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HindustanTimes Fri,29 Aug 2014

Auditor slams defence deal that’s bleeding India

Rahul Singh, Hindustan Times  New Delhi, July 24, 2009
First Published: 20:57 IST(24/7/2009) | Last Updated: 01:32 IST(25/7/2009)

You have probably heard of Admiral Gorshkov, the ship, not the man. It’s a second-hand aircraft carrier that India is buying from Russia at a price nearly 60 per cent higher than it would have paid had it bought a spanking new one elsewhere.

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It’s an old carrier retired by the Russian Navy many years ago. India got interested as it needed a ship like this when its only aircraft carrier INS Viraat was to retire in 2007; the replacement was not due until 2012.

It was supposed to be a stopgap deal, but not at Rs. 9,100 crore. The Comptroller and Auditor General, which audits government’s expenses, in a report tabled in Parliament on Friday severely indicted the purchase as wasteful expenditure.

The auditor also found serious problems with the purchase of six Scorpene submarines from a French firm for Rs. 18,798 crore – the vendor was favoured. And that is a big red flag.

“The cost of acquisition (of Admiral Gorshkov) has more than doubled to US$ 1.82 billion (Rs 9,100 crore, calculated at current exchange rates) in four years,” said the report.

“At best, the Indian Navy will be acquiring a second hand ship by paying significantly more than what it would have paid for a new ship.”

Arvind Awasthi, a senior officer at the auditor’s office, said: “This is unprecedented. It could be the largest…(case of wasteful expenditure in a single defence deal).”

The ship is four years past the estimated time of arrival, now expected in 2012.

The auditor cannot punish those found wasting public money, but its reports have in the past lead to prosecution by the CBI  – such as the purchase of HDW submarines from Germany and coffins for soldiers dying in the Kargil war.

The biggest defence scam in Indian history – the Rs. 1600 crore Bofors gun deal – would pale in comparison to the Gorshkov mess, if kickbacks were to be uncovered at a later stage.

So, who signed these inflated cheques for the old admiral from Russia?

The Navy denied any hand in it. A senior official who refused to be identified because of the controversial nature of the issue, said, “Navy does not carry out price negotiations. It is the defence ministry’s job.”

The defence ministry has maintained in the past, despite criticisms, that even at this price the Russian hand-me-down is a good deal.

A new one of this kind, a senior ministry official said, will cost $ 4 billion (Rs 20,000 crore).

India was to buy the 45,000-tonne Gorshkov for $974 million (Rs 4,870 crore) in January 2004.

It was to come as a gift from the Russians with payments required only for refitting the warship.

The carrier’s 16 fighter planes -- MigG-29Ks -- and six Kamov helicopters were to cost another $879 million (Rs 4,395 crore).

Very soon this turned the most expensive gift ever.

Most of the cost escalation was on account of sea trials, necessary to test the sea-worthiness of the re-fitted ship.

It was to cost only $27 million (Rs 135 crore), but now India is being billed $550 million (Rs 2,750 crore).

The auditor said this manifold increase raises doubts about “the diligence exercised while negotiating costs”.

The Russians have since then asked for more money for the fittings, which is currently under negotiations.

On undue favours in the Rs. 18,798-crore Scorpene submarine contract, the auditor said, “The submarine design selected had not proved its efficacy in any other navy… It was accepted on the validation of the design through computer simulation.”

The auditor added that “large concessions” were given to the French firm.


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