Unscrupulous government officials and contractors used bogus bills and fake reports to siphon off crores meant to help the needy between 2010 and 2013
Mumbai/ Pune/ Junnar: Government officials will stop at nothing to make money, it seems. This newspaper has unearthed a multi-crore scam, in which unscrupulous contractors and government officials connived to siphon off money meant for welfare schemes for the poor.
Reshma Meher, daughter of a farmer in Aale village of Junnar taluka, 90 km off Pune, has been given a cycle as part of the government’s welfare scheme in 2013 to encourage girls to go to school. She rode this wobbly cycle for 2 months before the wheel came off
This resulted in substandard social goods reaching the poor and the needy of Maharashtra, and, in some cases, no goods reaching at all. All of these welfare schemes are under the women and child, tribal and social welfare departments.
The abandoned remains of two tattered bicycles inside the cowshed of Jalinder Shivaji Meher
At the centre of the scam worth over Rs 450 crore is the Central Stores Purchase Organisation (CSPO), a state-run subsidised kirana shop set up in 1992. The CSPO streamlines procurement of welfare goods for social schemes by both the Centre and the State, which are run by the Zilla Parishads (ZP) and local bodies.
Through manipulations and by bending rules, officials awarded contracts for the purchase of goods worth Rs 451.88 crore to second-rate contractors, who produced bogus documents obtained from fictitious foundries at Ahmednagar and Rajkot, and fake test reports from Mumbai laboratories to get contracts between 2010 and 2013.
Documents accessed by this paper under the Right to Information (RTI) Act shows that Rs 271.88 crore of the total contracts were fully routed through mysterious hawala operators, and payments for them casually released by the government to traders, who did not deliver goods to the needy on the ground. This money was later taken out of several bank accounts of the fictitious operators and handed back to the traders.
Purchase of substandard goods
A joint probe by state industries and home department has now put six senior state officials and eight contractors in the dock for widespread irregularities within the CSPO and Maharashtra Small Scale Industries Development Corporation (MSSIDC).
The RTI response establishes that the rot runs deep within the CSPO. The body chalks out in June, the annual Rate Contracts (RC) for about 18 subsidised products — sewing machines, bicycles, raincoats, gumboots, and canvas shoes etc — which are to be distributed to the poor, under welfare plans.
Various departments and local bodies made an estimated R180 crore’s worth of purchases via the CSPO between 2010 and 2013. All these are under the scanner now.
The blatant disregard for administrative propriety of the CSPO committee has had a direct impact on the lives of lakhs of poor beneficiaries and the quality of various welfare plans.
We traced scores of beneficiaries under central-funded social schemes implemented by the Pune ZP, which, like the state’s 32 other ZPs, has been buying ‘poor’ quality goods via the CSPO.
These purchases resulted in shoddy bicycles being distributed to school-going girls through one welfare scheme, and women getting near-broken sewing machines in another plan.
In 2012, it turned out that a R2.05-crore order was secured hurriedly on the eve of the Pune ZP elections scheduled on January 3, 2012, and was based on a backdated, fabricated RC agreement actually signed in 2011 by the CSPO.
As a result, about 8,000 rickety bicycles got distributed to school-going girls in remote villages of Aale, Kolvadi, Kolmala, Umbraj, Pimpalgaon and Kusur.
The case is not an aberration, but one of many examples when ZP purchases via the CSPO went kaput, as faulty goods reached or did not reach the people. “The extent of this scam is mind boggling. But the government is just sitting on it,” said an official, adding, “Tenders for most reserved goods purchased via CSPO over the last 3 years are under the scanner, and 4 probes have been carried out.”
Needy get broken bicycles, sewing machines
Maharashtra is heading towards scorching summers. But, the heat is inconsequential to Jalinder Shivaji Meher, a local farmer with a tiny holding around an extremely fertile Aale village of Junnar taluka, located 90 kilometres off Pune, and popularly known as the birthplace of Maratha king Chhatrapati Shivaji.
