Bangalore: Karnataka`s Food, Civil Supplies and
Consumer Affairs Department has wasted Rs 54.53 crore by
entrusting to a private company the computerisation project to
digitise the data collected through a house-to-house survey
and issue computerised ration cards to the eligible families.
"The Department wasted Rs 54.53 crore through its failure
to enforce the agreed terms of implementation during the
project`s lifetime", said a CAG report, tabled in the
just-concluded legislature session.
The project, approved by the Government in 2005, sought
to eliminate ineligible ration cards, besides creating an
effective distribution management system to ensure
availability of rationed articles, reduce leakages and provide
an efficient and real-time Management Information System.
The Department selected a partner in March 2006 under
the Build, Operate and Transfer model of
Public-Private-Partnership through a bidding process to
implement the comprehensive project over a period of five and
a half years.
However, the Government`s decision to adopt the PPP route
had not been taken after considering all alternatives.
Balanced sharing of risks between the Government and the
private sector partner had not been ensured for enduring
success of the PPP arrangement and the choice of PPP was not
taken after due deligence.
The selection of the private partner and the qualifying
procedures were flawed, resulting in selection of the partner
who did not have the capacity to deliver.
The CAG observed that the oversight over implementation
of computerisation was so defective that the partner
persistently bypassed the contracted procedures and carried on
with the work in a totally uncontrolled environment. This
resulted in an abnormal increase in the number of ration cards
including those for the families below poverty line.
Although the partner was to complete the project set-up
phase by October 2006, it remained incomplete even five years
after the scheduled date of completion. After receiving a
payment of Rs 54.23 crore, the partner closed the operations
prematurely in November 2010 without transferring any of the
assets except the database of ration cards.
"An evaluation of the database by a third party showed
that it was incomplete in many aspects, suffered from many
deficiencies and was not capable of preventing duplication of
ration cards", it said.
"The PPP project ended up as an example of doubtful value
for money in a crucial area of Governance," CAG observed.
As of December 2010, 58.57 lakh families who had been
subject to photography and biometric capture had not received
permanent ration cards even after having remitted Rs 26.36
crore for the purpose.
Similarly 68.59 lakh families who had paid Rs 10.29 crore
for bar coded coupons were yet to receive the assured
The CAG has recommended fixing responsibility for
various lapses in the project formulation, contract award and
implementation of the project which caused huge loss to the
state exchequer in the form of subsidy given to ineligible
families besides frittering away Rs 54.53 crore out of the
resources collected from the public and bringing the process
of issue, modification and deletion of ration cards in the
State to halt since November 2010.