Now, doubts over Navy Italian deal

With the AgustaWestland helicopter scam still reverberating, another Italian company Fincantieri, one of the world’s largest shipbuilders, has come under scrutiny over the sale of two tankers to the Indian Navy in 2009.

A 2010 Comptroller and Auditor General (CAG) report had pointed out inadequacies in the deal, citing “undue favours to a foreign vendor”.

The tankers, each costing Rs 936 crore, were made of steel that was not mandated in the Request for Proposal (RFP) at the company’s Muggiano Shipyard.

Fincantieri is a 230-year-old company that has built more than 7,000 vessels till date.

The development was sparked off by a media report claiming that a Navy officer had sounded the alarm sometime back after one of the tankers, INS Deepak, developed cracks in its hull when it was escorting the the aircraft carrier INS Vikramaditya from Russia in November 2013.

The INS Deepak can carry 15,500 tonne of liquid cargo — water, ship and aircraft fuel.

The RFP had made it mandatory that DMR 249A or equivalent grade steel be used in the construction of the hull of the vessel. DMR 249A is a high quality steel used for naval applications and costs almost twice ordinary steel.

“However, the firm (Fincantieri) proposed to use DH 36 steel in place of DMR 249A,” the CAG report had stated, pointing to the use of an unsuitable grade of steel in terms of weight and resilience qualities.

While a defence ministry spokesperson said the ministry had not opened any inquiry into Navy tankers with so-called sub-standard steel, a spokesperson of the Indian Navy said: “Necessary procedures were followed diligently prior to acquisition of these tankers. Also, all approvals were obtained before signing the contracts.”

Reacting to the tanker’s hull cracking, the Navy spokesperson had said: “The cracks probably occurred due to a combination of factors – sub-zero temperatures in the region, heavy seas, stormy conditions etc.”

A board of inquiry set up to investigate the incident had found no material failure.

The CAG report had also pointed out flaws in the tendering process and violations in the execution of the offset agreement which is prescribed by the Defence Procurement Procedure (DPP) at a minimum of 30 per cent of the cost of the acquisition.

Disagreeing with the defence ministry’s reply, the national auditor had said: “However, the ministry concluded the offset contract for Euros 41,563,500 by taking 30 per cent of the basic price of the ship (Euros 138,545,000) excluding other costs like base and depot spares”.