A cross-verification of procurement records revealed that KEONICS procured equipment worth ₹75.81 crore, while the actual market value of the equipment was only ₹27.84 crore, an additional financial burden of ₹47.97 crore on the state exchequer, the CAG report said.
Published Mar 21, 2025 | 12:21 AM ⚊ Updated Mar 21, 2025 | 12:21 AM
Synopsis: The Karnataka State Electronics Development Corporation allegedly misused an exemption under the Karnataka Transparency in Public Procurement (KTPP) Act to procure materials for government departments at highly inflated prices, resulting in a loss of ₹47.97 crore on the state exchequer. A CAG report flagged irregularities in supplier selection, pricing, and contract enforcement, including the misuse of the 4(g) exemption under the KTPP Act, between 2018-19 and 2022-23.
The Karnataka State Electronics Development Corporation (KEONICS) misused an exemption under the Karnataka Transparency in Public Procurement (KTPP) Act to to procure materials for government departments at “highly inflated rates”, according to a report by the Comptroller and Auditor General (CAG).
The report stated that the irregularities resulted in an additional financial burden of ₹47.97 crore on the state exchequer.
A cross-verification of procurement records revealed that KEONICS procured equipment worth ₹75.81 crore, while the actual market value of the equipment was only ₹27.84 crore.
Additionally, KEONICS made payments amounting to ₹9.36 crore to Business Associates (BAs) without ensuring the actual delivery of equipment to user departments.
The departments impacted by the irregularities include the Bruhat Bengaluru Mahanagara Palike (BBMP), Minority Welfare Department, Tribal Welfare Department, Karnataka Thanda Development Corporation Limited, Department of Technical Education, and the Forest Department.
Procurement violations
KEONICS facilitated the supply of equipment worth ₹1,544.50 crore to various government departments and institutions between 2018-19 and 2022-23.
However, the CAG report flagged major irregularities in supplier selection, pricing, and contract enforcement, including the misuse of the 4(g) exemption under the KTPP Act.
The exemption permits government departments to procure information technology (IT) equipment and services from KEONICS without issuing tenders. However, the CAG audit found that KEONICS misused the exemption to inflate prices and flout procurement rules.
KEONICS enrolled BAs to procure and supply equipment to government departments but failed to follow a transparent selection process.
The corporation did not enlist Original Equipment Manufacturers (OEMs) or authorised dealers, violating the KTPP Act.
Furthermore, KEONICS did not enter into Rate Contracts with these suppliers, as required under the 4(g) exemption, allowing BAs to negotiate directly with departments for orders.
As per KTPP Act guidelines, Third Party Verification (TPV) is mandatory to confirm the actual delivery of equipment. However, the audit found that the TPV process was compromised, as third-party verifiers were appointed by the BAs themselves, creating a conflict of interest.
Out of 347 product procurements reviewed, payments amounting to ₹85.98 crore were made without conducting TPV. In some cases, payments were processed based on fake delivery challans and TPV reports. The CAG report uncovered instances where TPV reports were generated even before the actual delivery of equipment.
(Edited by Dese Gowda)
