Chapter-IV Audit of Transactions

CHAPTER-IV

AUDIT OF TRANSACTIONS

Election Department
4.1 Diversion/misutilisation of election funds

Non-observance of procedures and instructions regarding conduct of

State Assembly elections, resulted in misutilisation of election funds
amounting to Rs. 1.89 crore.

Expenses of election to the Lok Sabha and the State Legislative Assembly
comprise pay and allowances of staff engaged with the election process,
preparation and printing of scrolls, procurement/supply of ballot boxes,
consumable/non-consumable material and TA/DA/honorarium to the poll parties.
Expenditure incurred on election establishment/electoral offices, preparation/
printing of electoral rolls is shared equally by the Central and the State
Governments. Incurring expenditure from divisible pool of fund on creation of
assets of capital nature such as construction of buildings, purchase of vehicles,
generators, repair works, purchase of non-election related items viz. furniture,
furnishings/fixtures, photocopier machines and pre/post poll itemsβ is prohibited.

Test-check of records (March/April 2004) of the Chief Electoral Officer,

Divisional Commissioner, Jammu, Director General of Police, Additional
Director General of Police (Armed), Jammu, five District Election Officers and
13 Senior Superintendents (SSP)/Commandants of Police revealed that
Rs. 1.89 crore out of total expenditure of Rs. 9.08 crore (Appendix-23) incurred
during the period from July 2002 to April 2003 on conduct (October 2002) of
State Assembly elections, had been diverted/misutilised by these officers on
construction and repair works (Rs. 29.50 lakh), purchase of inadmissible# items
(Rs. 61.55 lakh), clearance of liabilitiesφ (Rs. 14.32 lakh) and pre/post poll
expenses (Rs. 83.93 lakh), which were not incidental to elections. On being
pointed out (March 2004) the Commandants, Indian Reserve Police–IV Battalion,
Jammu and Kashmir Armed Police-IV Battalion, Jammu and the SSP, Poonch
stated (March 2004) that the expenditure had been incurred under orders of the
Police Headquarters. The replies were not tenable as expenditure incurred was not
incidental to elections. No reasons for the diversion of election funds were
furnished by other 19 offices.

β
Transfer/Tour TA and DA, Hire charges of chairs/shamiyanas for police conference, POL and
telephone charges, etc. not related to election process
#
Colour Television sets, generators, furniture/fixtures, cordless phones, photocopier, fax
machines, refrigerator, kitchen ware and books
φ
Expenditure on Amarnath yatra (July- August 2002): Rs. 14.07 lakh and past liability on account
of purchase of furniture: Rs. 0.25 lakh.
67
Audit Report for the year ended 31 March 2004

Thus, non-observance of procedures and instructions regarding incurring

of expenditure during conduct of State Assembly elections, resulted in
misutilisation of election funds amounting to Rs. 1.89 crore.

The matter was referred to Government/Department in July 2004; reply

had not been received (September 2004).

Health and Medical Education Department

4.2 Embezzlement of Government money due to lax supervision

Lax supervision and non-observance of prescribed control procedures

by the Accounts Officer, SMHS Hospital, Srinagar and Resident Medical
Officer (OPD) facilitated embezzlement of Rs. 12.48 lakh.

Rule 2.2 and 2.15 of Jammu and Kashmir Financial Code Volume-I
envisage that all sums which a Government servant receives in his official
capacity should immediately be remitted/paid directly into the treasury or through
next higher officer maintaining the cash book. Audit scrutiny (December 2003) of
records of the Superintendent, SMHSϕ Hospital, Srinagar revealed that
diagnostic/service charges of Rs. 12.48 lakh realised by the Resident Medical
Officer (RMO), Out Patient Department (OPD), SMHS Hospital, Srinagar from
February 2003 to November 2003 was misappropriated by two officials& by non-
accountal of cash receipts (Rs. 7.08 lakh) and recording entries of fictitious
remittance (Rs. 5.40 lakh) to DDO♣ in his subsidiary cash book.

The embezzlement was facilitated due to laxity in supervision and non-

observance of prescribed control procedure by the Accounts Officer (DDO) and
RMO. Cash book was not checked, attested and closed (April to November 2003)
by the RMO. Periodical verification of cash balances reflected in the cash book
and reconciliation of remittances between RMO and DDO’s office had not been
conducted. Heavy cash balances were retained for two to four months and duties
for receiving cash had been assigned to a Nursing Orderly. Stock account of
receipt books had not been maintained by the RMO and receipts for revenue
realised were not issued under his seal and signatures or by any other authorised
officer.

On this being pointed out in audit (December 2003), the Medical

Superintendent, SMHS Hospital, Srinagar stated (December 2003) that
Rs. 3.29 lakh had been recovered, dealing officials placed under suspension and
departmental inquiry proceedings instituted in this regard.

The matter was referred to Government/Department in March 2004 and

another departmental committee was constituted (April 2004) to investigate the

ϕ
Shree Maharaja Hari Singh
&
One Senior Assistant and one Nursing Orderly
♣
Drawing and disbursing officer
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 Chapter-IV Audit of Transactions

embezzlement, who opined (August 2004) that the case be referred to any prime
investigating agency.

4.3 Unfruitful expenditure

Failure of the Department to acquire the land for construction of two

Public Health Centre buildings resulted in unfruitful expenditure of
Rs. 15.10 lakh.

