SCI chairman and managing director (CMD) PK Shirvastava says, "There are a number of questions that CAG raises from time to time but when we expalin the proper situation under which the expenses were incurred CAG gets convinced of exact nature of expenses."

The CAG felt that the repair cost incurred on MV Harshavardhana was exorbitant. The vessel was initially held up at Calcutta from March 24, 1995 pending management decision for revival of the vessel.

In a meeting held on May 1995 it was decided that due to shortages of vessels on mainland and the island sector SCI will get MV Harshavardhanareparied/renewed. Accordingly, the scope of work was drawn up by SCI, Calcutta office and forwarded to CSBL. The estimated total cost of repair given by CSBL was about Rs 6 crore with a repair time of 75 days.

As the vessel was required to be put into service immediately and the operation was required for six months only the scope of work was reduced and the estimated repair cost obtained from CSBL was Rs 1.8 crore with repair time of 35 days. This was approved by the management in June 1995. The vessel was repaired at a total cost of Rs 7.3 crore, which was subsequently reduced to Rs 5.2 crore through negotiations with the ship-repair yard.

The questions raised by CAG is that even though the repair cost has gone up by 28.4 per cent due to time and cost overrun it was not brought to the notice of the management for approval. Only after incurring the repair expenditure of Rs 5.2 crore the matter was put before the management for ex-post facto approval.

The SCI reply also clarifies that full job wasinitially entrusted to CSBL, but was partly offloaded to other workshops in the SCI panel when it was evident that CSBL was unable to handle such volume of repairs. The total final settlement amount of repair costs was about Rs 5 crore (of which CSBL got Rs 2 crore and other approved SCI workshops received about Rs 2 crore).