Even as Prime Minister Narendra Modi has promised corruption-free governance ("Na khayenge, na khaane denge”), Bharat Sanchar Nigam Ltd (BSNL) and American multinational Cisco have caused the Indian exchequer a loss of about Rs 300 crore in the name of expanding the existing National Internet Backbone (NIB) infrastructure.
Much of the money for two huge purchase orders (POs) was diverted to a “slush fund” that was appropriated by senior executives of the two companies. The companies began their collaboration in 2015 as part of their effort to deepen public sector business, especially strengthening the BSNL-pushed internet.
Cisco higher-ups based in the US and India have begun an internal investigation into the matter. The Prime Minister’s Office, the Central Vigilance Commission (CVC) and the Department of Telecommunications (DoT) are also aware of the scam. Yet, no probe has been ordered into the scandal by the government. The Cisco investigation is led by the company’s UK-based Director (Management Investigations) Steve Williams. Williams is part of the company’s global chief financial officer (CFO) Kelly Kramer’s team.
Flouting Norms Due to ‘Urgency’
BSNL placed a PO (No CT/PO/20/2015-16) for Rs 95 crore on New Delhi-based Presto Infosolutions in December 2015 (File No 80-06/2015-MMC/MPLS routers/317) for expanding NIB infrastructure. NIB infrastructure has been running partially on Cisco-supplied equipment for the past 12 years. The order involved spares for routers “which are being effectively maintained presently by HCL” for the last five years.
A BSNL team selected Presto, a Cisco partner supposedly with a turnover of about Rs 150 crore, ignoring other large and established Cisco-certified channel partners like HCL, Wipro, Dimension Data and IBM, among others.
This is in violation of CVC guidelines which stipulate that tenders must be called for.
BSNL checked neither the firm’s financial nor its capabilities. Besides, BSNL undertook no price validation exercise, especially when the PO was issued on “single-party nomination.”
Documents and information shared by BSNL sources reveal that the rationale for this was because of the “urgent nature” of the procurement. The urgency arose, the documents say, as BSNL was faced with capacity constraints. Besides, according to the papers, the Cisco board was “misguided” by a few senior company executives that the PO would allow the PSU to realise additional revenue in the 2015-16 financial year.
“This became BSNL’s primary objective owing to its precarious financial condition,” an insider said.
Fraudulent Transactions
Presto Infosolutions on its part placed a PO on Singapore-based Ingram Micro (a Cisco distributor) for about Rs 50 crore, thus raking in a windfall profit of Rs 45 crore. This amount is said to have formed the “slush fund”.
Documents and sources say that Presto Infosolutions had no capacity to install the equipment. Besides, the order wasn’t fully executed by March 31 2016, by which time BSNL could not realise the revenue target for FY 2015-16.
The “fraudulent transaction” resulted in the following:
• Under-invoicing by Ingram Micro and Cisco, causing avoidance of customs duties and taxes to the government.
• Outdated equipment was purchased at an exorbitant rate.
• Generating unaccounted ‘dirty money’ of Rs 45 crore.
• Loss of revenue for BSNL as not a single paisa was realised.
• Sources claimed that 35 percent of the inventory was never utilised because the equipment supplied by Cisco was “end of life” and still remains unutilised by BSNL. This defeats the very purpose of urgent procurement.
The second part of the scandal unfolded when a case was made out by BSNL for a five-year annual maintenance and the purchase of some additional hardware and services, amounting to Rs 200 crore. This was again done through the same opaque and non-transparent process.
‘Achhe Din’ Gone for a Toss?
BSNL sources told The Quint that “considering the products are end of life and support is limited, the Rs 95-crore project went through some major crises and had to be resolved by engaging Cisco’s global customer support teams”.
Moreover, BSNL, besides its own procurement means, is authorised to execute India-wide internet networks for the army and navy. What has raised eyebrows in BSNL’s top hierarchy is that through suspect procurement processes, only Cisco equipment was qualified for the two defence services. This was done while ignoring some of the original equipment manufacturers/suppliers (OEMs).
BSNL sources said that these are huge-value projects which are in the final stages of being awarded to partnering companies. All this, they said, has cast a shadow over Cisco’s role in public sector businesses in India.
Neither BSNL Chairman and Managing Director Anupam Srivastava nor Cisco’s Steve Williams responded to The Quint’s questionnaires, which were emailed to them nearly 48 hours before the story was published. When contacted over phone, Williams confirmed he had received The Quint’s email and that he had passed it on to “our press office.”
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