Pipavav may face penalty up to Rs 125 cr from Defence Ministry over delay in naval vessels project

NEW DELHI: Private shipyard Pipavav is facing a stiff penalty from the Ministry of Defence over a significant delay in the production of naval patrol vessels, a Rs 2,500 crore project that was signed in 2011. A top naval officer told ET that the Naval Offshore Patrol Vessel (NOPV) project is running almost 18 months behind schedule and that the ministry could take penal action as per the rules.

The NOPV project was the first ever Indian warship construction project that was handed over to the private sector and the first of five vessels under the plan was to be delivered by early this year. However, due to multiple reasons – one of them being a midterm change in the foreign design partner – the first vessel is now expected to arrive by June 2016.

Navy’s Controller of Warship Production and Acquisition Vice Admiral AV Subhedar confirmed to ET that the delay has occurred and as per the new timeline, all five vessels are to be delivered within a two year period starting June next year. A senior Navy officer said that the delay is likely to incur a penalty from the Defence Ministry as per the rules. The penalty would however not exceed Rs 125 crore. Despite attempts, Pipavav did not respond to queries on the matter that were sent by ET. Reliance Infrastructure which has recently acquired the shipyard did not comment as it is yet to take over the management of the company. The defence ministry is also believed to have made queries on the new ownership pattern of the shipyard as it is presently undertaking a military project.

Sources said that the NOPV project – the first naval order to be won in a competitive bidding by a private yard – has run into trouble due to a delay by Pipavav in finalizing a design partner. While a contract was initially signed with a Russian firm, negotiations broke down over differences on pricing and was terminated.