The Hindu Business Line : Cost management can be more professional

A FEW months back, the chief technical examiner (CTE), Central Vigilance Commission, issued an office memorandum to all chief vigilance officers of public sector units (PSUs) and statutory bodies under the Central ministries on `common irregularities in the award of contracts'.

The memorandum stated that an oil PSU issued a tender for a "big work of about Rs 20 crores... on the basis of a single page estimate submitted by the consultants and the same was revised upwards by 20 per cent after opening of price bids, in order to justify the quoted rates." The CTE wanted PSUs to shun "over-dependence on consultants". Surprisingly, the Comptroller and Auditor General (C&AG) missed that in the audit report of the oil PSU. The need for all-round expenditure discipline and restraint cannot be ignored. Coordination between the CVC and CAG and exchange of classified documents between them should improve.

It is not healthy to leave all decision-making to bureaucrats, especially senior IPS and IAS officers, though unfortunately many ministers depend excessively on the executive, being happy enough to sign the dotted line. It is not unusual for top IAS officers to behave like super-ministers, interested in promoting their personal interests, and least concerned about introducing cost-efficacy in a scientific way.

Take the annual mandate of 10 per cent cut in non-Plan expenditure in government departments (including commodity boards). Common sense would reject the concept of a single percentage of expenditure-slashing, as the figure varies from one unit to another.

Periodic setting up of committees to rationalise (read reduction) staff strength, such as the staff inspection unit (SIU), are often wasteful and at times, harmful too. For instance, the SIU, set up by the NDA Government, reportedly recommended the abolition of the post of cost accounts officer (CAO) in the Tea Board. The CAO saved nearly Rs 100 crore for the exchequer through stringent scrutiny of the finances of FERA tea companies in the late 1970s, that is, during their mandatory Indianisation. Most of these tea companies had, in their compliance report with regard to reducing their stake from 100 to 74 per cent or less, inflated their value base to extract higher compensation from the Government. The CAO at that time, with a handful of subordinates, had prevented a huge outflow in hard currency. However, the officer did not get any reward for this. After his superannuation, the Tea Board kept the post vacant for six years.

The SIU team failed to appreciate the need for a strong cost study cell in the Tea Board to scrutinise applications of loan and interest subsidy from tea companies; nor did it consider the past achievements (as also failures) of the cell. The Commerce Ministry mandarins, too, do not seem bothered about the goings-on at the commodity board.

Instead, the Ministry tends to rely on shoddy studies such as the one on cost of production of green leaf in the small growers sector and cost of manufacture of `made tea' in bought-leaf factories. Based on this, the Udyog Bhavan okayed the Tea Board's proposal on price-sharing formula between small growers and manufacturers.

That the study spoke of `25 small growers in Darjeeling' although there cannot be any small growers there, or did not provide any garden-to-garden listing of costs, got overlooked. Unless innovations are introduced, success in expenditure control will be elusive. Take the propensity among senior officers to become members of the frequent flyers club.

They travel merely to add mileage points and, thereby, get free tickets for trips abroad with family. Domestic airlines now allow frequent flyers to club mileage points of their spouse for redemption, and get free tickets as gift to a friend, family member, business associate or any other person of one's choice.

There are clear rules governing government departments and public sector enterprises on eligibility to travel by air where there is urgency, such as a meeting at short notice.

But these are given a go-by even when intimation reaches the persons concerned well in advance. If the CVC/CAG asks PSUs, commodity boards and government departments for reports on compliance of air travel rules, rampant violation will be detected.