The major indigenous warship building projects of the Navy running behind schedule are Project-15A, Project-17 and Project-28. The cost escalation in these projects has been about 225% for Project-15A, about 260% for Project-17 and about 157% for Project-28. The major cost escalation has been due to uncertainties associated with the complex warship building process. Project-wise reasons for cost escalations are as follows:
P-15A: The main reasons contributing towards cost escalations are: delay in supply of warship building quality steel by Russia, escalation due to increase in expenditure towards services of Russian specialists on account of inflation during the build period, impact of wage revision due from October 2003 and finalization of cost of weapons and sensors.
P-17: The main reasons contributing towards cost escalations are: delay in supply of warship building quality steel by Russia, delay in acquisition of weapon equipment from Russia, and delay in finalization of propulsion equipment in view of complex combined diesel and gas arrangement introduced for the first time in Indian Navy frigate. In case of Project-17, Air Conditioning system procured from M/s York Marine Systems, UK has been functioning satisfactorily on the first two ships. In case of Project-28, it was tendered on competitive basis and the order was placed on M/s York India.
P-28: Navy was using D40S/B-quality high tensile strength steel for construction of warships; however, due to high cost of import, indigenously developed DMR 249A steel was decided to be used on P-28 ships. However, there was delay in development of indigenous steel and associated complexities related to development of new weld consumables and welding techniques. The delay in identification of suitable propulsion package to meet stealth requirement of ships and delay in development of indigenous weapons and sensors also resulted in cost escalation.