Railways lost Rs 25.5 cr due to injudicious procurement: Parl panel

Injudicious procurement of an additional CNC horizontal boring and milling machine by Patiala Locomotive Works cost a financial loss of Rs 25.43 crore to the Railways, the Public Accounts Committee (PAC) has said in its report in the Lok Sabha.

The PAC, in its report tabled in the Lok Sabha on Wednesday, carried out a detailed examination based on the CAG report, which was laid on the table of the House on December 21, 2022.

Titled "Injudicious procurement of an additional CNC horizontal boring and milling machine: Patiala Locomotive Works", the report recommends the ministry to establish a mechanism for periodic review of procurement policies in line with evolving directives to prevent recurrence of such infructuous expenditure in future.

The matter pertains to the manufacturing and rebuilding of Diesel Locomotives for Zonal Railways and Non-Railway Customers by the Patiala Locomotive Works (PLW) as the Railway Board assigns the work for manufacturing and rebuilding of various types of Locomotives to different Production Units as per its production plan.

According to the report, the Patiala Locomotive Works (PLW) embarked on a procurement initiative for an additional CNC Horizontal Boring and Milling Machine in pursuit of increased production targets.

"However, the course of events took an unforeseen turn when the Railway Board communicated in June 2014 that there was no need for new mainline ALCO Locomotives for Indian Railways and advised the PLW to stop production of mainline ALCO Locomotives from 2015-16 onwards, leading to a fundamental shift in PLW's production strategy," the PAC's report said.

"Despite the directive to cease the production of mainline ALCO Locomotives, the PLW proceeded with the procurement of the CNC machine without revisiting the necessity in light of the policy change," it added.

The Committee observed that the machine faced delays in installation and commissioning, resulting in substantial time overruns.

"Moreover, within six months of commissioning, the PLW sought to transfer the machine to other Railway Units, citing a declining trend in engine block production due to decreased demand for Diesel Locomotives," the report said.

"Total expenditure of Rs 25.43 crore (as of April 2022) was incurred by the PLW for purchasing of the CNC machine," it added.

According to the report, the Ministry of Railways justified the initial procurement based on the 2011 requirement for new engine blocks but failed to acknowledge the need for a review after the 2014 directive to cease mainline ALCO Locomotive production.

"While acknowledging the context in which the initial decision of procuring the CNC machine was taken, it is also evident that with the changing policy landscape, as communicated by the Railway Board in 2014, a thorough review of the procurement plan was a necessity," the Committee observed in the report.

"The Committee, therefore, does not find the reasons afforded by the ministry for going ahead with the proposal for procuring the machine despite the changed policy dimension to the convincing and recommends that the ministry should own responsibility for the failure to review the proposal for purchasing the CNC machine in light of the change in policy," it added.

The Committee also noted that 80 per cent of the payment towards procuring the CNC machine was made to the supplier before the actual shipment.

Questioning it, the report said, "The Committee wishes to be apprised of the reasoning behind agreeing to this payment schedule, and safeguards, if any, that may have been put in place to protect the ministry's interests in the event of non-compliance by the supplier."

Besides, according to the report, the Committee also recommends that, in future procurements, the ministry considers all viable options and selects the most suitable solution to meet its manufacturing or maintenance needs, and minimises the risk of encountering deficiencies or delays.

"The Committee also feels that it would be appropriate for the ministry to establish a comprehensive supplier developing and handholding programme for identifying, developing and providing technological support for Indian suppliers so that they could be an integral part of the 'Make in India' supply chain system," the report said.