What’s the Mystery Behind CSC SPV Bagging Govt Contracts Worth Thousands of Crores?

CSC e-Governance Services India Limited (CSC SPV), a quasi-government company, has over the last few years gotten official business worth thousands of crore rupees on nomination basis from the government of the day, according to sources in the Ministry of Electronics and Information Technology (MeitY). Some of these projects may have been given without fully considering the company’s domain expertise or ability to execute the projects. 

The Common Service Centre (CSC) scheme was being implemented under the National e-Governance Plan since 2006. The CSC Special Purpose Vehicle or SPV was established in 2009 to provide support to the ongoing scheme. Since 2015, however, the CSC SPV has moved and morphed and gone far beyond this mandate. It has been allotted a number of contracts worth thousands of crores of rupees on nomination basis by the Union government, including an annual maintenance contract of the fibre optic network of Bharat Broadband Limited, as well as the mandate to establish one lakh Digital Villages in the country. 

As records with the Corporate Affairs Ministry show, CSC e-Governance Services India Limited is a non-government company. For instance, the 2015-16 annual report of the company shows in that year, banks and financial institutions were its majority shareholders with 53.05% stake. 

However, the government maintains a 51% voting right by virtue of holding what is called a ‘golden share’, a concept known in certain other countries like the UK, but whose legal validity in India is questionable.

The annual reports of government companies are submitted to the special committees of Parliament or to Parliament itself. 

In the case of CSC SPV, the auditors are appointed by the board of directors of the company. The company did not publish its annual reports after 2016-17. In fact, it did not submit the financial report for 2018-19 even to the Registrar of Companies or RoC. 

The Contract 

In a contract agreement signed between Central public sector undertaking, Bharat Broadband Network Limited (BBNL), Universal Service Obligation Fund (USOF) under the Department of Telecommunication (DoT) and CSC SPV in 2019, the company is mentioned as “a public company registered 

under Companies Act, 1956, with the government having a single share giving it 51% voting rights, and with secretary, MeitY, as its chairman....”. 

As mentioned earlier, CSC-SPV was incorporated as a monitoring agency of the CSC scheme. 

The public-private partnership model of the CSC scheme envisaged a three-tier structure consisting of the local CSC operators (CSCs), called Village Level Entrepreneurs (VLE), the Service Centre Agency (SCA) responsible for identifying, appointing, monitoring and managing 500-1,000 CSCs in select geographical areas, and a state government identified State Designated Agency (SDA), responsible for management of its implementation within a state. 

According to the FY 2013 annual report of MeitY, a total of 99,537 CSCs were rolled out in the country till March that year. The government’s aim was to set up 2.5 lakh CSCs across India. 

The SCAs were private entities, selected through a region-wise bidding system within states starting 2008 for an initial contract period of four years, extendable on mutually agreed terms. An SCA had to bid for mixed areas, like urban, rural and difficult areas. 

The government was aware that putting a large number of government services (G2C) online would take a longer time. As per the contract, if the government failed to roll out G2C services within the stipulated time, the SCAs had to be financially assisted by the government till the system became self-sustainable to run seamlessly. 

A MeitY document shows that in August 2012, the government withdrew financial assistance to CSCs and decided to extend the contracts of SCAs for four more years, without providing government support. 

Changing Role 

A year after the Narendra Modi government came to power, a CSC 2.0 project was launched in 2015. It was decided that the entire business would be operated through CSC-SPV. 

Since then, the role of SCAs has diminished and the CSC-SPV’s role has changed from a monitoring agency to one that runs the business. The government started providing business worth hundreds of crores of rupees to this entity on nomination basis, reportedly without any competitive bidding or even evaluating its technical competence in implementing those businesses, said sources. 

For example, in July 2019, BBNL cancelled its Annual Maintenance Contract (AMC) of the National Optical Fibre Network (NOFN) under the BharatNet Programme, funded by the USOF under DoT, with another PSU, Bharat Sanchar Nigam Limited (BSNL), and signed a new contract with CSC-SPV without inviting any tender. 

The new contract, signed for a period of five years, is worth Rs 1,903.5 crore. Interestingly, BSNL played a major role in phase one of the BharatNet project to connect one lakh Gram Panchayats with internet through fibre optic cables. 

According to a report published by ET Telecom, in less than one year after CSC-SPV signing the tripartite contract with BBNL and DoT, BBNL questioned the technical expertise and eligibility of CSC-SPV and wanted it to withdraw from the AMC. 

