Govt to look into CAG criticism on Gorshkov cost escalation

New Delhi, July 29 (PTI) Stung by Comptroller and Auditor
General of India (CAG) criticism for escalating cost of
second-hand aircraft carrier Admiral Gorshkov bought from
Russia, the government Wednesday assured Rajya Sabha (Upper
House of Indian Parliament) that it would finally agree to a
fresh price for the warship only after going through the audit
report.

"Before entering into any contract, the government will
go through all details. We will assess the criticism,
including that of CAG, on the issue. At present, the Gorshkov
price escalation is in negotiation stage. Nothing has been
finalised," India's Defence Minister A K Antony said during
Question Hour.

India had bought the 45,000-tonne Gorshkov from Russia
in January 2004 at a total cost of USD 974 million, which
included its refit and repair.

As the repair and refit of Gorshkov began in the
Sevmash Shipyard, Russians made an additional demand for USD
1.2 billion towards the escalating cost of the work.

After revising the repair costs three times since 2007,
Russia made a final demand for additional USD 2.9 billion in
February this year.

The CAG report for 2008 laid in Parliament last week
had slammed the Defence Ministry for buying the old warship at
the price of a new aircraft carrier.

The CAG had noted that till 2008 the escalated cost was
about USD 1.82 billion for the warship and another USD 52
million for the sea trials, which was originally pegged at USD
27 million in the 2004 contract.

"We had entered into a contract with Russia in 2004 to
buy Admiral Gorshkov. However, that country faced a lot of
difficulties during the intervening period. Subsequently
government was quoted a fresh price by Russia," Antony said.

Accepting that repair and refit of Gorshkov was coming at
a "substantially huge" price, he said "we have not entered
into any contract with Russia (on the fresh price), and are
only having negotiations with them."

He said when India started searching for an aircraft
carrier, there were very few manufacturers in the world.
"After an elaborate search, no country except Russia was
willing to give it to us. The decision to acquire it was taken
in consultation with the Navy, as per the price quoted by
Russia then," Antony said.

However, the minister said Russia was quoting a fresh
price, as most of the parts of the Kiev-class carrier are
manufactured in Ukraine.

Earlier, Minister of State for Defence M M Pallam Raju
said the country was building an aircraft carrier
indigenously, while the Navy had another aircraft carrier in
service.

"The government sanction for the indigenous aircraft
carrier was accorded in November 2002. The construction of the
Indigenous Aircraft Carrier (IAC) is progressing at Cochin
Shipyard, with the launch scheduled in 2010. However, the
final delivery of the ship is likely in 2014," Raju said.

Raju said induction of ships in the Navy, including
aircraft carriers, is driven by the need to maintain the
desired force levels.

"Future requirements of aircraft carriers could be met
either from indigenous or from foreign sources depending on
the required capabilities and envisaged time frames," he
said.

Antony had laid the keel of the indigenous aircraft
carrier at Kochi in February, while two more indigenous
aircraft carriers have been sanctioned.

The Navy currently operates INS Viraat, a 28,000-tonne
Centaur-class aircraft carrier, which has served both British
and Indian Navy for 50 years. PTI