Whiff of Rs 935-Cr BSNL-Army-HFCL ‘Scam’ in Sensitive NFS Project


UPDATED: 18H 48M AGOINDIA7 min read

Even as an alleged Rs 12,700 crore bank loan scam has singed the Narendra
Modi government, another financial scandal of Rs 935 crore involving
procurement of high-grade data transmission equipment for the critical
‘Dense Wave Division Multiplexing’ (DWDM) has surfaced.

The DWDM, when aligned with optical fibre cables, forms the critical
backbone for the armed forces’ Network for Spectrum (NFS) project.

Documents in The Quint’s possession reveal that the tender issued in
November 2013 was finally awarded in November 2017 to Himachal Futuristic
Communications Ltd (HFCL) over two others who bid for the same – Sterlite
and Larsen & Toubro.
Also Read: 2,000 Cr BSNL-Cisco-Army Scam: The Quint Responds With More Facts

Favouring Bidders, Diluting Clauses
According to the BSNL and telecom industry sources, following The Quint’s
exposé on 28 December 2016 of a Rs 2,000 crore scam involving the
loss-making public-sector undertaking – Cisco and the Indian Army – all
tenders related to the ambitious NFS project were put in cold storage for
close to a year.

This, the sources admitted, was done primarily for “pressure to ease,”
since the BSNL’s vigilance wing took a cue from The Quint’s report and
began preliminary investigation against at least two top officials of the
telecom PSU. Even the army began a preliminary probe against the
Directorate of Signals in December 2016 to ascertain the role played by
some senior officers – including a lieutenant general, a brigadier and a
colonel – in the deal with Cisco.
In November 2017, however, the first purchase order (PO) for the DWDM
tender was issued despite several “inconsistencies” in the tender,
including tweaking at least two vital clauses in the tender evaluation and
contract awarding process.

In the scam involving the BSNL, army and Cisco — which was connected to the
acquisition of equipment for the IP-MPLS (Internet Protocol-Multiprotocol
Label Switching) — Cisco was unduly “favoured” to be the only bidder and
sold equipment at twice the market price. In the DWDM case, several crucial
tender clauses were “diluted or violated” (despite strong and valid reasons
for them to remain in place without any changes) in ways that helped the
HFCL become the lowest (L-1) bidder.

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

Old, Obsolete Technology Could Spell Disaster
The DWDM is a terminal equipment used for sending data over long distances
via optical fibre cables, and is akin to the foundation of a high-rise
building that is built to take all the load and must therefore be the
“strongest and the most robust” component of the NFS. The DWDM works by
combining and transmitting multiple signals simultaneously at different
wavelengths on the same fibre. The technology helps carry data, multiplying
the physical medium’s capacity.

Its dilution by having on offer old and obsolete technology, defence
ministry sources said, could not just prove “disastrous” for the entire NFS
project, but bring into question the future operational capability of the
tri-services, especially the army. In this context, sources said they
suspect that Chinese products were offered in the garb of ‘Made in India’,
leaving the NFS vulnerable to interception, leaks and poor performance
during critical times.
Because of the complexities involved in the tender and the technology, The
Quint verified its findings with four independent technical experts with
in-depth knowledge of various components of the NFS project. All four, who
requested anonymity, said they strongly suspect “connivance” among some of
the officials concerned from the time the tender was issued.

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

Substandard Equipment & Loss of Rs 935 Cr to Army
According to the experts, the fact that some clauses were “custom made”,
while a few others were diluted and violated in the tender shows that BSNL,
army and DoT officials were fully aware of the outdated technology that
would be offered. One software expert who previously served in a government
agency said: “There is no way that after issuing the tender, some of the
officials could tweak the PMA policy to include the NFS project, knowing
fully well that the policy exempts the defence forces”.

Another software specialist said that “long distance routes between
different stations being interconnected through LAN/client ports is unheard
of and one will have to struggle to find another example of this kind in
any generation of network, leave alone a next-generation network”.
According to documents and revelations by BSNL sources, while the cost for
the DWDM equipment was kept within the budget, “substandard” equipment was
offered once the tender clauses were diluted, causing the army a loss of Rs
935 crore. This amount is a part of the massive Rs 24,664 crore budgeted
for the NFS project.