As per the contract document, analysed by NewsClick, the executing agency should give preference to electronics products manufactured in India. But, ET Telecom quoted ministry officials as saying that instead of using domestically developed and manufactured Gigabit Passive Optical Network (GPON) technology, which is approved by the government's technical committee after the general requirement (GR) test conducted by the Telecommunication Engineering Centre (TEC), CSC has been using China-made Ethernet Optical Network (EPON), which is much cheaper and “inferior in quality” compared with GPON. 

The ministry officials also alleged that the company was using low quality products and four-pair fibre instead of 24-pair to save money. 

In a letter to the administrator of USOF, dated May 2, 2020, the BBNL chairman has complained that the CSC-SPV violated contract norms by shifting the equipment related to the projects to the local CSCs controlled by VLEs. At the end point, every Internet Service Provider (ISP) and Telecom Service Provider (TSP) should have equal access to the network. But, shifting it to the local CSC, according to the BBNL chairman, would create a hindrance to this access. 

The contract also has clauses that give undue favours to the CSC SPV. For instance, once the network is completed, the company would get a 50% discount in user charges for the first six months and within that period, DoT would finalise the tariff for all service providers, including CSC-SPV. This, sources say, would kill the competition as other TSPs and ISPs would struggle to compete with this early price advantage. 

This is not the only government contract this private company got on nomination basis after the Modi government came to power. 

More Largesse? 

The CSC SPV was also made the management and implementation agency of the Central government-funded Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) without inviting any tender. The objective of the scheme is to make one person in every BPL (below poverty line) family digitally literate in rural areas. The CSC-SPV pays Rs 300 per head for the training to local CSCs. 

When the scheme was announced in 2017, the proposed budget outlay was Rs 2,351.38 crore. An article published in the Financial Express mentions that this amount is sufficient only to train 2.39 crore registered citizens and the government needs to enhance the allocation to achieve its set target of training six crore individuals. The entire money for the scheme is routed through CSC SPV. 

Not just that. An article published by Huffpost India shows how VLEs are milking the scheme to earn easy money without working as per the guidelines.This is leading to huge amounts of losses to the exchequer. 

The scheme guidelines say that an empowered committee has been constituted under the chairmanship of Secretary, MeitY, to take decisions regarding any policy-level interventions in the scheme. This itself creates conflict of interest because the MeitY Secretary is also the chairman of CSC-SPV. 

Cyber Gram Yojana is another government-funded project given to this entity without inviting any tender. 

With the intention of teaching Information and Communication Technology (ICT) to school children from minority communities, the Ministry of Minority Affairs (MMA) started the Cyber Gram Yojana in minority-concentrated schools and madrasas under the Multi- sectoral Development Programme (MsDP). As of now, the scheme is running in 710 blocks of 196 districts across the country. A report published by the MMA in January this year shows 1,04,916 students enrolled for the programme in West Bengal, Rajasthan and Tripura alone. 

In this case too, CSC-SPV is the implementation agency. For every student, the estimated expense is Rs.1,555, which is shared by the Central and state governments in a 75:25 ratio. Out of this Rs.1,555, Rs.130 is the project management fee for CSC-SPV and the SCAs get Rs.150 as training fee. 

As of now, there are no SCAs under the CSC-SPV and the company itself is managing the CSCs. As a result, the CSC-SPV is earning 18% of Rs 1,555, which is Rs 280. 

The scheme guidelines say the entire funds (both Central and state share) should be disbursed by state governments in two equal installments to CSC-SPV, which will release it to all other stakeholders. 

Digital Village Programme & Data Access 

The Modi government launched the digital village programme with an estimated budget of Rs. 10,000 crore and CSC-SPV was again selected as the implementation agency without inviting any tender. 

According to the memorandum of understanding signed between CSC SPV and MoPR (Ministry of Panchayati Raj) for the project, state governments have to bear the complete project cost. 

Under the Digital Village project, the private VLEs will be relocated to Gram Panchayat (GP) Bhawans and the GPs have to provide them free space and power for their operation. The GPs also have to provide complete access to the entire data to these private entrepreneurs . 

As per the MoU, the VLEs will be the front-end for all government-related services. This means, these private entrepreneurs will be issuing birth and death certificates, handling government social security schemes, like Integrated Programme for Senior Citizens, Rashtriya Vayoshri Yojana, Indira Gandhi National Old Age Pension Scheme, and scores of other such schemes, which will be available only through CSCs. Many government services that had been free for citizens when the departments concerned handled them, are paid services now. 

