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The chinks in India's armour
The CAG's 2008 audit report points out several irregularities in defence deals, ranging from procurement of arms to cost incurred for wasteful research and development.
The CAG flayed the defence establishment for glaring lapses in the two biggest naval projects -- acquisition of the Russian aircraft carrier Admiral Gorshkov and indigenous construction of six French Scorpene submarines.
In subsequent slides, rediff.com's Krishnakumar P will outline the CAG's observations.
Second-hand warship at the cost of new one
In simpler terms, the report damns the defence ministry for allowing the cost of acquisition to double in four years to Rs 7,207 crore ($1.82 billion)*.
The report says that the delay will also, in effect, mean that the Indian Navy will get a second-hand ship with a limited life span. And to top it, the navy is acquiring a second-hand refitted aircraft carrier that had half the life span of and was 60 per cent more expensive than a new one.
What is even more glaring is that India is now under immense pressure from Moscow to increase the price by Rs 9,700 cr ($2 billion)* more than the initial price of Rs 3,856 cr ($974 million)*.
And all this after two naval delegations visited the Sevmash shipyard in 1995 and 1998 and reported that the 'carrier's condition was deteriorating.'
Further, the CAG report says the following: Out of the total 2,500 compartments spread over nine decks on the ship, 1,650 would either be newly created or extensively modified. Thus, almost two third of the ship would be renovated.
In conclusion, the report says: 'The objective of induction of the ship as an aircraft carrier in time to bridge the gap in the Navy's capabilities has been defeated. In sum, the government has paid $407.05 million (August 2007) and is now faced with an additional demand for $1.2 billion (November 2007) for a second hand carrier whose delivery schedule is uncertain. The matter was referred to the Ministry in September 2008; their reply was awaited as of January 2009.'
* The CAG report keeps the dollar-rupee conversion rate at Rs 39.60.
That sinking feeling with Scorpene
There were allegations in 2005 that kickbacks totalling more than Rs 7,000 crore (Rs 70 billion) were paid to the French companies involved. Now the CAG report has slammed the defence ministry for taking nine years to conclude the contract for six submarines.
This nine-year delay has caused an increase in the project cost by Rs 2,823 crore (Rs 28.23 billion).
Again, as the same old story of India not having the cake it paid for and someone else eating it, the CAG says: 'The contractual provisions resulted in undue financial advantage to the vendor of a minimum of Euro 58.20 million (Rs 349 crore) besides other unquantifiable benefits.
All this at a time when the navy will be left with only nine out of its present fleet of 16 diesel-electric submarines by 2012.
'The Competent Financial Authority in August 1999 approved a project for series construction wherein 50 per cent of the envisaged force level was to be constructed during the first phase (2000-2012) and the balance in second phase (2013-2030). It took almost a decade, after formulation of NSQRs, to finalise the contract for construction of 25 per cent of the envisaged force level.'
Resultantly, the first submarine is likely to be inducted by 2012 only by which time the inventory of the operational submarines available for the Navy would be at its lowest ebb. This would lead to serious operational ramifications.'
In other words, even if we leave the matter of money aside, while the idea was to get 12 submarines by the time the fleet's depletion begins, India is now left with a more than 50 per cent depleted fleet. Even the acquisition of six submarines is now delayed.
And lest we forget, the CAG further adds: 'The particular submarine design has not proven its efficacy in any other navy.'
Still flying with the 80s syndrome
It then took the air force five years to spell out its requirements to the ministry. In 1987, the IAF told the government that it needed 66 advanced jet trainers.
However, it was not until 2004 -- a full 22 years after the need was felt -- that the government signed a contract with BAE Systems.
Here's the worst part: The government signed a contract for 66 trainer aircraft, 24 of which were to be supplied in the fly-away condition and the rest license-manufactured by Hindustan Aeronautical Limited.
Sixty-six is the number of trainers that the air force wanted in 1987. And 66 is the number of trainers that the government orders in 2004. No study was conducted to figure out the increase in the IAF's requirements in the 17-odd years that took for the government to act on it.
