday, he had called demonetisation a “serious error of judgment.” Sources have told The Indian Express that the Department of Personnel and Training (DoPT) has sent the former Finance Secretary a “show-cause” seeking his explanation on how extensions were given to DelaRue, a British firm, in 2012 for the supply of colour shift (security) thread without tenders when he was Finance Secretary.
The thread is a crucial component of a currency note that changes colours and, in some notes, appears as a straight line when the note is held against the light. Incidentally, DelaRue was blacklisted by the Government in 2011 (The Indian Express, September 14, 2011) after some of their supplies failed quality checks and later the company and its Indian representatives were named in the Panama Papers (The Indian Express, April 8, 2016).
When contacted, Mayaram confirmed that he had been asked questions by the DoPT about contracts given to DelaRue and said the genesis of this controversy was an anonymous complaint being received by the Central Vigilance Commission (CVC).
“The DelaRue matter is something to do with procedure and not substance and, yes, my explanation has now been sought on different counts. I have already sent my reply to the DoPT. It is indeed a sad reflection on how the system functions,” Mayaram said.
Finance Ministry officials and experts said that the security thread was among “proprietary” items used for currency-note printing and DelaRue’s contracts for it had been extended for years until 2012 when the security features were reviewed by a high-level committee. It was at this stage, with new security features not yet listed, that the Finance Ministry asked the RBI to give a further extension to DelaRue and it is the Finance Secretary, reportedly, who recommended a three-year extension instead of making it an annual exercise.
That decision has come back to haunt the retired officer. Officials said Mayaram has been asked to explain: one, why he sought a three-year extension of DelaRue’s contract; two, why had the Ministry not asked for a tender; and, three, why didn’t he seek the approval of then Finance Minister P Chidambaram.
In developments that followed, when the NDA Government came in, there was a fresh tender for the supply of the security thread and two other foreign firms, Fabriano of Italy and Crane of USA got the contracts. Officials in these companies said that following fresh tenders, the price for the supplies fell by about 35% and was pegged at Rs 650 crore annually.
Thus, as the CVC is understood to have been informed — in the original complaint — that around Rs 200 crore extra was spent every year by DelaRue getting fresh contracts for a three-year period.