New Delhi: Lack of due diligence, tweaking policy in favour of companies for mutual benefit and consequential loss of opportunity to maximise profits — these are some of the discrepancies highlighted in the Lokpal order that has now formed the basis for suspension of two top officials of the Steel Authority of India (SAIL), ThePrint has learnt.
In a statement released Saturday, SAIL said it has suspended V.S. Chakravarthy, director (commercial), and A.K. Tulsiani, director (finance) with immediate effect on the directions of the government.
“The issue pertains to some investigations being carried out as per the directions of Lokpal,” the PSU said in its statement.
National anti-corruption watchdog Lokpal issued its order on 10 January based on three complaints filed by an individual against three SAIL officials, accusing them of colluding with companies to grant them undue favours and causing loss to the public sector enterprise.
The Lokpal had initiated the case on 28 March last year and asked the Central Vigilance Commission (CVC) to conduct a probe and submit a report by 20 May. The CVC requested an extension and submitted the report of its preliminary inquiry on 28 July, leading to the final hearing that culminated in the 10 January order.
Meanwhile, SAIL’s dealings with Venkatesh Infra Projects and Avon Steel Industries are under the scanner. The investigation for both cases has been handed over to the Central Bureau of Investigation (CBI), according to the Lokpal order. The probe will be completed within six months.
ThePrint reached Venkatesh Infra and Avon Steel for comment over email. The report will be updated if and when their responses are received.
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The three complaints
The first of the three complaints mentioned in the Lokpal order was against the executive director (sales and international trade division) for signing an MoU on 20 October 2020 with a company called Venkatesh Infra Projects Private Limited, which was allegedly formed only eight days earlier.
Additionally, the complainant accused the officer of helping this company acquire 7,170 MT of steel in November 2020, 15,528 MT in the following month and 16,577 MT in January 2021 at low prices without any industry experience.
The complainant alleged that the firm was just a trader of steel, which procured material from SAIL and sold it in the open market. The complainant accused the director of violating the Monthly Pricing Scheme to give the firm steel at “abysmally lower prices”, which only government departments and companies operating in bonafide projects are supposed to get.
The second complaint alleged that the director (sales and ITD) and the chairman of SAIL misused their position to favour SAIL’s competitor Avon Steel — a leading producer of narrow-width hot rolled (HR) coils.
The complainant claimed that while both SAIL and Avon Steel sell their HR coils in the open market, Avon Steel’s coils are narrower and therefore more affordable for tube makers. The complainant further claimed that Avon Steel depended on SAIL for Semis, a vital raw material for making HR coils, and SAIL sold more of this raw material to its competitor Avon Steel than using it to produce its own HR coils.
The complaint alleged that this resulted in a huge loss of revenue for SAIL and a windfall gain for Avon Steel, which could not have sourced the raw material from anywhere else.
The complainant claimed that the net sale realisations (total sale and money earned) of the Semis and HR coils sold by SAIL’s Ludhiana plant diverged sharply, resulting in the PSU losing Rs 231 crore from October 2020 to May 2022 due to the two officers’ missteps.
The complainant also claimed that Avon Steel had no other source of raw materials than SAIL, which gave the PSU a “commanding position” to negotiate the price and make huge profits, but it failed to do so due to officials abusing their positions.
The third complaint alleged that the director (sales and ITD) and another executive director had a close relationship with Hi-Tech Pipes Limited and gave them undue favours that caused a loss of Rs 4.2 crore to SAIL.
What did CVC report find
The CVC investigated the first complaint about Venkatesh Infra and discovered that an MoU between the PSU and the company was based on a certificate from SAIL’s project customer APCO, dated 12 September 2020. The certificate stated that Venkatesh Infra had been doing reinforcement and structural steel work for NHAI-related projects at the national level for the previous 11 months.
The CVC probe revealed that this was false and that Venkatesh Infra was incorporated on 12 October 2020, the same date alleged by the complainant.
“There is a clear finding in the report of the preliminary inquiry that, in this case, a lapse has been found on the part of SAIL officials for not verifying the credentials of M/s Venkatesh before entering into the Project MoU,” said the Lokpal order quoting the finding of the CVC preliminary inquiry report.
On the allegations related to lower prices of steel offered to Venkatesh Infra, the CVC found that the company was offered lower prices compared with other companies that had MoUs with SAIL between November 2020 and October 2021, except in September of that year.
“The fact that has emerged is that lack of due diligence on the part of officers of SAIL is prima facie noticed for considering the lower pricing level of M/s Venkatesh vis-à-vis other customers of similar take-off, and especially considering their past association with SAIL, that resulted in loss of opportunity for maximising profit A to SAIL. Therefore, possible connivance of some officials with M/s VIPPL cannot be ruled out,” the report said.
On the second complaint of providing benefits to Avon Steel, the CVC found that, although the prices offered to the company were well within the pricing circulars and delegation of powers in SAIL, a “criminal act” cannot be ruled out considering the supply of a superior grade quality of raw materials to the company despite knowing that the company’s business growth was detrimental to SAIL’s own financial interests.
“The fact remains that SAIL failed to maximise the revenue (profit) from M/s Avon Steel Industries considering that better quality blooms were supplied to the company, which were being converted by M/s Avon Steel Industries to narrow width HR coils with substantially higher margin,” said the CVC report.
Moreover, the CVC report noted that a CBI probe was recommended for the first two complaints concerning Venkatesh Infra Projects and Avon Steel Industries.
“Ministry is of the view that this case also warrants deeper probe/investigation by external/specialised agency to ascertain the exact nature of the role played by various stakeholders with reference to fixing a leaky pricing/marketing policy, the principal beneficiary of which is M/s Avon Steel Industries itself and possible nexus among officials and the firm and other beneficiaries, etc. As such, the ministry recommends CBI enquiry into this complaint to unearth the linkages of stakeholders,” the CVC said.
However, the CVC report did not find any substance in the third complaint, which alleged that Hi-Tech Pipes Limited got undue favours from SAIL by lifting more materials when the prices were likely to increase in the next months. The report said that this was a common practice for all the companies with MoUs with SAIL in the northern region.
(Edited by Richa Mishra)
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