MoD fails to prevent cartelisation of suppliers

The all powerful defence ministry has failed to break the cartel of suppliers in several ordnance factories. Though the firms cornered lucrative orders, Ordnance Factory Board did not take any action against the guilty factories even after flaws were pointed out.

Cartelisation of vendors grew in several factories in violation of anti-cartel measures that exist on paper over the last six years. Five ordnance factories producing cloth, shoes, parachutes and other non-lethal items for the soldiers were found guilty of allowing the suppliers’ nexus to grow.

Ordnance Parachute Factory, Kanpur, for instance, equally distributed 26 orders worth Rs 6.57 crore against among various firms, which quoted identical rates.

In Ordnance Clothing Factory, Avadi; Ordnance Clothing Factory Shahjanpur, and Ordnance Equipment Factory, Hazratpur, as many as 40 orders valued at Rs 14.03 crore were either equally distributed or in the ratio of 60:40 or 50:30:20 amongst the firms that quoted the same rates.

Cartelisation was rampant in Ordnance Equipment Factory in Kanpur too where a large number of firms responded to 36 orders worth Rs 13.31 crore. As two or more firms quoted L-1, L-2 and L-3 rates, orders were distributed among them in 50:30:20 or 60:40 ratio.

The Comptroller and Auditor General found as many as 102 cases of cartelisation in these units. But neither the factories concerned made any enquiry nor did the OFB call for explanation from the units. “As a result, it could not be ensured that the best economic and competitive offers were obtained,” CAG says in its report tabled in Parliament on Friday.

The ganging up of suppliers happens in violation of clear cut government instructions issued in 2007 and 2012, in which general managers of these factories were not only warned but remedial measures were suggested too. The factories were asked to take actions against the guilty vendors.