Saturday, July 25, 2009

Glaring lapses in Gorshkov, Scorpene, Hawk defence deals: CAG

NEW DELHI: Sleazy wheeling and dealing, huge delays and financial irregularities continue to pervade all defence deals. The Comptroller and Auditor General has now hammered the defence establishment for glaring lapses in the two biggest naval projects — acquisition of Russian aircraft carrier Admiral Gorshkov and indigenous construction of six French Scorpene submarines.

This comes even as India under Russian pressure is getting ready to shell out almost $2 billion (Rs 9,680 crore) over and above what was initially a `fixed price contract' of $974 million for Gorshkov's refit, while the Rs 18,798-crore project to construct six Scorpenes at Mazagon Docks has slipped two years behind schedule, as first reported by TOI.

A senior CAG official, in fact, dubbed the Gorshkov deal as the "biggest defence mess-up" ever, stopping just short of calling it a "scam". ``The defence ministry did not provide us with full cooperation and access to documents for Gorshkov. As for the Scorpene project, undue favour and financial advantage was shown to the French vendor,'' he said.

In its latest report tabled in Parliament on Friday, the nation's auditing watchdog also punched holes in several other major defence projects, including the Rs 8,120-crore project for 66 British Hawk AJTs (advanced jet trainers). Interestingly, this also comes at a time when India is negotiating a follow-on order for 57 more Hawks.

While the desperate need for an aircraft carrier, a modern submarine fleet and AJTs to train rookie pilots cannot be overstated, what the CAG report underlines is a sordid saga of squandering away of public money, without even a hint of long-term strategic planning, whichever be the political dispensation in charge.

If the earlier NDA regime inked the initial $1.5-billion package deal for Gorshkov and the Hawk AJT contract in the run-up to the 2004 general elections, the UPA government in its first avtaar finalised the Scorpene project in October 2005, amid swirling allegations of kickbacks.

Coming down particularly heavily on the Gorshkov affair, the CAG report said, ``Indian Navy is acquiring a second-hand refitted carrier that has half the life span and is 60% more expensive than a new one.''

Originally meant to plug the `five-year carrier gap' in the Navy's capabilities from 2007 to 2012, Gorshkov is still a `high-risk' proposition since its delivery acceptance trials may not be completed even by 2012, it added.

Russia, as reported earlier, is demanding a whopping $2 billion more over and above the initial $1.5 billion contract of January 2004, under which the carrier refit was pegged at $974 million and the rest earmarked for 16 MiG-29K fighters to operate from its deck.

The CAG report pointed to a 2004 naval assessment that a new aircraft carrier, with a life of 40 years, would cost $1,145 million and take 10 years to build.

Gorshkov, in turn, would run for only 20 years. ``The acquisition cost has more than doubled to $1.82 billion in four years,'' said CAG, taking the $1.2-billion figure demanded by Russia in 2007 into account.

Listing out Gorshkov's `limited operational capabilities', CAG in particular expressed worry that a close-in weapon system — to detect and destroy incoming hostile missiles and aircraft — would be fitted on it only during its first refit in India around 2017.

As for the Rs 18,798 crore Scorpene project, under which the six submarines were to be delivered between 2012 and 2017, CAG blasted the government for taking nine years to finalize it despite Navy's depleting underwater combat force-levels.

Navy's projections show it will be left with only nine out of its present fleet of 16 diesel-electric submarines — 10 Russian Kilo-class, four German HDW and two virtually obsolete Foxtrot — by 2012. ``This would lead to serious operational ramifications,'' said CAG.

The government's delay in finalising the Scorpene project led to increase in its costs by Rs 2,838 crore. ``The submarine design selected has also not proven its efficacy in any other navy,'' it said.

``Moreover, the contractual provisions resulted in undue financial advantage to the vendor of a minimum of Rs 349 crore, besides other unquantifiable benefits,'' it added.

As reported earlier, the project has been dogged by some controversy, with allegations of kickbacks made in the October 2005 contracts signed with two French companies — Rs 6,135-crore with M/s Armaris (a DCN-Thales joint venture) for transfer of technology and construction design, and Rs 1,062-crore with M/s MBDA for sea-skimming Exocet missiles.

"Large concessions in respect of warranty, performance bank guarantee, escalation, arbitration, liquidated damages, agency commission were bestowed on the vendor," said CAG.

Similarly, CAG rapped the government for taking 22 years for finalising the Rs 8,120 crore project to acquire 66 Hawk AJTs, which were sorely needed to help train IAF rookie pilots on the intricacies of combat fighter jet flying and reduce crashes.

It also pointed out that the contract was concluded with BAE Systems in a single-vendor situation, without reviewing the `air staff requirements' laid down in 1987, as also slippages in delivery schedules, pricing anomalies in supply of spares and the like.
The Gorshkov Saga

* Mid-1990s: Negotiations on the partly-burnt 44,570-tonne Admiral Gorshkov between India and Russia begin. Russia touts it as `a free gift' to India, with the condition that India will pay for its refit and the fighter jets to operate from its deck

* January 2004: India and Russia finally ink $1.5-billion package deal for Gorshkov, which includes $974 million for its refit and the rest for 16 MiG-29K fighters. Gorshkov to be delivered by August 2008

* Mid-2007: Russia demands additional $1.2 billion for refit over and above the $974 million, and pushes back delivery to December 2012. India panics, sends teams to inspect warship and negotiate. Both sides agree refit work `grossly underestimated' earlier. India pays advance of $250 million

* 2008: Russia now wants $2 billion more, over initial $974 million figure, for refit. By now, India has paid $500 million as advance. It renames Gorshkov as INS Vikramaditya

* 2009: Flurry of negotiations, with India paying another $102 million and trying to get overall refit cost pegged closer to $2.2 billion instead of $2.9 billion. Fresh refit contract likely to be sealed by August. Delivery will be delayed beyond Dec 2012

Why is Gorshkov needed?

Gorshkov forms a crucial part of India's plan to have two operational `carrier battle-groups' by the middle of the next decade. The country's solitary and ageing 28,000-tonne carrier INS Viraat is currently undergoing another life-extension refit to ensure it can run at least five more years. Moreover, the delivery of the 37,500-tonne indigenous aircraft carrier being built at Cochin Shipyard is likely to take place only by 2014-2015 or so.

MOD contention: A new aircraft carrier of Gorshkov's size and displacement would cost around $4 billion. A carrier is not available off-the-shelf and takes at least 10 years to build. After extensive refit, Gorshkov will run for another 30 years.

CAG: At best, Navy will be acquiring, belatedly, a second-hand ship with a limited life span of 20 years by paying significantly more than what it would have paid for a new carrier. Moreover, Gorshkov will not have a close-in weapon system against incoming missiles and aircraft till her first refit in India in 2017.

Refit work on Gorshkov

Lying berthed at the Sevmash shipyard for over 12 years, ongoing work on Gorshkov entails removal of the huge missile launchers on the bow to build a ski-jump at a 14.3 degree angle for MiG-29Ks, apart from new-generation communication, air defence and other weapons, including new missile systems. A lot of equipment on the 283-metre long carrier like cables, steel, motors, turbines, boilers and the like also needs to be completely replaced.

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