Executive Engineer, R&B Division, Poonch took up (May 1998/February

1999) the work for construction of building for Public Health Centres on the sites
identified by Chief Medical Officer (CMO), Poonch at Sawjian (estimated cost:
Rs. 9.50 lakh) and Chattral (estimated cost: Rs. 10.65 lakh).

Test-check of records of Public Works Division (R&B), Poonch revealed

that after incurring expenditure of Rs. 15.10♣ lakh on part construction of
buildings further execution was held up (Sawjian: January 1999; Chattral: March
2001) as the land owners stopped the work due to non-payment of land
compensation by the Health and Medical Education Department. The CMO,
Poonch stated (February 2004) that land owners were being persuaded to settle
the dispute and action for payment of land compensation would be taken
accordingly.

Thus, non-acquisition of land by CMO, Poonch for construction of two

Public Health Centre buildings resulted in unfruitful expenditure of
Rs. 15.10 lakh.

The matter was referred to Government/Department in July 2004; reply

had not been received (September 2004).

Home Department

4.4 Inadmissible payment of House Rent Allowance

Non-adherence to prescribed rules/instructions by 20 Drawing and

Disbursing Officers of Police Department resulted in irregular payment of
House Rent Allowance of Rs. 24.31 lakh to 184 employees occupying
Government accommodation.

Jammu and Kashmir Civil Services (House Rent and City Compensatory
Allowances) Rules 1992, lays down that House Rent Allowance (HRA) is not
admissible to those Government Servants who are either provided with
Government accommodation or occupy/reside/share the Government
accommodation allotted to some other person. Finance Department issued
instructions in 1998 and 1999 to all the Drawing and Disbursing officers (DDOs)

♣
Sawjian: up to roof level (construction cost: Rs. 4.25 lakh, January 1999), Chattral: building
complete except furnishing items (construction cost: Rs. 10.85 lakh; March 2001)
69
Audit Report for the year ended 31 March 2004

and Treasury Officers (TOs) that HRA, if any, paid to such Government Servants
who occupy Government accommodation should be recovered forthwith.

Test-check of establishment bills of 20 DDOs (Appendix-24) of Police

Department revealed that HRA amounting to Rs. 24.31 lakh was irregularly
drawn and paid to 184 employees occupying Government accommodation during
the period from April 1999 to February 2004 in contravention to above rules/
instructions. Non-adherence to prescribed rules/instructions by these DDOs
resulted in irregular payment of HRA of Rs. 24.31 lakh to the employees
occupying Government accommodation.

The matter was referred to Government/Department in September 2004

and the Government issued instructions to the Director General of Police (DGP)
for taking immediate remedial measures and disciplinary action against the
defaulting officers. The DGP directed (October 2004) the concerned DDOs to
effect recovery of excess payments immediately.

4.5 Avoidable extra expenditure due to purchase at higher rates

Purchase of uniform cloth at higher rates from a local firm by the

Director General of Police, resulted in avoidable extra expenditure of
Rs. 19.09 lakh.

Director General of Police (DGP) invited (March 2002) tenders for supply
of 70,000 metres of uniform cloth♣ (terricot khaki). The State Level Purchase
Committee in its meeting (July 2002) rejected 34 offers out of 36 received in
response to the above tender notice due to non-fulfilment of required terms and
conditions of the tender (17) and poor quality samples (17). Of the remaining two
offers, the Committee did not consider offer of Rs. 72.90 per metre of a Delhi
based firm on the pretext that the firm had changed (May 2002) its
nomenclature♦, intimation of which had been received (June 2002) after opening
of tenders and instead approved rate of Rs. 88.20 per metre of cloth offered by the
local firm. The Committee, however, in the same meeting approved another offer
of shirtingφ cloth in favour of the same Delhi based firm contrary to their earlier
decision.

Test-check (March 2004) of records revealed that orders for supply of

1,24,800 metres uniform cloth was placed (August/November 2002) by the DGP
with the local firm which supplied (November 2002 to March 2003) 1,24,795
metres of the cloth for which an amount of Rs. 1.10 crore was paid (January 2003
to June 2003) resulting in extra expenditure of Rs. 19.09 lakh. On being pointed
out in audit, the DGP stated (March 2004) that offer of the Delhi based firm was
rejected by the purchase committee due to poor quality shade/colour of its sample

♣
138 cm width, Ist Grade quality conforming to IS No. 11248/1995
♦
From Private Limited Company to Public Limited Company
φ
Cellular khaki 81/84 cm width (IS No 1144/1980)
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 Chapter-IV Audit of Transactions

cloth. This was not based on facts as the offer of the firm was ignored by the
Purchase Committee merely on the basis of change of nomenclature of the firm.

Thus, purchase of uniform cloth at higher rates from a local firm resulted
in avoidable extra expenditure of Rs. 19.09 lakh.

The matter was referred to Government/Department in June 2004; reply

had not been received (September 2004).

4.6 Unfruitful expenditure due to wrong planning

Wrong planning by the Director General of Police to purchase part

machinery/equipment for printing press, Srinagar and without ensuring
trained manpower to operate it, resulted in unfruitful expenditure of
Rs. 43.97 lakh besides defeating the objective of upgrading the press.

