CAG raises stink over Gorshkov deal

The Comptroller and Auditor General (CAG) of India has come down harshly on the government and the navy for agreeing to pay around Rs5,000 crore more than the amount agreed to in 2004 for the purchase of the aircraft carrier Admiral Gorshkov from Russia.

Calling the warship a “second-hand” carrier with “half the lifespan of” and “60% more expensive than a new one”, the CAG said in its annual report that the centre has not been cooperating with its audit for several months.

It said, in the best possible scenario, what would be India’s biggest weapons platform will be available only after 2012, when it is needed now. “The objective of inducting an aircraft carrier in time to fill the gap in Indian Navy has not been achieved,” the CAG report said. The Gorshkov deal was signed by the NDA government in January 2004.

The detailed audit raises serious questions on whether the fiasco was a grave error of judgment on the part of the naval headquarters, ministry of defence and cabinet committee on security or if there was organised manipulation at play. The MoD’s silence and some of the outrageous price hikes only lend credence to theories of a scam behind the carrier purchase.

For example, the cost of sea trials for the carrier is being hiked from a mere $27 million (Rs135 crore) agreed to in the 2004 agreement to a whopping $550 million (Rs2,750 crore).

Since October 2007, the MoD has not cooperated with the CAG. Worse, the MoD has also not responded to the audit body’s queries, a senior official of the CAG said.
To the government’s explanation that the unprecedented hike was because it was a complex contract of unprecedented terms, the CAG official replied, “All contracts involving complex weapon systems are complex.”

Three years after the contract was signed and just 10 months before the expected delivery of Gorshkov, the Russians demanded a 137%, or $1.2 billion, increase in the payment. 

The cabinet committee on security has already in-principle approved the hike.

The CAG has suggested a “comprehensive review” given the criticality of the asset. The autonomous body said they were “not provided with full cooperation and access” to the Admiral Gorshkov project.

The audit points out that the government is now “likely to pay $1.82 billion (Rs9,100 crore approximately) as against the original contract amount of $875 million” (Rs4,375 crore).

The CAG reports that the cost of sea trials, which is now being increased 20 times, may have been decided using a “guess estimate”.

“Financial control by the Indian side was diluted as payment terms were not linked to physical outputs. Thus, though 66% of the contracted cost of repair and refit has been paid, only 35% of the work has been completed,” the CAG points out.