India's accounting watchdog, the Comptroller and Auditor General has found faults with the Indian Navy's deal with the French submarine manufacturer Scorpene and said the firm was given undue favours in spite of the "unproven" platform design.
"Inspite of negligible experience in submarine construction, the (French) vendor was awarded the contract (for the construction of six submarines)," the CAG said in its annual report released Friday.
"Large concessions in respect of warranty, performance bank guarantee, escalation, arbitration, liquidated damages, agency commission were bestowed on the vendor," it said.
The report noted that the Scorpene submarine was selected due to the Tube Launch Missile capability it offers. But "...the navy accepted the missile with reduced range by amending its own qualitative requirements. The navy also accepted deviations in the submarine parameters.
"The unproven design of the submarine was accepted based on the validation of the design through computer simulation, despite the fact the design of the submarine had not proved its efficacy in other navies," said the report.
India inked a $3.5 billion deal with France in 2006 for six Scorpene submarines. The first of these submarines is to be delivered by 2011 while the remaining five will be built at the state-owned Mazgaon Docks Limited in Mumbai.
Construction of the first, second and third submarine commenced in December 2006, December 2007 and August 2008, respectively.
Seconding Defence Minister AK Antony's observation on the delivery of the submarine, the report said: "The contract activities for submarines are lagging behind schedule. As against envisaged achievement of 27.43 per cent uptill December 2008, a mere 9.34 percent progress has been achieved."
On Monday, Antony told parliament that the delay in the delivery of the French Scorpene submarines would adversely impact the underwater capability of the Indian Navy.
He said the slippage in the delivery schedule is expected on account of some teething problems, absorption of technology and delays in augmentation of industrial infrastructure and procurement of Mazgaon Docks Limited (MDL) purchased materials (MPM).
Delay in the scheduled delivery of submarines is likely to have an impact on the envisaged submarine force levels, he said.
Under a 20-year submarine perspective plan, the Indian Navy intends to acquire 24 submarines by the year 2020.