For modernising and upgrading Police Printing Press Srinagar, on the

basis of decision (July 2001) of the high level departmental committee, the
Director General of Police (DGP) placed (December 2001) an order for supply of
colour offset printing machine (cost: Rs. 32.32 lakh) with Hindustan Machine
Tools (HMT) Limited. Orders for supply of three equipments♣
(cost: Rs. 7.66 lakh) were placed in December 2001/January 2002 and for further
six equipments♦ (cost: Rs. 10.86 lakh) in June 2003, after delay of 18 months,
with other suppliers. The printing machine and three equipment were received in
March 2002 but the remaining equipments were yet to be received (April 2004).
Payment of Rs. 36.75 lakh was released to the concerned in March 2002 after
withholding Rs. 3.23 lakh against performance of the machine. Further
expenditure of Rs. 3.99 lakh was incurred on carriage/toll charges, etc.
(Rs. 0.78 lakh), foundation/allied works (Rs. 2.92 lakh) and purchase of a
stabilizer (Rs. 0.29 lakh) during 2002-03 for installation of the printing machine.
The machine installed in May 2002 could not be made functional due to non-
availability of trained manpower to operate it. The firm offered (May 2002)
training to staff free of cost which was not availed of by the Department (March
2004). Balance Rs. 3.23 lakh was released to the firm in October 2002 before
expiry (May 2003) of the warranty period of the machine.

On being pointed out (January 2004) in audit, the DGP stated (March
2004) that the required training would be given to the concerned staff and
remaining equipments would also be procured to make the machine operational.
Further progress made in the matter was awaited (May 2004).

Thus, wrong planning by the DGP to purchase part machinery/equipment

for Police Printing Press, Srinagar and without ensuring availability of trained

♣
Automatic cutting Machine, Automatic Stitching Machine, Semi-Automatic Perfect Binder
♦
Plate exposure, Agfa scanner, Xinte Laser Printers, Plate developing sink, Planning Table and
Automatic Granning Machine
71
Audit Report for the year ended 31 March 2004

manpower to operate it, resulted in unfruitful expenditure of Rs. 43.97 lakh

besides defeating the objective of upgrading the press.

The matter was referred to Government/Department in June 2004; reply

had not been received (September 2004).

4.7 Idle investment due to injudicious action

Injudicious purchase of radio equipment by DGP without

ascertaining the actual requirement of accessories vital for their installation
resulted in idle investment of Rs. 12.27 lakh. The cost of financing the idle
investment worked out to Rs. 5.93 lakh.

Director General of Police (DGP) placed (October 1998) order with a

Delhi based firm for supply of two UHF Repeaters♣ (Radio equipment) on the
basis of indent (May 1998) of Director, Police Telecom (DPT) for monitoring
security of the Chief Minister. The equipment (cost: Rs. 12.27 lakh) was received
in October 1999. The departmental survey committee could not conduct field
trials of the equipment on its inspection (January 2000) due to non-availability of
the accessories required for its installation. Payment of Rs. 11.77 lakh was made
(June 2000) to the firm after withholding Rs. 0.50 lakh as security deposit.

Test-check (March 2004) of records revealed that the DGP belatedly

initiated process (December 2000) for purchasing the accessories♥ of the
equipment from the firm. The firm, however, communicated (August 2001/
November 2002) prices for only two accessories♠ sufficient for installation of the
equipment and impressed (March 2004) that other accessories were not required
at all. The DGP before successful commissioning and instead of getting the
warranty period of the equipment extended, released (March 2001) security
deposit of Rs. 0.50 lakh to the firm. On being pointed out in audit, the DGP stated
(March 2004) that the equipment would be made functional by procuring these
two accessories. This indicated that the DGP and DPT had not assessed the actual
requirement of accessories vital for installation of the equipment before placing
supply order with the firm.

Thus, injudicious purchase of radio equipment by the Director General of

Police without ascertaining the actual requirement of accessories vital for its
installation resulted in idle investment of Rs. 12.27 lakh for over four years. The
cost of financing the idle investment worked out to Rs. 5.93 lakh.

The matter was referred to Government/Department in June 2004; reply

had not been received (September 2004).

♣
800 MHZ, Model: MTR-2000
♥
Antenna system, R. F. Feeder UHF, Hand set, Speaker, Mounting rack and D. C. Battery cable
♠
Antenna system and L.D.F. Cable
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 Chapter-IV Audit of Transactions

Housing and Urban Development Department

4.8 Blocking of funds

Drawal of Rs. 3.50 crore by the Director, Local Bodies, Jammu

without any immediate requirement, resulted in locking of the amount for
the period ranging between nine and 40 months. Cost of blocked funds to
Government worked out to Rs. 53.48 lakh.

Financial rules of the Government envisage that no money should be

withdrawn from the treasury unless it is required for immediate disbursement.
Director, Local Bodies, Jammu drew Rs. 3.50 crore (Rs. one crore between
January and July 1999 and Rs. 2.50 crore in August 2000) for implementation of
State/Centrally sponsored schemesΦ and invested them in fixed deposits♥
(Rs. one crore: July 1999 to May 2000 and Rs. 2.50 crore: September 2000 to
January 2004) of a bank♣ outside Government account. Drawal of funds from the
Government Account and keeping these in FDRs of a bank resulted in interest
liability of Rs. 53.48 lakh on the overdrafts taken by the Government from the
same bank. The interest liability on the locked up amount at the borrowing rate of
the Government worked out to Rs. 1.19 crore against which Rs. 65.66 lakh only
were earned as interest on the FDRs. The Finance Department had also directed
(March 2003) that unspent balances of Centrally sponsored schemes in bank
accounts, at the end of March 2003, be credited to Consolidated Fund of the State.
This was also not done as of January 2004.

