Defence PSUs miserably failed in meeting self-reliance: CAG

NEW DELHI: In a scathing assessment, the central auditor said defence public sector units have miserably failed in meeting the objective of self-reliance, with a majority of contracts entrusted to them facing delays, hampering the capability enhancement plans of the Indian Army.

The report, which echoes the sentiments of the private sector that has been battling the government for more orders and is upset that a majority of contracts in the last two years have gone to PSUs, said in the 2007-2012 period, 63 per cent of the contracts given were delayed for various reasons.



"Besides impacting defence preparedness, the delay had financial implications towards loss of interest on payments made to DPSUs. The objective of self-reliance in defence production had also not been achieved," the CAG report tabled in parliament on Tuesday read.

As first reported by ET on June 22, the private sector has complained to the Prime Minister’s Office (PMO) that it has hardly received any orders from the government in the last two years and that the defence ministry has instead favored PSUs that are already facing massive delays.

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The CAG report, which has studied at least nine major army projects in detail besides assessing all contracts placed on PSUs, says that the "inordinate delay in supply of critical weapons and equipment" had "hampered the modernisation and capability enhancement plan of Indian Army". Besides the delay in critical equipment like Akash missile system and a weaponised version of the Advanced Light Helicopter, the audit report points out that the government has suffered a loss of Rs 1,931 crore on account of accrued interest on advance paid to the DPSUs.

Out of the nine contracts that it studied in detail, the report says that just in two supplies have commenced, albeit late. "Despite making payment of Rs 10,241 crore, constituting 42 per cent of total value of the contracts, tangible supply against nine contracts did not materialise," the report said.