The cash-strapped railways is losing a whopping Rs 10,000 crore every year due to cartels and the centralised procurement. In a report submitted to the minister Suresh Prabhu, India's 'Metro man' E Sreedharan, who was assigned to report on tendering and commercial procedures, pointed out that the centralizing procurement powers have accumulated enormous sums of money in the hands of few, and hugely enhanced rent-seeking power that encourages corruption. The committee, which heard views of senior officials and experts found cartels working at every step. "There is no item in which there is no cartel. Committee feels that vendors thus continue to fleece at will," the report said.
The cash-strapped railways is losing a whopping Rs 10,000 crore every year due to cartels and the centralised procurement. In a report submitted to the minister Suresh Prabhu, India's 'Metro man' E Sreedharan, who was assigned to report on tendering and commercial procedures, pointed out that the centralizing procurement powers have accumulated enormous sums of money in the hands of few, and hugely enhanced rent-seeking power that encourages corruption. The committee, which heard views of senior officials and experts found cartels working at every step. "There is no item in which there is no cartel. Committee feels that vendors thus continue to fleece at will," the report said.
Report's main findings
After scrutinizing current practices and procedures followed in the board, the report concluded that improving and decentralizing the system with empowerment and accountability shall effect the economy to the tune of Rs 5,000 crore in stores procurement and equal amount in works contracts. The committee also recommended that the board should not take any commercial decisions. It held that even procurement for the board should be done by the Northern Railways. It has called for decentralization of all those powers to general managers and lower levels.
Criticism of the board's role
Railways is the second biggest procurement agency after defence, spending almost Rs 1 lakh crore a year, and the railway board procures almost half of it. Sreedharan had submitted his interim report in November last year. In the final report, submitted a few days ago, Sreedharan says the board was set up originally to "make policies, plans, to lay broader principles of railway management, to frame rules, to inspect and guide the railways". However, he lamented that the board today does not follow those rules.
Railways could save Rs 10,000 cr with decentralization
For detailed analysis, the committee took up a few procurement items like diesel, concrete sleepers, 53-S grade cement and rails and concluded that the railways could end up saving a staggering Rs 10,000 crore annually if decentralization is undertaken.
In case of diesel, of which railways is the largest buyer in India, the new tender has not been finalized for the last 15 months. In case of 'weldable-CMS' and 'thick web switches', contracts have not been finalized for a decade, the report says.
Railways needs to stop losing its traffic to road, air
In his interim report, Sreedharan had recommended that the general managers should have full powers with regard to works, stores procurement, services and commercial tenders among other things. He also pointed out that the railways need to urgently reverse the trend of fast losing its traffic to road and air. Its freight share is down from 82% in 1960-61 to 30% in terms of tonnage and of passengers to 12%. In the next five years, it has to mobilize Rs 8.5 lakh crore.
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