Thus, injudicious drawal of Rs. 3.50 crore by the Director without any
requirement and retaining the funds outside Government account for the period
ranging between nine and 40 months was irregular and resulted in interest loss of
Rs. 53.48 lakh.

The matter was referred to the Government/Department in May 2004;

reply had not been received (September 2004).

4.9 Idle investment on construction of shops

Poor selection of sites for construction of shops by the Housing and

Urban Development Department, resulted in idle investment of
Rs. 83.16 lakh.

Housing and Urban Development Department approved (October

1999/March 2001) construction of shopping complexes comprising 260 shops
(90: Kashmir; 170: Jammu) under the 10th Finance Commission Award at an
estimated cost of Rs. 1.83 crore, in 40 Town/Notified Area Committees of the
Φ
Central schemes: IDSMT, NSDP, 10th Finance Commission; State schemes: IDMT, LCS and EIUS
♥
Two FDRs for Rs. 50 lakh each from July 1999 to April 2000/May 2000 and five FDRs for Rs. 50
lakh each from September 2000 to January 2004
♣
Jammu and Kashmir Bank Limited
73
Audit Report for the year ended 31 March 2004

State. These shops were to be alloted through open auction at market rates to be
determined by standing committees constituted (March 1997) for this purpose.
The Minimum Reserve Price (MRP) for auctioning these shops was fixed (March
1997) by the Department at 50 per cent above the construction cost plus land cost
of each shop. In addition to premium, monthly rent was also to be recovered from
the allotees at the rates to be determined by the respective committees.

Test-check (September 2003/February 2004) of the records of Directors,

Local Bodies, Jammu/Kashmir revealed that out of 212 shopsψ (cost:
Rs. 1.40 crore) constructed (October 2003/March 2003), only 92 shops♦
(construction cost: Rs. 56.91 lakh) had been allotted (March 2004) leaving 120
shops (Jammu: 94; Kashmir: 26; cost: Rs. 83.16 lakh) unallotted. The Directors,
Local Bodies Jammu/Srinagar attributed (October 2003/March 2004) non-
allotment of shops to poor response in realisation of the MRP. The Director Local
Bodies, Jammu also attributed it to selection of sites having low market potential
for shops. This indicated that the sites for the shops had been selected without
feasibility study and ascertaining their market viability.

Thus, poor selection of sites for construction and irrational fixing of MRP
of the shops by the Department resulted in idle investment of Rs. 83.16 lakh.

The matter was referred to the Government/Department in May 2004;

reply had not been received (September 2004).

Industries and Commerce Department

4.10 Idle investment on purchase of land

Selection of an unsuitable site for establishing an Industrial Park at

Ompora, Budgam rendered investment of Rs. 4.82 crore idle for over six
years. Cost of idle funds to Government worked out to Rs. 6.32 crore.

Director, Industries and Commerce, Srinagar advanced (March 1991)

Rs. 1.40 crore to the Collector Land Acquisition, Budgam through General
Manager, District Industries Centre, Budgam for acquisition of 1,000 kanals of
land at Ompora, for establishing an Industrial Park under the Centrally sponsored
“Export Promotion Industrial Park” (EPIP) scheme. The site for the park was
selected (July 1991) by the Dy. Project Engineer, State Industrial Development
Corporation (SIDCO) through which the project was to be implemented. A
further amount of Rs. 3.50 crore was advanced (March 1997) to the Collector for
the purpose. Acquisition of additional 12 kanals of land was sanctioned by the
Government in September 1998. The land (1,008 kanals) acquired against 1,012
kanals requisitioned by the Department at a cost of Rs. 4.82♣ crore was handed

ψ
Kashmir: 65; Jammu: 147
♦
Kashmir: 39; Jammu: 53
♣
Rs. 7.50 lakh were lying with Collector Land Acquisition, Budgam
74
 Chapter-IV Audit of Transactions

over to SIDCO in Augustβ 1997 and November# 2000. The project, however,
could not take off as the site was not found (July 1999) suitable for sinking a tube
well for supply of water to the industrial units by the State Geology and Mining
Department. The Managing Director, SIDCO after lapse of about three years
requested (April 2002) the Government for shifting of the project to an alternate
site at Ply-Board Complex, Pampore. Further progress in the matter was awaited
(January 2004). Meanwhile, the land acquired at Ompora continued to remain idle
(June 2004).

Thus, defective selection of the site for the EPIP, Ompora rendered the
investment of Rs. 4.82 crore idle for over six years. The Department had also not
sought refund of balance Rs. 7.50 lakh from the Collector Land Acquisition,
Budgam. The cost of idle funds to Government worked out to Rs. 6.32ψ crore.

The matter was referred to Government/Department in February 2004;

reply had not been received (September 2004).

Irrigation and Public Health Engineering Department

4.11 Unfruitful expenditure

Failure of the Superintending Engineer/Executive Engineer to ensure

unencumbered source of water before execution of work resulted in
unfruitful expenditure of Rs. 12.70 lakh.

