A government-run firm has come under sharp criticism of the top auditor for inflating budget estimates and making huge profits in providing security equipment for the Commonwealth Games.
The Electronics Corporation of India Ltd was appointed by the government in May 2009 "on nomination basis" to provide an Integrated Security System (ISS) for the 2010 games.
The approved cost for the ISS was Rs 346 crore.
"We found that ECIL prepared inflated cost estimate which allowed it to make an exorbitant profit of at least Rs.126 crore," the Comptroller and Auditor General of India said in its report tabled in Parliament on Friday.
The security system was required to ensure effective surveillance for the games to cover events, open areas, lanes and highly sensitive and crowded areas in Delhi.
The security arrangements for the games were coordinated by the union home ministry through an empowered security committee.
The decision to have ECIL provide ISS was taken by the union cabinet in 2009 and the production cost of items was approved by an inter-ministerial committee.
It said the ECIL's Rs 346 crore approved budget included imported items worth Rs 196 crore, indigenous items worth Rs 105 crore, installation charges at Rs 12.6 crore, testing Rs 10.16 crore, commissioning Rs 7.72 crore, integration Rs 7.57 crore and decommissioning Rs 5.60 crore.
"Clearly the inflated estimates prepared by ECIL did not reflect true market rates and allowed ECIL to make exorbitant profits," the CAG report said.
Recommending that final payments to the ECIL be released only after detailed examination of actual costs, the report remarked that such conduct by a PSU "amounts to breach of trust".
ECIL also received excess cash advance of Rs 37.08 crore for imported items.
The report has also criticised the home ministry for poor legacy planning that resulted in non-utilisation of procured items.
"The ministry did not have an approved legacy plan for the utilisation and redeployment of the security equipment. Further, there was no 'a priori' identification of ISS items as legacy items, non-legacy items and consumables," said the report.
Of the 176 portable explosives detectors (PED) procured by ECIL in March 2010 at a total cost of Rs 38.55 crore, 42 were found in packed and unused condition.
Of the 18,700 radio frequency identity tags, only 3,610 were used and the remaining worth Rs 4.41 crore were lying unutilized with ECIL, suggesting that the bill of quantity was not prepared realistically by the ECIL.
ECIL, in its report to the home ministry in November 2010, had identified legacy equipment of Rs 86.47 crore and non-legacy equipment of Rs 186.18 crore at the 31 venues.
But the auditor found equipment worth Rs 272.65 crore lying unutilised.