HAL sold choppers below cost price

Indicting the top management of HAL,the CAG report says that the chairman took the call to reduce the offer price of the choppers even though as per the rules,he did not have the authority to offer any sale price that would be less than the cost of manufacturing.

“By affecting an unviable price and failure to meet the contractual obligation for timely supply,HAL has incurred a loss of Rs 58.80 crore from the contract as of March 2013,” the CAG report notes. It adds that while HAL says the aim was to offer a low price so that the choppers would get their first export order that could lead to more contracts,the CAG has noted that no additional export order have been bagged by the helicopters yet.

In its defence,HAL has also said it expected to recover the loss incurred in selling the choppers for a low price by bagging contracts for after sales service and support.

However,the CAG has also demolished this argument by saying that after the contract,the total value of spares and services sold to Ecuador remains at Rs 23 crore and “considering the low magnitude of orders received for spares,the expectation to recover cost in the operating life of 20 years seems unrealistic”.

While the first five ALH were supplied to Ecuador in March 2009 and the order was touted as a rare successful military export,HAL faced international embarrassment after one of the choppers crashed at the national day parade of the nation in October of the same year. The crash took place as one of the three choppers on flying display was banking after passing in front of the VIP stands. It was caught on tape and the two pilots were seriously injured. In a later report,the CAG had said the crash occurred due to a design deficiency in the ALH.