The Comptroller and Auditor General (CAG) has pulled up the Ordnance Factory Dehu Road (OFDR), along with two other units, for having failed to supply a particular type of ammunition to the Indian Army since 2009. The recent report of the CAG has pegged the losses to exchequer in two cases to Rs 2.7 crore “due to improper storage facilities at OFDR” and Rs 24.79 crore “due to procurement of a particular component from a sister factory at a price six times more than the market price of the finished product the component was a part of”.
According to the report, based on a Transfer of Technology (ToT) agreement with a South African firm, the ordnance factories undertook indigenous manufacture of Shell 155mm Illuminating Ammunition from October 2000. While Ordnance Factory Kanpur (OFC) was engaged in manufacturing its empty shells, OFDR was to assemble/fill the ammunition. Controller of Quality Assurance Establishment (Ammunition) Kirkee (CQA/A) was to inspect the process.
Subsequently, OFC received Inter Factory Demands (IFD) for 17,018 empty shells from OFDR, against which 9,410 empties were supplied under 18 lots, which were duly cleared by CQA/A. OFDR filled these empties and issued 9,069 filled ammunition to the Army between April 2002 and June 2009.
The auditors observed that the 19th lot comprising 966 empties in November 2007 was rejected by CQA/A on technical grounds and needed to be re-tested. “However, no testing could be carried out since the 19th lot of empties lying at OFDR had rusted due to improper storage resulting in returning of these empties worth Rs 2.78 crore to OFC in 2012.As a result, no further filled ammunition was issued to the Army by OFDR since June 2009 (till date) on account of non-availability of proof passed empties from OFC. Consequently, inventory valuing Rs 10.28 crore remained blocked,” says the report.
The report refers to yet another case where Ammunition Factory, Kirkee (AFK), and OFDR procured a particular component — Tail Unit 8A — for manufacturing of 51 mm ammunition at a price higher than that of the entire finished component (for which it was procured) in the open market. This, the report says, “led to avoidable extra expenditure of Rs 24.79 crore”.
“During 2008-09 to 2011-12, OFDR and AFK procured Tail Unit 8A34, a component required for manufacture of 51mm ammunition, from trade firms as well as from Ordnance Factory Kanpur. The material cost of Tail Unit 8A during 2008-09 to 2011-12 ranged between Rs 337 and Rs 504 each, which had exceeded the total unit cost of finished goods ex-trade (ranging between Rs 63 and Rs 81) by nearly six times.
AFK/OFDR, in violation of OFB’s Circular dated December 2006 procured 6.51 lakh Tail Unit 8A from OFC during 2008-09 to 2011-12. During the same time, AFK/OFDR also purchased 6.42 lakh Tail Units 8A from trade at much cheaper rates ranging between Rs 58.50 and Rs 81 per unit against 20 supply orders. Despite violation of existing circular, neither did the ministry nor OFB address this issue in any of its board meetings,” says the report.
“Thus, procurement of 6.51 lakh Tail Units 8A from OFC, at a significantly higher cost than the trade cost in violation of OFB’s Circular of December 2006, resulted in extra expenditure of Rs 24.79 crore,” the report adds.