CAG Criticises Hindustan Aeronautics Limited For Delay And Cost Overruns In Development Of Jet Engines

The Comptroller and Auditor General (CAG) of India has criticised Hindustan Aeronautics Limited (HAL) for failing to foresee the risks associated with the design and development of aircraft engines.

This oversight resulted in a wasteful expenditure of nearly Rs 160 crore.

As detailed in its 18th report on Public Sector Undertakings (PSU), presented in Parliament recently, the CAG highlighted that the project's scope was altered after the commencement of design and development activities.

According to the report, CAG emphasised that the original project plan was modified.

The CAG pointed out that concerning a project labeled as "Core Engine 1" (unidentified in the report), the state-owned HAL "failed to anticipate the delay in availability of the originally planned material."

This led to the production of the engine using substitute materials.

Subsequently, HAL approached its board seeking approval to construct a second engine, Core Engine 2, using the initially planned materials.

This change resulted in a cost of Rs 159.23 crores borne by the exchequer by March 2022, according to the report's findings.

In September 2012, HAL sanctioned an estimated expenditure of Rs 441.41 crore for the design and development of a gas turbine engine.

The purpose was to build critical competency and achieve self-reliance.

The CAG report noted that HAL envisioned a market for such an engine in trainer aircraft for the armed forces, regional jets, autonomous unmanned research aircraft, future drones, and small business jets.

The engine's development was divided into two stages — project definition and design in the first stage, and design, prototype development, tests, and clarification in the second stage.

HAL's board approved a total of Rs 185.87 crore by March 2021 for this purpose.

The report disclosed that the first stage of engine development was completed with an expenditure of Rs 52.87 crore.

HAL attributed the delay to a "modified scope," extending the timeline from September 2014 to December 2015.

The CAG emphasised that, as of July 2022, the design and development of the engine project were still ongoing, even four years after the scheduled completion date.

The project's prolonged timeline and expenses amounting to Rs 159.23 crore had resulted in financial losses, as stated in HAL's financial statements between 2019-20 and 2021-2022.

The auditor also criticised HAL for inadequate planning of design and development activities and highlighted the absence of a technology gap analysis between the building of Core Engine 1 and Core Engine 2.