Also Read: The Quint Impact: BSNL, Cisco to Look Into Signal Scam Report

Describing the HFCL-offered equipment (almost 90 percent of DWDM offered by
the original equipment manufacturer (OEM), United Telecom Ltd (UTL)) as
“outdated” and “obsolete”, knowledgeable industry sources said that the
higher echelons of the army’s Directorate of Signals (DoS) and BSNL are
“fully aware” of the irregularities since the contract process, followed by
the offered equipment, could not have “gone ahead without an explicit
written order from the DoS”.

The “substandard” system, telecom sources explained, would weaken the
network being developed, whereas the NFS is touted to be in the “next
generation” category by the defence forces. Sources said that some senior
BSNL officers, the Department of Telecom, army and executives at HFCL
allegedly “connived” to dilute Clause 5.4.1 of the tender (No.
CA/NCP/NFS-DWDM/T-455/2013 of 20 November 2013) to read:

Bidder will select only one OEM for one type of equipment supplied as part
of this tender. Bids offering multiple OEMs/Technology Partners for one
type of equipment are liable to be rejected.
HFCL & BSNL’s ‘Response’
The BSNL did not respond to The Quint’s questions, while the army sought “a
week’s time” to reply. However, responding to a questionnaire by The Quint,
HFCL (in a long-winded reply) sought to pin the blame on its “competitors”,
claiming that it is “their intention to derail a strategically important

Defending UTL, HFCL said:

UTL is fully home-grown indigenous technology in line with the Government’s
vision of ‘Make in India’. Such kind of malicious allegations are contrary
to the government’s efforts and undermines the capabilities of indigenous
companies and are detrimental in our efforts to be self-reliant in key
technological areas…
It added, “In view of our response above it is clearly evident that no
technical or quality requirement has either been diluted/violated. We also
take this opportunity to reiterate that the finest technology has been
provided and we stand by our commitment and take great pride in
implementing this network, which is of great national and strategic

Flouting of Clauses in Tender
Notwithstanding HFCL’s response, various clauses of the tender (No 32 –
design criteria and No 33 – technical requirements) for DWDM were flouted
at the checks-and-balances level both at the stage of Technical Evaluation
Committee comprising officers from the army and BSNL, as also during the
‘Proof of Concept’ stage, though serious objections were raised (on file)
to the technology offered by HFCL as it was not in line with the

For instance, Clause No 32.2 stipulated that all DWDM links should be
designed such that they are upgradable to 40 Gigabytes and 100 Gigabytes.
However, 90 percent of the DWDM equipment offered to the army cannot be
upgraded, sources revealed.
Sources explained that Clause No 33.3 mandated compliance with ITU Standard
G.694.1 for all types of systems in every link of the network. However,
since two different (UTL and US-based Cienna) OEM equipment were offered,
the interconnecting links were found to be incompatible for the DWDM
wavelength and hence, violative of the tender.

What was worse was the waiving and flouting of the eligibility criteria for
DWDM OEM (Clause 6.4.4 of the tender). In this case, UTL, supplying 90
percent of the DWDM, did not even have minimal experience.
This, sources said, was done through “fraudulent implementation” of the
Preferential Market Access policy which at (Para 7(v)) forbids splitting
the procurement of telecom equipment between domestic and foreign OEMs when
it is not technically prudent. For proper functioning, all DWDM equipment
was required to be supplied by only one OEM.

Counter-Intuitive to NFS Objective
The sources said that neither the army nor BSNL demanded that HFCL change
the obsolete technology even as extensions were given, for over a year, to
help HFCL offer the inferior DWDM technology – that too at 10 Gigabyte –
which no country has been procuring globally for the last five years.

Most countries, including Nepal, are buying 100 Gigabyte technology for
their next-generation networks, which have the capability to push 10 times
the data over almost twice the distance at nearly the same cost. “At least
testing of UTL’s DWDM for upgradability to 40G and 100G should have been
done,” the sources said.
Pushing such low-capacity, obsolete technology goes against the NFS
objective as the “scalability factor of the entire NFS system is critical
since it is designed to take on the requirements of the defence forces of
the next 15 years,” a senior BSNL official said.

Over and above the deviations, work on commissioning the DWDM section of
the NFS project, which was to begin in June 2015, was delayed and restarted
only in the first week of November 2017.

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First Published: 19H 24M AGO
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