Yeddy & co take kids for a ride

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Bicycles meant to help poor students, particularly girls, ride to school are helping Karnataka’s top politicians fill their pockets. IMRAN KHAN reports

Queasy rider Chief Minister BS Yeddyurappa falls off a bicycle during a BJP rally
Queasy rider Chief Minister BS Yeddyurappa falls off a bicycle during a BJP rally
Photos:KPN Photo

THE KARNATAKA government’s Department of Public Instruction has been procuring nearly 6 lakh bicycles every year for free distribution to eighth standard students of poor families. For the past 3-4 years, the order has been given to the same four major companies, who have formed a cartel to quote the same rate. And yet, a large chunk of bicycles are being procured by the government at par with or above the prevailing maximum retail price (MRP) in the market.

Various bicycle associations and smaller companies have been taking up the matter with Chief Minister BS Yeddyurappa but to no avail — all indications are that this cartel has his full blessings.

The scheme of offering bicycles to students was launched by the then HD Kumaraswamy government in 2006. It was meant to check students, especially girls, from dropping out of school due to the difficulty of trudging long distances every day to attend classes.

When the BJP government came back to power under the leadership of Yeddyurappa, the scheme was continued by the present government. But over time, rumours of nepotism, kickbacks and corruption around the scheme, meant for Below Poverty Line families, started doing the rounds.

On 12 December 2009, the issue was raised in the Assembly by Member of Legislative Council (MLC) and state Congress spokesperson VS Ugrappa, who alleged that there was large-scale corruption in procurement of bicycles. He had also alleged that the CM’s son BY Raghavendra had got huge kickbacks in the deal.

“The government is paying around Rs 2,400 per bicycle, whereas the market price is Rs 1,750-2,000. And every year, more than Rs 30 crore is being misused,” Ugrappa told TEHELKA.

Apparently taking serious note of the allegations, Yeddyurappa promised to constitute a committee on it, which was duly done under the chairmanship of JD(S) MLC MC Nanaiah. But he resigned after some time, saying he was not given enough leeway to investigate the case.

Later, the state government appointed BJP MLC S Thontadarya as head of the committee. This committee, which submitted its report to the Assembly in January this year, gave a clean chit to the chief minister’s son Raghavendra.

“Even going by the committee’s report, you can make out that there were lots of discrepancies,” says Ugrappa.

According to the report, every year the bicycle price has increased and also the purchase quantity. The year (2009), when Ugrappa raised the issue in the Assembly, there was a jump in procurement of bicycles by up to 2.5 lakh, and also, the price of the bicycles was increased from Rs 2,050 to Rs 2,397 — a difference of Rs 340 per bicycle, which amounts to an extra outlay by the government of Rs 71 crore.

Year

2006-07

2007-08

2008-09

2009-10

2010-11

Bicycles Purchased

4,20,323

4,35,000

6,66,222 (jump of 2 lakh)

5,33,392 (drop of 1 lakh)

11,27,376 (jump of 7 lakh)

VICIOUS CYCLE

Amount (in Rs)

85.32 crore

89.18 crore

159.67 crore

127.48 crore

248.02 crore

STUNG BY the allegations, the state government scaled down the procurement of the bicycles to 5.3 lakh in 2010, taking it down by 1 lakh. Also, the amount paid per cycle was reduced from Rs 2,397 to Rs 2,390.

In an interesting case, documents available with TEHELKA show that a sub-agent of Atlas cycles in Bantwal taluk near Mangalore has quoted around Rs 1,832 per bicycle with a special discount of Rs 50. While the parent company quoted around Rs 2,253 for the same bicycle, clearly charging an inflated rate for the government.

The fact remains that the CM’s son was an agent of Hero and Atlas cycles for Shimoga

“The committee could have taken quotations from various agencies, agents and sub-agents,” says Ugrappa. “Such quotations could have shown the difference in the procurement price. They should have also asked the four companies — Hero Cycles, Atlas Cycles, Avon Cycles and TI Cycles — who have been getting the contracts to place (on record) their cycle’s turnover, sales tax. These records would have reflected the real position. However, all this was not done.”

All this goes to show, says Ugrappa, that the real beneficiaries of the scam were being protected.

More damningly, “They have also not taken into account the fact that Raghavendra was earlier an agent for Atlas and Hero Cycles for Shimoga district,” says Ugrappa.

In February this year, the education ministry, through the Department of Public Instruction, again floated a tender for the procurement of bicycles.

This year the quantity has been increased to 11.27 lakh bicycles, which is a jump of 6 lakh bicycles from last year. This year too, the tender has been worded in such a way that only the four large companies can bid for the contract, ignoring small and medium enterprises (SME).

Though this time the SME sector tried to participate through National Small Industries Corporation Ltd (NSIC), which was incorporated to help the small-scale sector, the attempt failed when the tendering authority rejected its eligibility in the prebid meeting on 26 February this year.

According to the terms of participation, a bidder should have Rs 200 crore turnover and should have production capacity of 2 lakh bicycles per month, up from 50,000 bicycles per month.

Ringing the bell Members of the Legislative Council VS Ugrappa and MC Nanaiah (right)
Ringing the bell Members of the Legislative Council VS Ugrappa and MC Nanaiah (right)

These two clauses make it possible only for the four large companies to participate, ruling out any other player. It has also been alleged that the tender terms make it possible for the four large companies to divide the order among themselves, and makes it possible for them to maintain the price at a level higher than the retail price.

At an average price of Rs 2,200 per bicycle, the total value of the tender comes to approximately Rs 248 crore and each company will be getting an order of about Rs 62 crore. The turnover clause has been pegged unnecessarily high, for the guidelines merely say the turnover should be more than 33 percent of procurement value (which would be Rs 20.46 crore).

It is a known fact that whenever competition has been restricted during the tender process, it not only allows cartelisation but the government ends up paying exorbitant prices.

This has been happening in Karnataka every year. If SME units are allowed to participate, prices will surely be reduced by 15 percent in fair competition and supply will also be expedited.

But these suggestions are not acceptable to top politicians and bureaucrats because greater transparency will prevent them from subverting the system.

Imran Khan is a Correspondent with Tehelka.com. 
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