The Gorshkov

New Delhi, July 24: Floating in the waters of the Sevmash Shipyard in faraway north Russia is India’s single-largest weapons platform. But today it is India’s biggest defence scam.

India is buying the Gorshkov, a used, gutted carrier that is being refitted at more than the price of a new carrier after its cost doubled in the four years since it was contracted in January 2004 to more than $1.82 billion (Rs 7,207 crore), audit findings have revealed.

The figure of Rs 7,207 crore is just about half the size of the total central budgetary allocation for higher education for 2009-2010. Or, more than 100 times the amount of the kickback in the Bofors scam that followed the Howitzer deal of March 1986.

The tardiness that goes with the Gorshkov was known. But this is the first time an audit investigation has revealed the amount of public money that is being wasted. In exasperation, in November 2007, even the navy chief, Admiral Sureesh Mehta, had wondered aloud: “Where are our relations with Russia going?”

India contracted 12 single-seater MiG 29K and four twin-seater MiG 29 KUB aircraft as part of a $1,465-million package deal with the Gorshkov (which has been rechristened the INS Vikramaditya) on January 20, 2004 ($650 million for the refit of the vessel and $815 million for the aircraft, including helicopters).

India’s only other aircraft carrier, the INS Viraat, is being operated at the end of its service life with extensive refits.

The Russians are now asking for even more. A team of officials from India and Russia are at work to redraft the contract with an escalated price. The total price of the Gorshkov package has now gone up to $2.9 billion. India is trying to get it down to about $2.2 billion.

“The objective of induction of the ship... as an aircraft carrier in time to bridge the gap in Indian Navy capabilities has been defeated,” the comptroller and auditor general (CAG) has concluded. The auditors have written that the defence ministry did not co-operate with them.

“We were not given any documents after September 2007 and not allowed to photocopy documents, either,” said Gautam Guha, the director general (audit), defence services.

The CAG report tabled in Parliament today also unearths irregularities in acquiring the French-origin Scorpene submarines that caused delays and led to an increase in project cost by Rs 2,838 crore.

The Gorshkov is a rusty old tub, the audit findings show, but India is sinking public funds into it for a worthless cause. The ship was originally scheduled for delivery in August 2008. There is little chance the navy will get it before 2013.

“It is unprecedented, it could be the largest,” admitted additional deputy comptroller and auditor general Arvind Kumar Awasthi when asked if his office had ever found such a waste of funds in any single defence project.

India concluded the contract in January 2004 with a “guess” estimate of $27 million for sea trials. The amount under this head had gone up by September 2007 by almost 20 times to $550 million.

In 2004, the navy compared the cost of a new carrier with that of the Gorshkov. A new carrier with a life of 40 years and deliverable in eight years would cost $1,145 million when the Gorshkov was priced at $974 million.

The Gorshkov is projected to have a life of 20 years. But by September 2007, the cost had gone up to $1.82 billion.

“Thus, it can be seen that Indian Navy was 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,” the CAG report says.

When the Gorshkov was contracted, the NDA government was in power and George Fernandes was the defence minister. Subsequent negotiations for the escalated price have continued in the successive UPA governments when the defence portfolio has been held by Pranab Mukherjee and A.K. Antony.

The CAG says the defence ministry also contracted six Scorpene submarines, of French origin, after nine years of negotiations in October 2005, despite the navy’s depleting force level. The delay led to a cost increase by Rs 2,838 crore.

The contract for the six submarines to be made under technology transfer from DCNS Thales and Armaris at Mazgaon Docks was concluded for Rs 18,798 crore.

The CAG says: “The ministry/naval headquarters scaled down the original technical specifications and extended undue financial benefit to the vendor.”

The first submarine is to be delivered by 2012. But since construction began in December 2006, only 9.34 per cent of the work has been done, against a targeted 27.43 per cent, by September 2008.