Exclusive: Army, BSNL, Cisco Allegedly Partner in 2,000 Cr Scam

Army, BSNL and Cisco officials involved in alleged Rs 2,000 crore rip-off of NFS project, reports Chandan Nandy.

Even as the Narendra Modi government has time and again vowed to hit hard against corruption, trouble could be brewing for it in the form of a Rs 2,000 crore scam involving the purchase of IP-MPLS equipment for the Network for Spectrum (NFS) project from the American multinational Cisco via the public sector Bharat Sanchar Nigam Ltd (BSNL).

Documents in the possession of The Quint reveal that BSNL’s tender or request for proposal (RFP) was manipulated in a way that favoured Cisco, much in the same way as was done in the recent helicopter scam involving AugustaWestland, wherein technical parameters were changed, to ensure only one OEM qualifies.

The Quint had on 4 November exposed a Rs 300-crore scam involving BSNL and Cisco in the name of expanding the existing National Internet Backbone (NIB) infrastructure. This scam also involves the unholy nexus between Cisco and BSNL Enterprise Business, which “conspired” to create an unfair advantage for the multinational firm, this time involving the Indian army as well.

Scam Beneficiaries

Documents and sources indicate that senior BSNL, army officials and Cisco executives have been the beneficiaries of the Rs 2,000 crore scam, which began during the UPA regime but spilled over after the Modi-led BJP government assumed power in May 2014. It also blows a hole in the Modi government’s claims to root out corruption, especially in the armed forces.

The Director General of the army’s Directorate of Signals, Lieutenant General A R Prasad, responded neither to an emailed questionnaire nor to several phone calls. Major General P S Rana called this reporter on Friday when he sought two days’ time to respond to the questions, but did not respond till the publication of this report. BSNL Chairman and Managing Director Anupam Srivastava chose not to respond to a questionnaire.

Likewise, Cisco Worldwide CEO Chuck Robbins, Chairman John Chambers and Legal Head Mark Chandler also did not respond to The Quint’s detailed emailed questionnaire.

Tender Bending

Documents accessed by The Quint disclose that in the BSNL tender (13 November, 2013) some technical parameters in the RFP for NFS (an arrangement between the Department of Telecommunications, Ministry of Defence and the Ministry of Finance, wherein the armed forces vacate spectrum in lieu of network provided for by the DoT), the RFP Clause 79.3 was tweaked to favour Cisco.

However, in this case when the RFP was made public, all bidders and OEMs (barring Cisco) raised questions over one particular clause (79.3) and sought change in the clause, with two OEMs, M/s Juniper and M/s ALU commenting that they would not be able to take part in the RFP process unless the clause was amended, as it favoured one particular OEM.

Consequently, the army’s NFS cell suggested making the change to include wider participation and control prices, besides seeing to it that no single OEM is favoured. These clarifications were sent to BSNL in April 2014. However, once BSNL’s EB Cell received the responses to the clarifications, they were allegedly selectively leaked to Cisco. BSNL sources said that Cisco executives “strategised” with officials of the EB Cell to “have the clause amended” in a way that would favour them.

Senior Army Officers Involved

Sources said that documents addressed to Lieutenant General A R Prasad, who heads the army’s Directorate General of Signals, reveal that two army officers, including a Lt Gen and a Colonel, “connived” with senior Cisco executives and BSNL officials to get the clause changed for “undue pecuniary considerations”. On the then Lt Gen’s (DG Signals) instructions, the Army’s NFS cell wrote to BSNL in June-July 2014 that the clause not be diluted as this was an “operational requirement”, a cover to pave the way for the scam.

This resulted, according to sources, in the selection of only Cisco for the IP-MPLS part (Edge routers and associated equipment) of the entire deal, resulting in turn in the picking of a single vendor, which is in gross violation of guidelines issued by the Central Vigilance Commission. Incidentally, the feature which is paved to be deemed as so called “operational requirement” by the Indian Army, will not even be used owing to the peculiar architecture, wherein secrecy equipment will be installed as per operational guidelines.

The Stringed Deals

While the IP-MPLS part of the deal was pegged at Rs 1,300 crore, the IMS (Internet Multimedia Subsystem), which was a Rs 300 crore transaction, the Gigabit Passive Optical Networks (GPON, which is a short-haul network of fibre optical cables used for internet access, voice over internet protocol and digital TV delivery) that stood at Rs 300 crore, telepresence (for discussion of operational and administrative issues, Rs 50 crore) and testing and measuring of equipment (Rs 50 crore). The total expenditure on the entire NFS is said to be to the tune of Rs 13,000 crore.

The entire Rs 2,000 crore deal involved procurement, supply, implementation, installation, commissioning, testing, optimisation, training, documentation and maintenance of the “nationwide” IP-MPLS backbone with access networks and integrated IMS-based communication solution on turnkey basis for defence network.”

Cisco-BSNL Nexus

BSNL, during the same time, came out with an RFP/tender for same technology (IP-MPLS) issued on 19 June, 2014, in which Cisco did not participate. The multinational, in concert with BSNL’s EB cell, was eyeing undue gains on account of getting repeat orders on a nomination basis for the National Internet Backbone (NIB II) and the NFS projects, on two accounts.

1) The specifications were latest, but generic.

2) Had the OEM competed, the entire pricing structure would have been exposed, and corrupt officials would not have made windfall gains.

Cisco shied away from participating in the tender as it feared competition, but worked in a manner to create a “single vendor situation” and command an undue price.

Documents with The Quint show that BSNL paid Cisco four times in the expansion for upgrading NIB II project, for an outdated technology, 40 percent of which is still lying unutilised in BSNL stores. It is understood that the government is yet to institute an enquiry into the suspected NIB II scam to the tune of Rs 300 crore.

Also Read: Exclusive: Rs 300-Cr Scam in BSNL-Cisco Deals in Modi’s Achhe Din