In the CAG's words: 'It took 22 years to finalise contracts towards fulfilling the felt need for inducting an aircraft to meet essential training requirements of the IAF pilots. The supply and production of the aircraft was based on air staff requirements that were not reviewed since their issue in 1987. The restriction in utilisation of aircraft would compromise operational and training requirements.'
'Inordinate delay in acquisition of these trainer aircraft, which is essential for improving the skills of IAF pilots graduating from lower speed aircraft to advanced high performance fighter aircraft, has affected pilot safety,' it said.
There is more: 'Because of software and integration problems, the IAF cannot utilise 40 per cent of the flying time. Due to pending integration of electronic weapons suite, the aircraft could not be used for tactical weapon training, limiting the operational use of the aircraft.'
Blind by sight, way off target
The BVR missiles, fitted to Su-30 MKIs, MiG-29s and MiG-21s were bought at a 'cost of Rs 2 crore each' but their failure during tests, says the CAG report, has affected the 'operational preparedness' of the IAF.
Further, 42 of the 300 air-to-air missiles acquired from another manufacturer at a cost of Rs 76 crore (Rs 760 million) became unserviceable during the warranty period. Another 165 missiles remained unserviceable for significant periods.
Though the shelf life of all the missiles would expire by June 2010 and despite having a stock of 440 missile launchers Air HQ procured 145 additional launchers between August 2006 and March 2008, rendering the expenditure of Rs 66.86 crore (Rs 668.6 million) on their procurement largely infructuous.
DRDO's eye-wash in CAG's radar
In 1997, the Indian Navy projected wanted a maritime radar to ensure that its helicopters could perform their patrolling role effectively. Thus, in April 1998, the competent financial authority (CFA) took on the task of development of the radar with funding from the navy.
In June 1998, the government sanctioned a radar project to the Defence Research and Development Organisation at a cost of Rs 24 crore (Rs 240 million) to be completed by June 2002. In 2003, with the radar project still in developmental stage, the DRDO asked for a new radar project.
It was sanctioned at a cost of Rs 15 crore (Rs 150 million). The CAG has now found two things: 1. After 10 years, DRDO was unable to develop the radar to the navy's satisfaction. 2. The specifications of the new project that DRDO got sanctions for are part of the first project.
In simpler terms, DRDO -- having failed to deliver at the first instance -- had started another project with the same specifications!
The report says: 'The DRDO stated that the new project was an offshoot of the earlier project in a Mark I -- Mark II kind of developmental effort. It is to be noted, however, that the first radar project's goals included incorporation of SAR/ISAR radars. A new project was initiated in order to achieve the very same goals of the earlier project, albeit with a fresh set of target dates and new funding.'
'Thus, despite claiming that the project was a success, the DRDO was unable to deliver the radar as per stated requirements for installation on the desired platform. On the other hand, the DRDO had to initiate another 'Staff Project' with new funding for achieving the same goals. In sum, even after passage of nearly a decade and after incurring Rs 27.88 crore expenditure, the fundamental objective of production of a user acceptable radar was not achieved.'
Defective ammo, choppers, the list goes on...
When faced with technological difficulties in the development of Advanced Light Helicopter, HAL decided it was no point working on it. It has been two decades since, and nothing has been done.
'Technological gaps in design and development of Advanced Light Helicopter by Hindustan Aeronautical Limited, Bangalore, remained unresolved even after lapse of two decades. Resultantly, ALH costing Rs 1,747 crore (Rs 17.47 billion) inducted conditionally by the Army suffered from operational limitations.'
Defective ammunition: Krasnopol ammunition is used in 155 mm guns for destruction of enemy armour, high value mechanised forces and static pinpoint targets during operations.
The army procured Krasnopol ammunition from a foreign firm, without adequate trials, resulting in import of defective ammunition worth Rs 526 crore (Rs 5.26 billion).
The procurement of ammunition without adhering to the prescribed norms affected operational preparedness as the ammunition has not been available to the indenting units for use.
Faulty imported radars: Five radars imported at a cost of Rs 24.88 crore (Rs 248.8 million) could not be installed for more than three to five years after their acquisition. In the process, the radars have not only lost 50 per cent of their life but also remained unavailable for operational purpose.