Article Posted on : - Mar 11, 2010

French made Scorpene class diesel-electric submarine.

NEW DELHI (PTI): A Parliamentary Committee has slammed the Indian Defence Ministry for taking nine years to finalise a contract with French firm Thales to build six Scorpene submarines and said its "indecisiveness" led to Rs 2,800 crore cost escalations.

The "unacceptable delay" also adversely impacted Navy's operational preparedness besides resulting in undue favour to the vendor, the Public Accounts Committee (PAC) said in its report tabled in both Houses of Parliament on Wednesday.

The PAC noted that due to the delay in the finalisation of the contract during negotiations for as long as three years from 2002 to 2005, there had been an escalation in the price of submarines by more than Rs 2,800 crore and an additional Euro 27.05 million commitment on the procurement of missiles for the naval vessel.

The contract was finalised in 2006 and the construction of the Scorpenes at the Mazagon Docks in Mumbai is on.

"Such indecisiveness and systemic flaws on the procurement of submarines led to time and cost overrun and undue favour to the vendor besides adversely impacting Navy's operational preparedness," the report said.

The PAC also cited a Comptroller and Auditor General (CAG) report for 2008 that rapped the Ministry for the delay.

The CAG report had observed that "despite the Indian Navy's depleting force level, the Ministry took nine years to finalise a contract for the construction of the six submarines."

Referring to the Ministry's reply attributing the delay on forwarding of Cabinet Committee on Security (CCS) note to Finance Ministry for examination and reference to Central Vigilance Commission (CVC), followed by several rounds of deliberations, the report said the process was "too cumbersome" and asked it to dispense with the CVC route.

"It (CVC route) is unnecessary and totally uncalled for and resultantly leads to unacceptable delays, as has happened in the instant case," it added.

The report said the cost overrun was primarily due to escalations of exchange rate variations and increase in cost of missiles, despite a discount of 1.03 per cent by the vendor.