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CAG criticises Scorpene deal for delay, benefit given to firm

July 26, 2009 16:28 IST

Bogged down by kickback charges, the Scorpene submarine deal has now come under criticism from the Comptroller and Auditor General for the delay involved and financial "advantage" given to the French company. In its latest audit report tabled in Parliament on Saturday, the Comptroller and Auditor General came down heavily on the Defence Ministry for the nine-year delay in concluding the contract and for showing "undue financial advantage" to the company, which hiked the price by Rs 2,838 crore despite the vessel's designbeing unproven.

The auditors' indictment comes a week after Defence Minister A K Antony told the House that the delay in delivery of Scorpene would impact Navy's underwater capabilities. The CAG report for 2008 said Indian Navy's projected requirement for a submarine fleet was approved in 1997, but the contract with Armaris, a joint venture of DCN and Thales, was done only in October 2005. This despite the fact that the Navy's force level was depleting fast and of the present 16 diesel-electric submarines in its fleet, it would be left with only nine by2012. "It took almost a decade to finalise the contract for construction of 25 per cent of the envisaged force level (24). 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," the report said. 
    
The CAG noted that the Rs 18,798-crore project to construct six Scorpenes at Mazagon Dockyards Limited (MDL) had
already slipped two years behind schedule, though the delivery of the submarines was fixed between 2012 and 2017."The submarine design selected has also not proven its efficacy in any other navy," the CAG report said, adding that the project cost had increased from Rs 12,609 crore in October 2002 to Rs 15,447 crore by October 2005 when the contract was signed. Moreover, the report added that "the contractual provisions resulted in undue financial advantage to the vendor
of a minimum of Rs 349 crore, besides other unquantifiable benefits," it added.
    
In October 2005, India had also signed another Rs 1,062-crore with MBDA for supply of sea-skimming Exocet missiles.
The missiles, the CAG said, would be fitted on the submarine only after its construction is over. But even before the missiles becomes operational on the submarine, the warranty period of first two batches of the missiles supplied by the company would have expired, it added. India also extended to the vendor "Wide ranging concessions" on warranty, performance bank guarantee, escalation formula, arbitration clause, liquidated damages, agency commission and performance parameters, it added.

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