As Meher scurries to complete the day’s work, his cattle cool off in a shaded corner, unmindful of the abandoned remains of two tattered bicycles sharing their space in the cowshed. This is what his daughters got to ‘reignite their academic interest’ as part of a state experiment. The cycles were meant to enable them to reach schools easily.
But, the cycles are wobbly, with loose joints threatening to fall apart any moment. That’s how they were delivered to Meher. “They are nothing more than scrap. I will not invest anymore in their repairs,” he says, as his daughters Reshma and Ashwini look on.
“These were like this right from the beginning, on the verge of collapse, mudguards and chains making squeaking sounds. We abandoned them after two months,” says Reshma (15), a welfare recipient of 2013. Ashwini received a welfare bicycle a year earlier from the ZP.
The sisters are just two of thousands of recipients who seemingly benefitted from welfare programmes implemented by the Pune ZP between 2010 and 2013. In Barav village, about 30 km north of Aale, 26-year-old Manisha Kedari rues the day she received a hand-operated pico fall sewing machine under a welfare scheme. Within 48 hours, the stand and table on which the machine was mounted, came off.
The unstable wheels meant the fall beading on sarees wasn’t as effective. “I invested Rs 3,000 in repairing the machine over the next one year. Many women just gave the machine away in junk,” said Kedari. The Pune ZP had, along with bicycles, distributed 4,545 pico fall machines purchased each at a cost of Rs 6,050 via the CSPO in 2012-13.
“Thousands of complaints poured in from talukas of Junnar, Ambegaon, Daund, Haveli, Khed and Maval. The beneficiaries just wanted to return them to the government, but we didn’t have a choice of replacement,” says R N Kaskar, a gram sevak posted at the local panchayat office in Umbraj village.
Facilitating inferior contractors
An ongoing probe of the state industries department shows backdated entries in the R2.05-crore tender for bicycles secured by the Pune ZP on January 2, 2012. The probe reveals that the RC agreement for 8,000 cycles was actually signed with contractors M/s Manor Cycle Stores of Ratnagiri and M/s Sony Cycle Company of Kolhapur on January 1, 2011.
An enquiry report (Report/cycle/2013/A-540) prepared by the development commissioner (industries) on April 6, 2013, said: “It is clear the CSPO committee comprising Joint Director (Industries) S P Mahajan, Industries Officer N E Gawde, and D W Patil, deputy director (industries) abused their positions to manipulate the tender in favour of M/s Manor and M/s Sony.” This resulted in purchase of poor quality goods.
False tests, fake units
RTI documents show that in 2010, specifications were altered by the then Additional Director (Industries) B V Rathod, from ‘ISI’ to ‘IS’, while drawing the RC of sewing machines to be distributed by the government to those in the economically backward class.
The changes facilitated the backdoor entry for contractors M/s Sony, M/s Manor, M/s Muskan Traders and M/s National General Stores, all from Ratnagiri.
The contractors were then empanelled by the CSPO in 2011 and 2012, even as they did not confirm to the quality standards. They also submitted dealership documents from Azad foundry in Ahmednagar and Everest Electricals, Rajkot, both non-existent units.
A material testing report from National Test House, Andheri, too, turned out to be partly faulty. These same documents were repeated for tenders for bicycles in 2011 and 2012. M/s Sony and others submitted false test reports from a test house in Andheri, in the name of the fictitious unit Azad foundry, reads an internal report.
“The CSPO empanels ordinary contractors, who grease palms to make the cut. We are tired of their poor quality bicycles and sewing machines. Last year, we diverted all our funds towards purchase of flour mills under a welfare scheme,” said Dattatreya Munde, deputy executive officer, Pune ZP.
The Rs 271-crore money trail
This is a case of rerouting money to fool the government into thinking that the promised goods were actually delivered to the intended recipients.
The concerned contract is for school kits (uniforms, books, stationery etc) to be given out in rural areas. A cloud hangs over funding of contractors empanelled by the Central Stores Purchase Organisation between 2010 and 2013.