Executive Engineer, Public Health Engineering Division, Kargil took up

(1996-97) the work for reactivation/upgradation of water supply scheme
Gundmangalpora (estimated cost: Rs. 20.45 lakh) with spring as source. After
incurring an expenditure of Rs. 12.70≠ lakh further execution was stopped
(1999-2000) as the residents of nearby village did not allow use of identified
spring as source for proposed water supply scheme. Meanwhile, Superintending
Engineer accorded administrative approval belatedly in February 2001. Audit
scrutiny (August 2003) revealed that Executive Engineer had not ensured that the
source was unencumbered before taking up the execution work. On being pointed
out in audit, Executive Engineer stated (July 2004) that alternate arrangements
were being made to tap substitute source. The reply was not tenable as the
Department had failed to identify the substitute source of water for the last four
years.

Thus, failure of Superintending Engineer/Executive Engineer to ensure

unencumbered source of water before execution of work resulted in unfruitful

β
August 1997: 999 kanals and 19½ marlas
#
November 2000: 8 kanals and 2 marlas
ψ
Worked out at the borrowing rate of State Government from April 1991 to January 2004
≠
Construction of collection chamber: Rs. two lakh; Installation of missing pipes due to snow
avalanches and flood, etc: Rs. 3.15 lakh; replacement of damaged pipes at gravity main and
distribution system: Rs. 7.55 lakh
75
Audit Report for the year ended 31 March 2004

expenditure of Rs. 12.70 lakh for over four years, besides non-achievement of
intended benefits.

The matter was referred to Government/Department in September 2004;

reply had not been received.

4.12 Unfruitful expenditure on an overhead tank

Executive Engineer, Public Health Engineering Division, Udhampur

defaulted in releasing payments to the contractor engaged for construction of
overhead tank at Nagrota-Kallar, Udhampur which led to suspension of
work and consequent unfruitful expenditure of Rs. 22.84 lakh.

Chief Engineer, Public Health Engineering Department, Jammu allotted

(October 1998) the work of construction of a two lakh gallon capacity overhead
tank (OHT) at Nagrota-Kallar, Udhampur on turnkey basis to a contractor at a
cost of Rs. 33.59 lakh. The work was to be completed within one year reckoned
after 15 days from the date of approval of the drawings/designs by the Directorate
of Designs. Specified♣ percentage of the total cost of the work was to be paid to
the contractor on completion of each stage of the work.

Audit scrutiny (January 2003) of the records of the Executive Engineer,

Public Health Engineering Division, Udhampur revealed that the contractor
started the work in September 1999, after approval of the drawings/designs by the
Design Directorate. The contractor preferred four running bills for Rs. 22.84 lakh
during the period from November 1999 to May 2000 against which Rupees three
lakh only were released to him in February 2000. The contractor suspended (May
2000) the work and sought release of his balance claim. A further amount of
Rs. 14.53 lakh was released to the contractor during September 2000 to February
2002 after adjusting Rs. 5.31 lakh towards cost of departmental material, income
tax, service charges, etc. The contractor, however, refused resumption of work at
the existing rate and demanded 50 per cent increase, which was not accepted by
the Department. The contractor also claimed interest/compensation for losses
caused due to delay in payments/suspension of the work and sought arbitration.
As of December 2003, the case was pending with the arbitrator.

On being pointed out in audit, the Executive Engineer stated that full
payment could not be made to the contractor due to financial crunch. This was not
tenable as Rs. 20 lakh and Rs. five lakh were specifically allotted for the work
during the years 1999-2000 and 2000-01, respectively.

Thus, failure of the Executive Engineer in releasing payments to the

contractor as per contractual stipulations, rendered expenditure of Rs. 22.84 lakh
on the OHT unfruitful, besides denying the facility of enhanced water supply to

♣
Approval of design, excavation and laying of PCC: 10 per cent, Foundation of shaft: 25 per cent;
Completion of first half of staging: 15 per cent; second half of staging: 15 per cent; Ring Beam,
bottom dome and balcony: 15 per cent; stair case and other accessories: 3 per cent; vertical wall:
7 per cent; top dome: 8 per cent and testing: 2 per cent
76
 Chapter-IV Audit of Transactions

the population of the concerned area of Udhampur. The cost of finance on the
incomplete asset worked out to Rs. 9.18ψ lakh.

The matter was referred to Government/ Department in February 2004;

reply had not been received (September 2004).

4.13 Unfruitful investment

Defective planning in execution of works on Water Supply Scheme,

Kud by Executive Engineer, Public Health Engineering Division, Udhampur
without first ensuring the right to use the water source resulted in unfruitful
investment of Rs. 66.67 lakh.

Water supply improvement, augmentation and extension scheme Kud was

taken up for execution (February 2000) at an estimated cost of Rs. 76.76 lakh to
be completed within one year. It was contemplated to augment the existing
sources≠ (capacity: 1.68 lakh GPD) with a new source♠ (capacity: 1.02 lakh GPD)
so as to raise the capacity of upgradation scheme to 2.70 lakh GPD. It was also
envisaged to increase the available requirement for 6,813♥ persons from 4,225♦
persons.

