KATHMANDU, Aug 14: The Department of Passports (DoP) under the Ministry of Foreign Affairs has incurred a loss of over Rs 2 billion in revenue due to a collusion between DoP officials and a French company during the procurement and printing of electronic passports (e-passports). The government faced this substantial revenue loss after deciding to distribute 64-page passports at the cost of 34-page passports. To address this, the government has amended the passport regulations.

On June 15, 2023, the government amended the regulations to revise passport fees. This information was also published in the Nepal Gazette on the same day. As of that date, there were 85,000 34-page passports and 393,000 64-page passports in stock. Sources claim that the government incurred a loss due to the amendment to the passport regulations for immediate crisis management.

The decision was made by the government led by Pushpa Kamal Dahal. By reducing the fee for a 64-page passport to the rate of a 34-page passport, the distribution of 372,552 passports by February 2024 resulted in a revenue loss of about Rs 2.31 billion, according to a report from the Office of the Auditor General.

A staff member from the DoP revealed that due to collusion between the DoP officials and the French company IDEMIA, the state lost Rs  2.31 billion in revenue and incurred an additional cost of over Rs 24.55 million. The staff member claimed that there appears to be significant collusion, suggesting that senior officials and the French company were involved in the malpractice. At the beginning of 2018, it was estimated that printing 50 million e-passports would cost Rs 8 billion. However, this estimate was later canceled, and after four rounds of bidding, IDEMIA was awarded the printing contract.

In mid-July 2018, the Cabinet meeting granted theoretical approval for the DoP to transition from Machine Readable Passports (MRP) to e-passports. A month earlier, in mid-June, the Ministry of Foreign Affairs had presented the proposal for e-passports to the Cabinet. The Cabinet referred the proposal to the Social Committee for further discussion. Based on the committee's recommendations, the Cabinet gave its approval for the transition to e-passports in mid-July 2018.

The government had planned to print five million e-passports at a security printing press. Although the process of establishing the security printing press was initiated, it was not implemented. On March 2, 2020, a decision was made to purchase 20 million e-passports. The DoP called for international tenders three times over a period of 13 months for the procurement and printing of e-passports. Initially, on August 27, 2019, the DoP issued a tender for printing five million e-passports over a period of five years. The deadline for the tender was extended multiple times, and eventually, on November 7, 2019, the DoP published a notice canceling the first tender and calling for a new one.

On March 2, 2020, the DoP issued a second tender. The deadline for the tender was extended multiple times, and eventually, it was canceled on September 22, 2020. During the second round of tendering, applications were received from four companies: IDEMIA Identity & Security SAS from France, Muehlbauer ID Services GmbH from Germany, HID Global from the United States, and Aisino Corporation from China. IDEMIA proposed a cost of $26.59 million, HID Global proposed $29.29 million, Aisino Corporation proposed $32.65 million, and Muehlbauer ID Services GmbH proposed $39.32 million. At that stage, the government was unable to reach an agreement with these companies. Later, in 2021, the government finalized the contract for e-passports.

The French company IDEMIA, which was responsible for Machine Readable Passports (MRP), received the e-passport contract as well through its local commission agent, Siddhartha Pandey. The Auditor General's report has raised questions about this contract. Most recently, in June of the previous year, the same company was granted approval for additional passport printing.

Auditor General’s report

On June 15, 2023, a notice was published in the Nepal Gazette announcing the amendment of passport fees. On that date, there were 85,000 34-page passports and 393,000 64-page passports in stock. To manage the crisis, the passport regulations were amended. As a result, the fee for the 64-page passport was reduced to the price of the 34-page passport. By January 2024, as many as 372,552 passports had been distributed, leading to a revenue loss of about Rs 2.315 billion for the State.

Due to the amendment of passport fees, printing 64-page passports instead of 34-page passports resulted in an additional cost of $0.50 per passport. For the 372,552 passports, this led to an increased cost of $186,276, amounting to Rs 24.545 million. The Council of Ministers decided to purchase 28 million passports through an international tender, but this procurement process had not been implemented by the time of the audit.

During the initial contract period, $121,000 was allocated for training Level 1 and 2 staff from the DoP in France. However, despite this training cost being included in the passport cost, the training was not conducted as per the agreement. Although the payment was made for the agreed number and duration of training, no training was provided. After staff were supposed to receive training, the supplier was to transfer infrastructure, including passport printing machines, to the DoP, which would have allowed it to print passports independently. Instead, the work was continued through a new supplier, preventing the passport printing process from becoming self-sufficient and cost-effective. According to the agreement, $121,000 should be reclaimed, which amounts to Rs 15.951 million, as the training was not conducted.

According to Section 11.2 of the general terms of the procurement agreement between the DoP and the supplier, destroyed or canceled passports must be included in subsequent purchase orders for supply by the supplier. By June 2023, a payment of $352,863 had been made to the supplier for 33,714  34-page passports and 72 64-page passports - a total of 33,786 passports - were noted as destroyed or canceled. According to the agreement, the supplier is required to replace the destroyed or canceled passports. If the supplier fails to provide these passports, an amount of Rs 45.791 million should be reclaimed from the payments made.

 
• Department_of_Passports
 
• Ministry_of_Foreign_Affairs
 
• state
 
• loss
 
• electronic_passports
 
• IDEMIA