Defence Ministry orders CBI probe on Mazagon Dock contracts

CBI starts probe, questions officials of the shipyard; contracts given during UPA tenure

The Ministry of Defence has ordered a probe by the Central Bureau of Investigation (CBI) into the composite outfitting works awarded by Mazagon Dock Ltd (MDL) for two warships in 2013, under the previous United Progressive Alliance government.

In a communication to member of Parliament (MP) Prasanna Patasani of the Biju Janata Dal, the defence ministry said the matter regarding the award of composite outfitting works for the second and third ships of Project 15A at MDL was examined in consultation with the company’s chief vigilance officer (CVO). “It was found by the CVO that the composite outfitting works were awarded at higher rates compared to the rates in the ongoing outfitting rate contracts at MDL,” it said.

HOW IT ALL STARTED

• Scope of work consisted of insulation, installation of electrical & weapon items, and installation of hull outfit items apart from other work
• MP Prasanna Patasani had complained  estimates of all the works were increased 3-4 times higher than the existing orders, ostensibly to favour outside contractors   
• Under the UPA govt, govt-owned shipyards received all orders for warships from the defence ministry  
• This resulted in huge backlog of orders and the shipyards are full for the next 10 years

According to Patasani’s complaint to the defence ministry, the company gave orders worth Rs 35-40 crore at an inflated rate of Rs 104 crore.

“This was due to the erroneous estimation of the man-day rates for labour and labour overheads and discrepancies in the calculation of the estimated rates by a committee. The members of this committee were below the board of director level officers and hence CVO of MDL has been asked to draw the report and seek advice from the CVC (Central Vigilance Commission) in the case for further action,” said the letter.

The CBI, which has asked for the CVO's report, has started the probe and is questioning a few MDL's officials, documents reviewed by Business Standard show. When contacted, an MDL spokesperson said on Thursday that there was a reference from an MP to the defence minister about contracts for composite outfitting, which was tried for the first time in MDL to enhance the pace of work. “The Member of Parliament had suggested that the matter be investigated by the CBI. Apparently, the Ministry of Defence has referred the same to the CBI,” said the Mazagon Dock statement.

The scope of work awarded by the MDL consisted of insulation, installation of electrical and weapon items, and installation of hull outfit items apart from other work. The MP had complained that the estimates of all the works were increased three to four times higher than the existing orders, ostensibly to favour outside contractors.

Under the UPA government, government-owned shipyards had received all orders for warships from the defence ministry. This resulted in huge backlog of orders and the shipyards are full for the next 10 years. To push the Make In India initiative and reduce corruption, the Narendra Modi government wants to open up the sector to private companies.