Test-check (February 2002) of the records of the Executive Engineer,

Public Health Engineering Division, Udhampur revealed that an expenditure of
Rs. 66.67 lakh was incurred (November 2001) on construction of two service
reservoirs and laying of pipes, etc. without obtaining technical sanction and
administrative approval on the augmentation scheme. The scheme was not made
functional as the new source could not be tapped by the Department due to
objection raised by the local population. On this being pointed out in audit, the
Executive Engineer stated (February 2004) that new pipes laid were being used by
connecting them to the old source (Shivgarh II). This was not tenable, as there was
no increase in the intake capacity due to non-tapping of additional source.

Thus, defective planning in execution of the works of water supply

augmentation scheme, Kud by Executive Engineer, Udhampur without first
ensuring the right to use the water source resulted in unfruitful investment of
Rs. 66.67 lakh.

The matter was referred to Government/ Department in February 2004;

reply had not been received (September 2004).

ψ
Worked out at borrowing rate of Government from Jammu and Kashmir Bank Limited from
February 2000 to March 2004
≠
Nallah Shivgarh-II: 1.32 lakh GPD; Swami Bowli: 0.12 lakh GPD; Bowli Bazar: 0.24 lakh GPD
♠
Shivangi-III
♥
Design requirements for the year 2014
♦
At the rate of 40 litres per soul
77
Audit Report for the year ended 31 March 2004

4.14 Locking up of funds due to inadequate control mechanism

Superintending Engineer (Mechanical Circle), Irrigation and Flood

Control Department, Srinagar placed Rs. 25 lakh at the disposal of Executive
Engineer, Flood Mechanical Division, Baramulla at fag end of year. The
amount was subsequently deposited in deposit account which resulted in
locking up of Rs. 22.78 lakh.

Executive Engineer, Flood Mechanical Division, Baramulla projected

(June 2001) requirement of Rs. 19.28 lakh, in its annual works plan for 2001-02,
for shifting the existing idle dredging machinery and their repairs/maintenance.
The machines after repairs/maintenance were to be given on hire to contractors,
army and locals with a view to earn revenue. The Superintending Engineer
(Mechanical Circle), Irrigation and Flood Control Department, Srinagar provided
(March 2002) Rs. 2.77 lakh only for maintenance and repair of assets and
Rs. 25 lakh for purchase of an excavator cum loader for use on desilting
operations. The amount of Rs. 25 lakh was drawn (27 March 2002) by the
Executive Engineer, Flood Mechanical Division, Baramulla and passed on (April
2002) to Executive Engineer, Mechanical Irrigation Construction Division
(MICD), Srinagar for purchase of the machine. The latter deposited the amount in
deposit account. As of January 2004, Rs. 22.78 lakh were locked up in the deposit
account, while Rs. 2.22 lakh were diverted on procurement of POL. On this being
pointed out in audit, the Executive Engineer (MICD), Srinagar stated (January
2004) that the machine could not be purchased due to non-receipt of
specifications of the machine from the indenting division.

Release of funds by the Superintending Engineer at the fag end of the

financial year and subsequent non-utilisation thereof indicated inadequate
financial control mechanism in his circle, leading to locking up of Rs. 22.78 lakh
for about two years, besides diversion of Rs. 2.22 lakh. The cost of locked up
funds worked out to Rs. 5.03∉ lakh at the borrowing rate of Government for the
relevant period.

The matter was referred to Government/Department in March 2004; reply

had not been received (September 2004).

∉
April 2002 to December 2002 at the rate 13 per cent : Rs. 2.22 lakh; January 2003 to August 2003
at the rate of 12 per cent: Rs. 1.82 lakh; September 2003 to January 2004 at the rate of
Rs. 10.5 per cent: Rs. 0.99 lakh
78
 Chapter-IV Audit of Transactions

Power Development Department

4.15 Unfruitful expenditure on purchase of transformer oil

Failure of the Chief Engineer, Systems and Operations (PDD),

Jammu for not making prior funding arrangements for reconditioning of the
transformers rendered the expenditure of Rs. 36.12 lakh on purchase of
transformer oil unfruitful for more than three years.

Techno Economic Committee of the Power Development Department, in

view of deteriorated quality of the transformer oil, recommended (August 2000)
reconditioning and replacement of oil of four transformers (24/40 MVA) at
Gladni Grid Station. The job was estimated to cost Rs. 47.50 lakh. Chief
Engineer, Systems and Operations (PDD), Jammu placed (December 2000)
Rs. 36.12 lakh at the disposal of Chief Engineer, Procurement and Material
Management, Jammu for purchase of 100.32 Kilo litres of transformer oil.

Audit scrutiny (December 2003) of the records of the Executive Engineer,

Transmission Line Maintenance Division-II (TLMD), Jammu revealed that entire
quantity of transformer oil purchased by Chief Engineer, Procurement and
Material Management, Jammu was lifted (January 2001) by the Division from the
Electric Central Store, Jammu. The reconditioning of the transformers was,
however, not done and the oil purchased remained unutilised (March 2004). After
being pointed out in audit to the Government, the Executive Engineer stated (May
2004) that the transformers were got reconditioned but not re-commissioned.

Thus, failure of the Chief Engineer, Systems and Operations for not
making prior funding arrangements for reconditioning of the transformers
rendered expenditure of Rs. 36.12 lakh on purchase of transformer oil unfruitful
for more than three years.

