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March 16, 2018

‘Repeated delays in naval projects led to huge cost escalation’


Repeated delays in key naval projects have not only hit country’s maritime preparedness, but also led to huge cost escalation. Three important naval projects, which were to cost Rs. 9,892 crore, eventually cost the Navy Rs 38,855 crore—four times the original cost.
Highlighting the delays in naval projects, the Standing Committee on Defence, headed by Major General B.C. Khanduri (retd), in its report tabled in the Parliament on Tuesday, claimed that repeated delays in procurement projects have become ‘part and parcel of the procedures’.
While mentioning about considerable delays in number of projects of the Navy, including Indigenous Aircraft Carrier (IAC), naval offshore patrol vessels, fast interceptor crafts, landing craft utility and water jet fast attack craft, the parliamentary panel observed that ” the delays have adversely impacted the exchequer.
In case of IAC, the delivery schedule of the aircraft carrier has been been revised from December 2010 to October 2018. But, the warship is expected to be delivered by October 2020. The panel noted that the main reasons for time overrun are the non-availability of Russian steel, and delay in receipt of critical pre-launch equipment such as gear box and diesel generators.
“The original coast of Rs. 3,261 crore was revised to Rs. 19,341 crore by the Cabinet Committee on Security in July 2014. Increased equipment costs, including weapons and sensors, and Aviation Facilities Complex (AFC) due to finalisation from generic to specific equipment has further added to the cost overrun,” the Standing Committee report stated.
After commissioning 40,000 tons warship, the IAC will be formally named as INS Vikrant. With this, India will join the elite group of indigenous built aircraft carrier, as other than Indian Navy, only the US, Russia, Britain and France have capacity to design and build aircraft carriers of 40,000 Similarly, in case of Project 15A with MDL, Mumbai, delivery of three ships named INS Kolkata, INS Kochi and INS Chennai, faced repeated delays. The committee observed that “the original cost of Rs. 3580 crore was revised to Rs. 11,662 crore. Cost overrun has been mainly due to the increase in equipment cost and Yard material, increase of cost of labour and labour overheads and realistic assessment of cost of weapons and sensors.”
And in case of Project 28 with M/s GRSE, Kolkata, delivery schedule of three ships—INS Kamrota, INS Kadmatt and INS Kiltan—was revised repeatedly, which led to cost overrun from Rs. 3,051.2 crore to Rs. 78,52.39 crore.

“The Committee are distressed to note that factors relating to costing are not assessed and calculated well in advance. To the dismay of the Committee, apart from the required capability not being handed over to the navy, the cost incurred on the project turned to a complete waste,” the panel observed.
The Committee recommended that due care be taken in concluding contracts and added that regular follow ups are an inescapable necessity. Otherwise, the precious funds of the exchequer will continue to keep going in vain, the committee stated.

 -defenceupdate

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