Bihar liquor ban: Officers – supplier nexus robs over Rs 4 Cr

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BY J P GUPTA

Patna: The  New Excise Policy of the Bihar government notified in December 2015, containing provisions to enforce complete liquor prohibition, turned a boon for a furniture supplier.

The officers in the nodal agency —Bihar State Beverages Corporation Limited (BSBCL) — which managed the affairs of the beverage industry in the state could not sustain the heady cocktail that the new policy offered and flouting all financial norms  paid over Rs four crore to a furniture supplier for  reasons unjustified and known only to them.

A Comptroller and Auditor General (CAG) report submitted to the government on March 23 this year has exposed all the underhand dealings of the officers of the Bihar State Beverages Corporation Limited, which has the mandate to manufacture food products and beverages.

The CAG report said violation of financial rules led to undue favour to a furniture supplier and infructuous expenditure of Rs 4.33 crore. The BSBCL officials are yet to take any action against the fraudulent payment to the supplier, who was awarded the work order violating all financial norms and rules.

State Beverages Corporation Limited had four Directors when the policy came into force, including CM Nitish Kumar’s all time favorite Home Secretary Amir Subhani. The three others being Shishir Sinha, Sujata Chaturvedi and Managing Director Aditya Kumar Das.

As the story goes, Government of Bihar (GoB) notified (December 2015) its New Excise Policy (NEP), 2015 containing provisions to enforce complete liquor prohibition, albeit in a phased manner.

In the first phase, production, sale and consumption of country spirits/spicy country spirits was to be prohibited with effect from 1 April 2016 and thereafter only foreign liquor/Indian Made Foreign Liquor (IMFL) would be available for sale only in town (Nagar Nigam/ Nagar Parishad) areas, that too only through outlets controlled and operated exclusively by Bihar State Beverages Corporation Limited.

Scrutiny of records revealed that in line with the above, the Company invited (December 2015) bids for 650 tables, 1,300 computer tables, iron grill gates and shelves/racks that were to be supplied at 650 retail foreign liquor shops to be established by the Company in town areas.

 The work order was awarded to a contractor on February 02, 2016 with instruction to complete the work by 07 February 2016. Due to non-supply of the items, the Company sought an explanation on 04 April 2016 from the supplier as to why the work order should not be cancelled.

Further, GoB vide Notification (05 April 2016) prohibited the manufacture, trade and consumption of all kinds of liquor across the State with immediate effect.

Owing to the blanket ban imposed on the sale/consumption of IMFL across the State by GoB with effect from 05 April 2016, the Company terminated the work order of the contractor the same day.

The supplier did not comply to any orders of the company but when the blanket ban was notified it presented bills for payment of goods whose procurement was never established officially and all the officials involved in this shady deal were benefitted.

 What the CAG audit report observed in this connection is self-explanatory. It said ..

• The Company, in violation of Rule 131-O and Rule 131-P of the Bihar Financial Rules, 2005 failed to incorporate the provisions of Earnest Money Deposit (EMD) and Performance Security Deposit (PSD) in its Notice Inviting Tender (NIT). This resulted in favour of ` 44.10 lakh (i.e. Rs 12.60 lakh towards EMD and Rs 31.50 lakh towards PSD) to the supplier on the basis of amount billed according to the conditions fixed in BFR 2005.

Rule 131-O and 131-P of the Bihar Financial Rules, 2005 provides that  Bid Security/ Earnest Money ranging between two per cent to five per cent and the Performance Security equivalent to five per cent to 10 per cent of the value of the work shall be obtained from bidders and the successful bidder respectively.

The Performance Security shall remain valid for a period of 60 days beyond the date of completion of all contractual obligations of the supplier including warranty obligations.

• The progress of the work was neither reviewed in February 2016 nor till 04 April 2016.

• The quality of furniture and fixtures supplied was not pre-qualified.

The Company, in disregard to the basic tenets of BFR and contract management, did not enter into an agreement with the contractor for the supply of furniture, iron gates and shelves/racks in its retail IMFL shops. This resulted in complete reliance on the vendor for the quality of furniture and fabrication of gates/grills.

• The contractor had claimed payment of Rs 6.30 crore against the supplies made by it at the Company’s depots prior to termination of the contract on 05 April 2016. Against the claims made by the contractor, the Company made payments aggregating to Rs 4.33 crore to the contractor up to January 2017.

However, as per the work order, the items were to be supplied and installed at the retail shops and not at the depots and that too prior to 07 February 2016. The records confirming inward receipt of the items at depots were not made available to audit.

The Department stated (August 2019) that in view of the urgent implementation of the New Excise Policy, 2015; the provisions of the BFR 2005 could not be adhered to.

Further, the payments to the contractor were made in respect of the supplies made by him prior to termination of the work on 05 April 2016.

The reply is not acceptable as on 04 April 2016, the Company warned the vendor of termination of the work order due to non-supply. However, the next day when total prohibition was ordered by the State Government, the Company started counting the supplies made prior to 05 April 2016.

Besides, the records confirming the inward receipt of the items at depots prior to 05 April 2016 and the written intimation to the Company’s Headquarters from the respective Depot Manager of having received the goods in the depot of the Company prior to 05 April 2016, was not placed on record.

Further, the work order was not reviewed till 04 April 2016. Non-obtaining of the EMD and Performance Security in violation of BFR also resulted in undue favour to the supplier.

Thus, gross impropriety in procurement of furniture and fixtures not only resulted in undue extension of benefit to the contractor,but also led to the infructuous expenditure of Rs 4.33 crore, the CAG audit report observed.

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