4.16 Idle investment

Failure of Executive Engineer, Sub-Transmission Division-II, Jammu

to submit reimbursement claims to REC and non-prioritisation of scheme in
annual works programme 2002-03 and 2003-04 resulted in idle investment of
Rs. 42.57 lakh, besides non-achievement of objective of saving annual energy
losses of Rs. 38.17 lakh. Cost of idle investment worked out to Rs. 12.77 lakh.

To improve the existing system and to save the energy losses, Rural
Electrification Corporation (REC) approved (March 1998) “System Improvement
Scheme Chakroi District Jammu” for completion in two years (extended March
2001). The scheme estimated to cost Rs. 88.10 lakh was to be financed through
loan♣ from REC and involved construction of 33/11 KV sub-station at Chakroi,
laying of six kilometres, 33 KV transmission line and two kilometres, 11 KV HT
Line for interconnection and re-orientation of existing 11 KV feeders.
♣
Annual interest 15 per cent, repayable in seven years
79
Audit Report for the year ended 31 March 2004

Twenty per cent of the loan was to be released by REC on completion of loan
document and balance on reimbursement basis.

Test-check (May 2003) of the records of Executive Engineer, Sub-

Transmission Division-II, Jammu revealed that work on the scheme taken up
(October 1998) was partly completed (March 2002) at a cost of Rs. 42.57 lakh.
Further execution of work was suspended owing to non-submission of
reimbursement claims to REC and non-availability of funds, as there was no
progress under the scheme and it was also not included in the annual works
programme 2002-03 and 2003-04. Meanwhile 41 poles of 33 KV Transmission
Line damaged (May 2000) had not been restored (April 2004). On this being
pointed out in audit, Executive Engineer stated that the balance work of the
scheme had been proposed under APDRP♦ for which approval was awaited and
the work continued to remain suspended (April 2004).

Thus, failure of Executive Engineer to submit reimbursement claims to

REC and non-prioritisation of the scheme in annual works programme 2002-03
and 2003-04 resulted in idle investment of Rs. 42.57 lakh, besides non-
achievement of objective of saving annual energy losses of Rs. 38.17 lakh. Cost of
idle funds worked out to Rs. 12.77 lakh⇔.

4.17 Idle investment

Chief Engineer, EM & RE, Jammu approved System Improvement
Scheme for Ghomanhasa for erection of receiving station without upgrading
the existing transmission system which resulted in idle investment of
Rs. 46.79 lakh on the receiving station. The objective of saving energy losses
of Rs. 1.09 crore annually was also not achieved.

Chief Engineer, Electric Maintenance and Rural Electrification, Jammu

approved (March 1995) construction of a receiving station at Ghomanhasa at an
estimated cost of Rs. 67.78 lakh, to reduce line losses and relieve Trilokpur
station from overloading. The scheme involved erection of 3.15 MVA receiving
station at Ghomanhasa, laying of 33 KV Line and 11 KV tapping line for
different feeders for completion in two years. The scheme was approved (March
1995) by Rural Electrification Corporation for financing under System
Improvement Scheme. Twenty per cent of loan was payable on completion of
loan documents by the Department and balance on reimbursement basis. The loan
was to be repaid in seven years and carried an interest of 16 per cent per annum.

Audit scrutiny (July 2003) of the records of Executive Engineer, Sub-

Transmission Division No. I, Jammu revealed that the Department had not made
any provision for conversion of existing transmission system from 6.6 KV to
11 KV in the system improvement scheme, a pre-requisite for making the scheme
operational. As a result, the receiving station at Ghomanhasa completed at a cost

♦
Accelerated Power Development Reforms Programme
⇔
Interest at the rate of 15 per cent from April 2002 to March 2004
80
 Chapter-IV Audit of Transactions

of Rs. 46.79 lakh in September 2001, could not be made functional rendering the
investment idle. The Department, however, framed (January 2003) another
scheme (estimated cost: Rs. 66.49 lakh) for conversion of 6.6 KV system to 11
KV system, for which techno-economic clearance was awaited (January 2004).

Thus, defective planning by not providing upgradation of the existing

transmission system in the scheme resulted in idle investment of Rs. 46.79 lakh.
The objective of saving energy losses of Rs. 1.09 crore annually was also not
achieved. The interest liability on the idle investment worked out to
Rs. 52.41 lakh.

The matter was referred to Government/Department in April 2004; reply

had not been received (September 2004).

Roads and Buildings Department

4.18 Unfruitful expenditure on a road

Injudicious action of Executive Engineer, R&B Division, Basholi in

taking up construction of Machedi-Badnota road without obtaining
administrative approval or clearance of the Forest Department and ignoring
the land compensation component, led to unfruitful expenditure of
Rs. 27.73 lakh.

Construction of the roads passing through forest land are to be taken up

after obtaining prior approval of the Forest Department.

