AAGL on track for sale after approval on disinvestment

Alcock Ashdown Gujarat Ltd (AAGL), the state's shipbuilding company, has secured green signal from the Gujarat government for its 100% equity stake sale and has appointed consultants for the valuation.

The proposal for disinvestment of the company has been under consideration since July 2006 with the Government of Gujarat (GoG). The state government had invited expression of interest for appointing consultants in November last year.

"The government has given approval for its 100% equity stake sale in the company. A consultant has been appointed for doing the valuation, and within 20 weeks they shall submit the report," a top AAGL official told PTI.

However, he did not disclose the name of the consultant.

The company staring at losses close to over Rs 96 crore, on a contract bagged from the Ministry of Defence for constructing six survey vessels for the Indian Navy, is on track for sale now.

Originally, a British company engaged in shipbuilding and ship repairs, it had gone into liquidation and was taken over by Government of India (GoI) in 1975 and subsequently acquired by the Government of Gujarat in 1994.

AAGL has been rapped by CAG for not safeguarding its financial interest, thereby exposing it to probable loss of Rs 96.42 crore in execution of a contract bagged from the Indian Navy, for constructing six survey vessels.

The company had bagged a contract for construction of six survey vessels (Catamarans) for the Indian Navy from Ministry of Defence (MoD), at an aggregate price of Rs 698.91 crore, in 2006, the CAG report stated.

As per contract terms, first vessel was to be delivered on April 6, 2009, while the remaining five vessels were to be delivered between July 6, 2009 to July 6, 2010.

The CAG report had observed that the company imprudently accepted the price of Rs 109.89 crore per vessel for MoD project even though its own estimated cost of construction per vessel was Rs 115.87 crore.

As per the company's own latest estimate, the cost of construction per vessel would be Rs 125.96 crore against the contract price of Rs 109.89 crore. Thus, the company was already exposed to the probable loss of Rs 96.42 crore, CAG report stated.

The company in an audit query admitted to CAG that uncertainty on Government of Gujarat's (GoG's) disinvestment plans and non availability of adequate financial assistance from banks had resulted in delay of execution of the contract.

The company has two shipbuilding yards one each in Bhavnagar and Chanch (Amreli district), respectively.