Whistleblower exposes Rs. 5000 crore Railways scam-September 11, 2010 -

Whistleblower exposes Rs. 5000 crore Railways scam

NDTV Correspondent, Updated: September 11, 2010 22:31 IST

(After Sugar scam, telecom scam and CWG scam, now comes the great railway sacm under a honest Prime Minister. It's Rs 5000 crore per year - perhaps the mother of all scams.)



Kolkata: When you board a train, ever wondered about the cost of curtains in an AC-2 tier coach? Ever noticed a pleasant smell in the toilet? Or is it the stink of corruption?

NDTV has access to documents showing how crores are gifted to vendors by Railways which lets them charge exorbitant rates - in return for kickbacks - for curtains, odour control systems and hundreds of other items that it buys every year.

Atul Kumar, an Indian Railway Store Service officer, wrote a letter to Railway Minister Mamata Banerjee in March, detailing the modus operandi for the leakage of around RS. 5000 crore rupees each year.

"The Railways buys from pre-approved vendors. After getting approved, the vendors take advantage and form cartels and quote exorbitant prices. They dictate prices and this problem is known to all. But due to kickbacks involved or perhaps more due to normal bureaucratic apathy, nothing fruitful is done," said Atul Kumar, IRSS Officer.


Cartels are not peculiar to Railways. It's a universal phenomenon. However, what is peculiar is the organization itself first breeds the cartels and then the cartels bleed the organization.

Surprisingly, Kumar's letter has never been acknowledged, neither by Mamata nor by the Railway Board.

If one takes a look at the scam documents, the letter speaks the glaring truth.

In the case of fragrance dispensers installed in AC-2 tier coaches and toilets in 2005, the Railways Research Design & Standards Organisation (RDSO) told the management to install a specific brand of odour control systems in trains. The brands were Auto Janitor and Microburst produced by a UK-based company. Three Mumbai-based suppliers - Dinesh Kumar & Company, SR Electronics and Jade International- were named by sources.

In 2007, Jade imported the dispensers for Rs. 415 each and sold them to Railways for Rs. 4600 a piece - more than ten times the cost. Dispenser refills were imported for Rs. 226 and sold to the Railways for Rs. 1300 each - at five times the cost .

The Railways cut out competition by making specifications match a particular brand. Other vendors say that similar dispensers are available locally at about Rs. 700 per piece.

But this is not all, the tale of the side bearer pads is equally shocking.

In 2007, these pads cost Rs. 300 each. But specifications were changed to suit the concerns of pocket bearers. In September and December 2008, the prices were flared up to Rs. 4160 which is 14 times the original.

As per Atul Kumar, the whistleblower in this case, each year the Railways buys goods worth Rs. 17,000 crore in which overpricing is by about 30 per cent or a whopping Rs. 5000 crore that goes from the exchequers money.

But when asked about this report, Minister of State for Railways, K H Muniappa, completely denied that there was any kind of scam. He said the process was entirely transparent.

"It is not true; the Railways department has got transparency. Whatever work is entrusted to the vendors, all are transparent," Muniappa said. (Watch)

Mamata Banerjee had brought up these issues last year and, this July, the Railway Board's vigilance office began a nationwide probe into the procurement of 16 items. By 6th August, that list grew to 20, the CVC stepped and reports were sought within four weeks. Investigations are on though there has been no action yet.

"CWG is a much smaller and one time scam. Scam in railway procurement is much bigger and perennial," said Atul Kumar.