A report (PN/ DGIT(INV)/ MSSIDC/ 2013-14/ 1008) of the Director General of Income Tax (Investigations), Pune, rips open a money trail of a R271.88-crore tender awarded via CSPO by the MSSIDC. The tender for supply of the subsidised school kits was found to be funded by eight hawala operators of Sangli.
I-T investigations point out how bogus accommodation bills were obtained by traders from these hawala operators. The traders — M/s Revati Enterprises of Pune, M/s Creative Industries, M/s Varad Enterprises and M/s Akshar Udyog of Ahmednagar – showed they made purchases from hawala operators, who promised delivery of the said goods to Block Education Officers (BEO).
But, between the operators — GM Traders, Param Trading, Sai, Sarvesh, Shree, Swastik, Trishul, and Crystal – and the traders, no delivery was made.
No deliveries, only bills
The firms claimed these hawala operators supplied goods on ground on their behalf. But, the operators, on their part, claimed they did not supply any material, but only provided bills to firms, the IT report reads.
Once the contract was awarded to the traders, the ‘suppliers’ of the kits — the hawala firms — paid 1 per cent of the total contract value (Rs 2.7 crore) to conduit firms to obtain fake delivery challans from BEOs, as proof of delivery.
The proposed deliveries were apparently made to schools via panchayat samitis, who issued delivery challans. These were then used to claim payments from the government for the ‘delivered’ school kits.
Once the government transferred the money to the four traders, the traders then transferred the money to the eight hawala bank accounts in HDFC, ICICI and Rajarambapu Sahakarai banks through RTGS.
The hawala firms kept 1 per cent as their fee; the rest went straight back to the traders. No goods reached the school kids; all of the money is kept between the traders and the hawala operators.
“There is reason to suspect no material or substandard material was supplied, and excess payment released by the government to contractors. The trail of cash first deposited in operators’ account and then suddenly withdrawn is mysterious.
But, it is obvious that the cash withdrawn must have been returned only to the beneficiary of this whole scam,” says Harshad S Vengurlekar, deputy director of income tax (investigation), Pune.
>> P B Dandekar, deputy secretary (Industries)
>> S M Mhatre, joint secretary, finance (Industries)
>> P Mahajan, additional director, CSPO (Industries)
>> D W Patil, deputy director, CSPO (Industries)
>> V Rathod, joint director (Industries)
>> N E Gawde, industries officer (Industries)
>> Sony Cycle Company, Kolhapur
>> Manor Cycle Stores, Ratnagiri
>> Srinath General Stores, Ahmednagar
>> Muskan Traders, Devrukh
>> National General Stores, Ratnagiri
>> Revati Enterprises, Pune
>> Creative Industries, Ahmednagar
>> Akshar Udyog, Ahmednagar
>> Varad Enterprises, Ahmednagar.
Central stores purchase organisation
Set up in 1992 to facilitate purchases made by different departments under the Industries Commissioner, the CSPO prepares the annual rate contract (RC) in June every year for 18 reserved items to be distributed or internally used by the department and Zila Parishads (ZP).
Upon receiving indents from departments, the CSPO floats tenders and empanels manufacturing and trading units as approved contractors. RCs are issued to ZPs and departments, who can then secure orders and make purchases based on these RCs.
Earning through Hawala
Central Stores Purchase Organisation
CSPO awards a tender for school kits of Rs 271.88 crore to four traders
Traders book purchases from one Suresh Electricals, a supplier who promises delivery via conduit firms
The hawala operators
These ‘firms’ are the eight hawala operators. They will supply an accommodation bill at a fee of 1% of the total contract to the traders
Hawala firms have conduit firms that get fake delivery challans from the Block Edu Office for another 1% fee, as proof of delivery
Rs 271.88 crore
Traders claim payment from govt on these delivery challans, and transfer money to ‘supplier’ hawala accounts
1% Hawala fee + 1% Conduits’ fee
Rs 266.5 crore
After deducting commissions, hawala operators return the remaining amount to the traders.
In all of this, schoolchildren get little or nothing of the promised school kits. No deliveries are made, and the money stays between the eight hawala firms and the four traders.