Ministry of defence’s desi projects under CAG fire

Report also comes heavily on Bharat Electronics Ltd for deal with blacklisted firm.

The Comptroller General of India has come out with stinging audit remarks on various projects of the defence ministry related to Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL), pointing out a series of deficiencies in planning and execution leading to inordinate delays and cost escalation.

Pulling up the ministry of defence and HAL for failing to provide the Intermediate Jet trainer to the Indian Air Force (IAF) for the last 13 years, the CAG report says the project suffered at every stage of its execution. It also raps the MoD for releasing Rs 3,074.83 crore towards production of the IJT series despite not obtaining the initial operational clearance — 95 per cent (Rs 2,907.11 crore) of the fund remains unutilised.

Against the original sanction of Rs 180 crore for development of IJT, the project has already incurred an expenditure of Rs 516 crore, the CAG report observes.    “While the planning went awry with the indecisiveness about the weight, thrust and life of the engine at the design stage itself, taking up limited series of production and series production simultaneously with design/development without obtaining initial operational clearance (IOC) did not serve the objective of providing the aircraft to IAF which had projected a requirement way back in 1999.”

The CAG further says that with a realistic date for obtaining IOC yet to be decided, efforts to attain indigenisation have remained unsuccessful even 13 years after the initiation of the project.

Advance Light Helicopters (ALH): The HAL has again come under the CAG’s attack for not achieving self-reliance in manufacture of Shakti engine for the ALH even after a delay of 10 years.

The CAG report says the need for variants of engines to operate in different climatic conditions and altitudes was not foreseen leading to frequent modifications requiring more investment in terms of time and money. The HAL had to bear addition burden due to the failure of Turbomeca, France (TM), indicating “undue favours extended to the foreign partner” in the development and production of Shakti engines.

The foreign collaborator’s failure to ensure compliance to offset obligation has so far denied an opportunity to the Indian industry to contribute towards self-reliance.

The report concludes that the inability of HAL to absorb the technology and non-assessment of the available in-house capacity to manufacture Shakti engines impacted timely induction to ALH into Defence forces and also resulted in avoidable extra expenditure of Rs 207.27 crore to HAL.

Bharat Electronics Limited contract with firm under CBI scanner: The CAG has come heavily on BEL for signing a procurement contract with foreign vendor Zurich-based Rheinmetall Air Defence despite knowing that the CBI was investigating the firm’s deals that were  facing the risk of being blacklisted by the government.

The CAG terms the actions of a joint secretary as “inappropriate” to let BEL sign the contract with Rheinmetall Air Defence even after it was named in a CBI report for paying kickbacks in the Ordnance Factory scam and the Defence Ministry had frozen its ties with it.

Rheinmetall was eventually blacklisted by MoD for 10 years in April 2012 after the final CBI report in the case.

“BEL entered into a contract for procurement with Rheinmetall Air Defence, Zurich, despite the fact that CBI was investigating the firm’s deals for alleged corrupt practices in earlier contracts which had a risk of the firm being blacklisted,” the report said.“The signing of a contract with a firm whose credibility was under examination for alleged corrupt practices and placing purchase orders committing heavy liability was hasty and without adequate assessment of associated risks. This resulted in blocking of company funds of Rs 502 crore for an indefinite period,” it said.

The report said the joint secretary (Electronic System) had told BEL that it was not legally valid to blacklist a company in anticipation of actual blacklisting and advised the PSU to take a decision as appropriate.

The communication was sent by him on September 2010, over a year after the MoD froze all its business with Rheinmetall in May 2009 after it was named by the CBI report.


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