Front firms rule roost for PSU contracts: CVC

In its section on Public Procurements, the CVC has noted there existed a ‘‘disturbing practice’’ of PSUs entering into back-to-back contracts with private sector entities to execute projects.

The pattern was of private companies obtaining contracts on a ‘‘nomination basis’’ from government departments and other PSUs and then entrusting them to these private sector ‘‘partners.’’

The CVC has noted in page 10 of its report, ‘‘This has led to unscruplous private sector entities in the PSUs (acting) as a convenient front and obtaining orders which they would not have obtained otherwise because of their pre-qualification criterion. Needless to say this breeds corruption in which officials of the ministry concered and the officials of the PSUs get involved.’’

The CVC has noted that several such ‘‘irregularities’’ have been noted during the inspections done by its Chief Technical Examiners (CTEs).

While preference is sometimes justified in the case of potenially-viable but financially-sick manufacturing PSUs, there was no justification at all for extension of such preferences to PSUs which have no particular technical or manufacturing experience and which do not employ qualified technical personnel either.

‘‘Unfortunately this issue has not been addressed with the seriousness it deserves…worse is the case of institutions like the Kendriya Bhandar which obtain orders from government departments without the formality of a public tender,’’ the annual report points out.

Giving further details of the ‘‘front’’ companies the report notes, ‘‘Originally meant to supply items of daily use and consumables today, these institutions have become convenient front agencies for unscruplous public servants as also private traders to seek and obtain favourable orders at the cost of the national exchequer…inspite of several voices raised against the practice of including by MPs and the Commission, the Government has not taken as yet serious note of the problem and the irregularities continue.’’

Continuing on the subject of what ails PSUs, the CVC has noted that after raising the issue of removing ‘‘unnecessary aprehension’’ in the minds of PSU executives who have to take quick commercial decisions, they still wanted to flag the following issues which had the ‘‘potential’’ of fostering corruption (See Box).

The CVC had pointed out that the report submitted by the Group of Experts on Empowerment of PSUs addresses several important issues, which, if implemented, will give the required freedom to top executives while removing certain unhealthy practices which are a source of corruption in government.