Third Minister In Dock: What Is AAP’s DTC Scam?

Delhi has an acute shortage of buses. In such a scenario, the Delhi government needed to procure DTC buses to meet the rising demand.

In January 2021, the AAP government came out with a work order to purchase 1,000 DTC buses. However, within five months, the Delhi government put the work order in indefinite abeyance.

Since then, it has failed to procure even a single DTC bus. Why?

Trouble for the Aam Aadmi Party (AAP) government began when the hints of a scam in the tendering process reached the opposition and it raised the issue in Delhi Assembly and demanded a criminal inquiry.

A three-member fact-finding committee, constituted by the Delhi LG, eventually brought out incriminating observations that cast aspersions on the maintenance contract of the new DTC buses.

The committee advised the AMC bid to be scrapped.

In August 2021, the Home Ministry recommended a CBI probe into the matter. The CBI registered a preliminary inquiry to investigate the alleged corruption in the procurement of 1,000 low-floor DTC buses.

Here’s a chronological breakdown of the entire story.

Details of the Tender Issued

On 27 November 2020, the DTC Board held a meeting to approve the resolution to issue the purchase order for 1,000 low-floor buses.

The meeting was chaired by AAP government’s Transport Minister, Kailash Gahlot.

The tender was to be given to two private companies: JBM Auto Ltd and Tata Motors for 700 and 300 buses respectively at the cost of Rs 890 crore. This included a warranty period of three years.

In the same meeting, DTC Board also took out the work order for the maintenance of the buses and fixed it at Rs 45 per kilometre, totalling to Rs 3,500 crore.

This, too, was handed over to the same bus suppliers.

Cost of Maintenance Four Times Higher than Cost of Purchase

As per the contract provisions, the order of the buses’ maintenance would have come into effect from the very first day of the buses plying on the road.

That meant that even within the warranty period, the government was handing over additional Rs 1,000 crore to the private companies for maintenance of brand new buses.

Gahlot defended the maintenance charge stating that it covered 71 items that are not part of the warranty. However, those “71 items” were not part of the tender document or the work order.

Arbitrary Nature of the Process

In the same meeting, an approval for procurement of a total of 1,250 buses was given, and order for 250 buses, over and above the tender of 1,000 buses, was issued.

The Cabinet decision taken on 11 July 2019, however, referred to the procurement of 1,000 buses only.

Adding 250 buses to the purchase order without the Cabinet’s approval raised suspicion about the arbitrary nature of the entire process.

Gahlot was forced to change his decision to procure 250 more buses, without prior Cabinet approval, in a DTC Board meeting he convened on 6 January 2021.

Concealing Minutes of the Meeting

The opposition accused the government of not uploading the minutes of the meetings held on 27 November 2020 and 6 January 2021, which is mandatory.

It was only after the opposition raised the issue in the Assembly session on 8 March 2021, that the minutes were uploaded on the website.

Complaint to Anti-Corruption Bureau

The opposition in Delhi raised the issue of a compromised tendering process and complained to the Anti-Corruption Bureau (ACB). The ACB began an investigation.

Meanwhile, the Delhi government withdrew the tender process. It made the plea that the ACB investigation must be dissolved since the work order had been withdrawn.

Even after this, it again gave the tender for DTC buses to JBM Auto Ltd, but with a different route.

Issue Raised in the Delhi Assembly

During a ‘Calling Attention Motion’, Former LOP, Delhi Assembly and BJP MLA Vijender Gupta raised the issue of irregularities in the Delhi government’s procurement of new buses on 11 March 2021.

Gahlot claimed that they are saving money on the deal and challenged the BJP to stop the bus deal.

Demand for Permission to Conduct Criminal Investigation

BJP MLAs in Delhi wrote to ACB demanding an inquiry into the matter on 12 March 2021.

The ACB took cognizance of the matter and sent the request to conduct an inquiry to the Transport Department, Delhi government.

Work Order Put on Hold Indefinitely

The Committee, thus, formed under Special Commission Vigilance, Transport Department, Shashi Kaushal, in its report submitted on 4 June 2021, found grave financial irregularities and recommended giving permission for ACB inquiry.

On 11 June 2021, after five months of a work order being issued, Delhi government put the order on hold indefinitely (see below).

Three-Member Fact Finding Committee

On the direction of the LG, the Chief Secretary proposed a three-member committee to inquire further into the matter.

The Delhi LG accepted the proposal and also nominated three members for the committee, thus formed.

Findings of the LG Constituted Committee

The committee restricted its focus to the procurement process for AMC of the buses. It did not dwell into the purchase contract of the DTC buses. Here is what the Committee found:

1. The Committee underlined the need to take special measures to ensure competition in the tendering process and avoid monopoly pricing. It said:

“It is, therefore, essential to take special measures to widen the market and get others to bid for maintenance. Restrictive and unduly demanding tenders could limit the market severely.”

However, the Committee found that they were not addressed when DTC floated a tender for the purchase of the AMC. The tendering process was found to be restrictive in nature leading to cartelization of the bid.

2. The Committee detected fraud in the eligibility conditions of this tender.

It noted that splitting the tender between the purchase of buses and the purchase of AMC of the buses did not make any difference to the number of players applying to the tender for the AMC contract.

The Committee also detected fraud in the design of the tender saying that it was designed in such a way that only two players, who received the contract for the purchase of buses, would be the ones eligible for the second tender.

3. The conditions were so provided that the two companies that were finalised for the tender of purchase of buses knew in advance that they would get the tender for the AMC as well.

4. The DTC did not, fraudulently, provide any internal cost assessment for benchmark bids. The Committee points out:

The field was open for the two players to quote any price they deemed fit since the DTC did not have any benchmark for the cost estimation.

The Committee, also, found serious irregularities in market price. It noted that: “…DTC should have ensured that they did some kind of reasonableness test of the rates for AMC, especially since the rates were far higher than what they had in earlier contracts.”

5. The Committee detected another fraud in the tendering process that the DTC engaged DIMTS as a bid management consultant for a much simpler bid.

But, when it came to the procurement of the AMC, a much more complex bid, it did an in-house exercise.

It found that DTC board was not apprised of the true comparison of bids to arrive at an informed decision on the lowest bidder.

6. It found gross violations of provisions of GFR and manual of procurement rules.

7. It also came across clear violations of CVC guidelines in the tendering process.

After examining the matter, the Committee came to the following conclusion:

The above observations point to a financial fraud worth thousands of crores of taxpayers’ money.

The AAP government has also been facing other serious charges of corruption, the latest being the liquor scam.

Once caught, the staple reaction of CM Arvind Kejriwal and his government is to withdraw the policy under question.

In the DTC procurement too, once the details began leaking and the possibility of ACB stepping in became plausible, it hastily withdrew its work order.

Recently, CM Arvind Kejriwal shared a news report based on “sources”. The report, incorrectly, said that the Kejriwal government has been given a “clean-chit” in the DTC matter.

With the CBI opening a preliminary inquiry into the matter, more trouble awaits the AAP government. It would be interesting to watch how it salvages its image tainted with charges of corruption.

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