In a report tabled in Parliament, the federal auditor said two of the four warships were delivered to the Navy were not fitted with required weapons and sensor systems due to which they could not perform to full potential as envisaged.
The CAG was severely critical of the Navy's Directorate of Naval Design (DND) for delay in finalising the design of the corvettes, saying approved designs were amended 24 times.
The Garden Reach Shipbuilders and Engineers Limited (GRSE), a defence public sector undertaking (DPSU), was issued letter of intent for the project in 2003 but major modifications in design of the ships continued till 2008.
The first corvette was delivered to the Navy in July 2014 and second one in November 2015. According to the contract for the project, the third corvette should have been delivered in July 2014 and fourth in April 2015.
"Against the 18 weapons and sensors to be installed on ASW corvettes, audit observed that the two ASW corvettes delivered were not fitted with 'X' weapon and sensor systems. Thus, ASW corvettes could not perform to its full potential as envisaged," the CAG said.
The auditor also observed that Sea Acceptance Test (SAT) on six weapons and sensors in the first corvette and all weapons and sensors on the second one were pending satisfactory completion.
"Thus, the effectiveness of the main feature of anti-submarine warfare was yet to be fully proved."
(SAT) is conducted to test vessel's speed, equipment, manoeuvrability and safety features.
The CAG also expressed dissatisfaction over licence production and supply of Hawk Mk 132 AJT aircraft by Hindustan Aeronautics Limited.
It said not insisting for licence for manufacture of unlimited number of aircraft by the ministry of defence (MoD) while negotiating for "batch I" contract resulted in avoidable payment of licence fee for licenced manufacture of unlimited number of aircraft.
The CAG also said HAL incurred an expenditure of Rs 107.05 crore on account of procurement of six additional engine kits in anticipation of order from MoD which remained infructuous.
The HAL produces the plane under licence from BAE. under licence from the BAE Systems.
"Though establishment of facilities for major servicing of airframe and engines was envisaged to be completed by March 2016 and March 2018 respectively, considering aircraft directly procured by MoD, HAL was yet to establish the facilities till date," it said.