Audit scrutiny (November 2003) of the records of the R&B Division,

Basholi revealed that the Chief Engineer, R&B, Jammu recommended accord of
administrative approval to the Administrative Department for the construction of
12 Km Machedi-Badnota road (estimated cost: Rs. 2.82 crore) passing through
forest land without obtaining clearance of the Forest Department. The Executive
Engineer, R&B, Basholi also without obtaining administrative approval took up
(1997-98) construction of first five Kms (estimated cost: Rs. 36.70 lakh) of the
road. After incurring an expenditure of Rs. 27.73 lakh on scattered sections of the
road, the construction work was stopped (2001-02) for want of mandatory
clearance from the Forest Department and non-settlement of land compensation
claims of the land owners falling under the road alignment. Audit scrutiny further
revealed that the component of land compensation was ignored while projecting
the estimated cost in the application for administrative approval. On this being
pointed out in audit, the Executive Engineer stated (January 2004) that clearance
of the Forest Department shall be obtained in due course of time.

Action of the Executive Engineer in taking up the construction work

without obtaining administrative approval, clearance of the Forest Department
and ignoring the land compensation component was injudicious which led to
unfruitful expenditure of Rs. 27.73 lakh. The Chief Engineer had also not acted

81
Audit Report for the year ended 31 March 2004

prudently by recommending accord of administrative approval without clearance

of the Forest Department.

Rural Development Department

4.19 Unfruitful expenditure and blocking of funds on purchase of land

Injudicious action of the Director to advance funds to the J&K

Projects Construction Corporation for construction of training centre
without acquiring land, resulted in unfruitful expenditure of Rs. 24.22 lakh
and locking up of Rs. 15.78 lakh, besides diversion of Rs. 50 lakh.

In anticipation of administrative approval/technical sanction and without

acquiring the land, Director, Rural Development Department, Kashmir advanced
(March 1998) Rs. 50 lakh out of 10th Finance Commission award to Jammu and
Kashmir Projects Construction Corporation (JKPCC) for construction of the
Rural Extension Training Centre (RETC) at Chadoora, Budgam for imparting
training to the grass root level workers of the Department. Rupees 40 lakh were
subsequently♠ advanced to Collector Land Acquisition, Budgam for acquiring
land measuring 21 kanals 10 marlas identified by the Department for the said
purpose.

Audit scrutiny (September 2002) of the records of the Director, Rural

Development Department, Kashmir revealed that only 14 kanals 19 marlas of
land (cost: Rs. 24.22 lakh) was acquired by the Collector, possession whereof had
not been taken by the Department. The balance Rs. 15.78 lakh was lying
unutilised (February 2004) with the Collector. Meanwhile, Rs. 50 lakh advanced
for construction of the RETC were diverted for construction of Rural
Development Department office complex at Lal Mandi, Srinagar.

Thus, injudicious action of the Director to advance funds to the JKPCC

for construction of training centre without acquiring land for it and subsequent
failure in taking possession of the land for over four years, resulted in unfruitful
expenditure of Rs. 24.22 lakh and locking up of Rs. 15.78 lakh, besides diversion
of Rs. 50 lakh for other purposes and non-achievement of the intended objectives.

The matter was referred to the Government/Department in May 2004;

reply had not been received (September 2004).

♠
November 1998: Rs. 10 lakh; January 1999: Rs. 10 lakh; February 1999: Rs. 8 lakh and
November 1999: Rs. 12 lakh
82
 Chapter-IV Audit of Transactions

Tourism Department
4.20 Extra avoidable payment of land compensation and registration fee

Non-observance of rules and procedures by the District Tourist

Officer, Kargil for acquisition of land for establishing a Tourist Adventure
Centre at Kargil, resulted in extra avoidable payment of Rs. 14.52 lakh on
compensation to the land owners and registration fee.

Director General, Tourism released (October 2000) an amount of

Rs. 25 lakh to the District Development Commissioner (DDC), Kargil for
establishing Tourist Adventure Centre at Panikhar Suru (Choskoor Thang),
Kargil. Land for the said Centre was identified (January 2001) by the Director
General. The DDC in turn sanctioned (January 2001) advance drawal of
Rs. 25 lakh to the District Tourist Officer (DTO), Kargil for acquiring land for the
said Centre. For this purpose land was to be acquired by the Collector, Land
Acquisition after fulfilling requirements of the State Land Acquisition Act. The
DTO in violation of the Act, acquired (April 2001) land measuring 106 kanals for
the Centre directly from the land owners without involving the Revenue
Department. The land acquired was khalsa sarkar♣ and according to the Act, the
owners in possession of such land were to be paid one third of its compensation
cost. The DTO instead paid full compensation of Rs. 21.20Φ lakh to the land
owners against Rs. 7.06 lakh payable to them. This resulted in extra payment of
Rs. 14.14 lakh to the land owners. The DTO further paid registration fee of
Rs. 0.38 lakh for executing sale deeds with the land owners which was not
required under the Act. On this being pointed out (September 2003/February
2004), the Assistant Director Tourism (Planning) stated (April 2004) that a
departmental enquiry had been instituted to investigate the matter. The unspent
balance of Rs. 3.42 lakh kept (March 2001) in civil deposit by the DTO,
continued to remain there (April 2004).

Thus, non-observance of rules and procedures by the DTO, Kargil for

acquiring land for the Tourist Adventure Centre resulted in extra avoidable
payment of Rs. 14.52 lakh on account of compensation (Rs. 14.14 lakh) to the
land owners and registration fee (Rs. 0.38 lakh).

The matter was referred to Government / Department in May 2004; reply

had not been received (September 2004).

♣
State Government land allotted to tillers without absolute ownership/title to land
Φ
At the rate of Rs. 20,000 per Kanal
83