A survey conducted by India Forum in Jharkhand found that banking services, which are part of CSCs for free, are charging an average of 3.5% of the transaction. The prescribed rate for issuance of a certificate is Rs.30; but the VLEs are reportedly charging an average Rs.75 from citizens. For most VLEs, running the Centre has become a second business, it is alleged. 

In another instance, the Ministry of Statistics and Programme Implementation had signed a MoU in January 2019 with this entity for conducting the Census, surveys and information dissemination through CSCs. This MoU, valid for three years, had also been signed without inviting any tender. Under this MoU, the CSC SPV has already conducted the economic survey. 

The CSC SPV has access to a lot of data of citizens, including personal information and bank account details. The Election Commission of India has partnered with CSC SPV for voter ID card ( EPIC) printing through CSCs. 

The Electoral Registration Management Systems of many states have been integrated with the company’s Digital Seva Portal. During 2016-17, as many as 56.18 lakh EPICs were printed and delivered through the CSC network in these states. And in many of these states, allegations of voter names missing from electoral rolls were raised by Opposition parties and activists just before the 2019 general election. 

In 2018, citing corruption complaints and enrollment violations, the Unique Identification Authority of India (UIDAI) refused to allow CSCs  to continue providing Aadhaar services. By then, CSCs had issued 26.80 crore Aadhaar cards. In December 2019, after intervention by IT minister Ravi Shankar Prasad, CSC got back the contract. 

Data Exposure 

Israeli cybersecurity company vpnMentor published a Report on June 3, 2020, alleging that the CSC-SPV-run CSC BHIM website, which is used to promote payments App, BHIM, reportedly suffered a massive data breach, compromising highly sensitive personal data of over 70 lakh Indians. The leaked data included names, date of birth, age, gender, home address, religion, caste, biometric details, profile and ID photos, biometrics photos, such as fingerprint scans and ID numbers for government programmes and social security services along with scanned copies of many of these documents. 

According to vpnMentor, this exposure of user data is similar to a hacker gaining access to the entire data infrastructure of a bank, including user account information. vpnMentor says they contacted CSC-SPV and informed the company about the data breach and it did not rectify it. After various reminders, the Computer Emergency Response Team or CERT rectified it a month later. 

“The developers of the CSC BHIM website could have easily avoided exposing user data if they had taken some basic security measures to protect it," the researchers of vpnMentor wrote. 

In India, the CSC-SPV and National Payments Corporation of India refuted the claim and said there was no data breach. But the Israeli company put out photocopies of some leaked documents. 

A senior official, who was a part of National Level Service Agency or NLSA from 2006 till it handed over the responsibilities to CSC SPV, said: “What is the expertise of a company which was set up to monitor the CSC to implement technical and engineering projects like BharatNet AMC?” According to him, through CSCs, the IT Minister seems to have seen an opportunity to directly reach out to every corner of India, which would give the ruling party (Bharatiya Janata Party) an advantage in spreading its narrative about development work done by the Modi government. “The government grabbed this opportunity with both hands. But why government businesses worth thousands of crores were given to this company on nomination basis, is a mystery.” he said. 

Questions Abound 

In Definition and Principles of Public Procurement, the Central Vigilance Commission says: “Public Procurement can be defined as the procurement of goods, works and services by all Govt. Ministries, Departments, Agencies, Statutory Corporations and Public Sector Undertakings in the Centre and the States, Municipal Corporations and other local bodies and even by private Public Sector Undertakings providing public services on a monopoly basis.” It adds: “Public procurement is only an extension of personal procurement by two key words i.e. transparency and fairness.” 

In Nagar Nigam, Meerut Vs A1 Faheem Meat Export Pvt Ltd, the Supreme Court of India stated: “The law is well-settled that contracts by the State, its corporations, instrumentalities and agencies must be normally granted through public auction/public tender by inviting tenders from eligible persons and the notification of the public-auction or inviting tenders should be advertised in well known dailies having wide circulation in the locality with all relevant details such as date, time and place of auction, subject-matter of auction, technical specifications, estimated cost, earnest money Deposit, etc. The award of Government contracts through public-auction/public tender is to ensure transparency in the public procurement, to maximise economy and efficiency in Government procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the Constitution.” 

Till now, there is nothing in the public domain to suggest that the CSC-SPV participated in any tender to get government business. Some officials in the ministry also allege that the CSC SPV has never participated in any tender till date. 

A detailed questionnaire sent to IT minister Ravi Shankar Prasad and IT Secretary Ajay Prakash Sawhney on June 8 remained unanswered till this was published. This article will be updated once we receive their response. 

Ravi Nair is an independent journalist. He can be contacted on twitter @t_d_h_nair .