K.V. Prasad

“Objective of inducting second-hand ship at high cost has been defeated”

A second-hand ship is costing the Navy more than the price of a new ship

The cost of acquisition has more than doubled to $1.82 billion in four years

NEW DELHI: With cost overruns and delay affecting the acquisition of aircraft carrier INS Vikramaditya (Admiral Gorshkov), the Comptroller and Auditor General of India on Friday said the Navy’s decision to go in for a second-hand ship has become questionable, and that the objective of its induction has been defeated.

High risk

“The objective of inducting an aircraft carrier in time to fill the gap in the Indian Navy has not been achieved. The cost of acquisition has more than doubled to $1.82 billion (Rs. 7,207 crore) in four years. At best, the Indian Navy would be acquiring, belatedly, a second-hand ship with a limited life span, by paying significantly more than what it would have paid for a new ship,” the CAG said in its latest report to Parliament.

The report said that although the CAG was not provided with full cooperation and access, it noticed after audit that the delivery of the ship — originally acquired to fill the five-year carrier gap during 2007-2012 — still involves high risk, as the delivery acceptance trials of the Gorshkov would only be completed by 2012 at the earliest.

The contract with Russia for the carrier was signed in October 2000, with India paying $875 for Repair and Re-equipping (R&R) the ship that was a ‘gift.’

It was to be delivered in August 2008, and was expected to fill the gap left by INS Viraat, the only aircraft carrier in service, which was originally to be decommissioned by 2007. INS Viraat is currently undergoing repair and refitting at Kochi.

Sea trials add to costs

The most substantial increase of $522.57 million, the report said, is on account of sea trials, originally contracted for $27 million.

“This has increased by almost 20 times to $550 million, creating doubts about the diligence exercised while estimating and negotiating costs,” it said.

In addition, the carrier will not have a Close-In Weapon System — a vital ship-board point weapon for detecting and destroying incoming anti-ship missiles and enemy aircraft at short range — under its first refit in 2017 in India.

The report also noted that monitoring and supervision was surprisingly lax, with no committee adhering to the frequency prescribed. “As a result, the enormity of the situation could not be foreseen till the vendor presented revised costs.”

Financial control diluted

It also said that financial control by the Indian side was diluted, as payment terms were not linked to physical outputs. While 66 per cent of the contracted cost of R&R has been paid, only 35 per cent of the work was completed.

The CAG surmised that given the expected force level of the Navy by the time the aircraft carrier was inducted, it was not clear how the Navy would provide an adequate complement battle group — large frigates, missile boats, and an air complement — for the carrier, as it would form the centre of a full-fledged group.

Corrections and Clarifications

The fourth paragraph of a report "CAG picks holes in Gorshkov acquisition"(July 25, 2009) gave the figure India was paying Russia for Repair andRe-equipping (Ramp;R) the ship as $875. The figure should have been $875million.