In the first-ever audit of any intelligence agency in India, the Comptroller and Auditor General (CAG) has unearthed a Rs 450-crore purchase scam of Israeli unmanned Aerial Vehicles (UAV) lying as junk with the Hyderabad-based National Technical Research Organisation (NTRO), a technical arm of the external intelligence agency Research and Analysis Wing (RAW).

Efforts were mounted to prevent the probe the CAG sought on the basis of a complaint from a whistle blower, but Prime Minister Manmohan Singh allowed the inquiry overruling all objections as he felt such a serious charge on an agency providing technical intelligence capabilities to the country with huge budget to fight the cyber piracy is too serious to be overlooked.

The CAG submitted the report to the government in February second week marking it as "top secret" since its release in public domain can blow off the secrecy of the operations of NTRO created in 2004, primarily for strategic monitoring of satellite, terrestrial and internet communications.

The government decided to keep the report in the wraps and did not table it in parliament, accepting the CAG's "top secret" label, but the Prime Minister's Office (PMO) has now ordered an internal inquiry into the 2007 purchase.

The budget and expenditures incurred by the intelligence agencies are treated sacrosanct as they are not allowed scrutiny by CAG or even parliament, but such a scandal has made the prime minister think of making them accountable, the PMO sources said. The next meeting of the Cabinet Committee on Security (CCS) may take a view on all intelligence agencies subjected to the CAG scrutiny.

The CCS had sanctioned Rs 300 crore in 2007 for purchase of UAVs from Israel Aerospace Industries (IAI). The NTRO, however, purchased additional satellite link and electronic intelligence equipment worth Rs 150 crore from the company without keeping the CCS in the loop.

Then NTRO chief tweaked the rules that empower him to spend up to Rs 20 crore without clearance from the CCS by paying the additional Rs 150 crore in several smaller instalments to show he was not overstepping his financial powers.

Then National Security Adviser (NSA) M K Narayanan, who is now West Bengal governor, had tried to scuttle the inquiry the CAG wanted to carry out in December 2009 on the complaint by a whistle blower, pointing out that the intelligence agencies are kept out of scrutiny to maintain secrecy. The NTRO reports directly to the NSA and the RAW chief and hence Narayanan's refusal of permission meant a dead end.

The CAG, however, felt the whistle blower's tip-off was too serious to be ignored and hence it approached the prime minister who overruled Narayanan's objections and allowed the CAG sleuths get cracking in January last year.

NTRO chairman KVSS Prasada Rao, a scientist who retired last October, and its current adviser M S Vijayaraghavan, have been indicted in the CAG report. Dr Prasada Rao had also served the Space Department and the Defence Research and Development Organisation (DRDO) earlier.

As part of the inquiry ordered by the PMO, some major generals, who were on deputation to NTRO, as also some senior finance officials involved in the deal are being questioned. Once this internal inquiry is over, the government may hand over the case to the Central Bureau of Investigation (CBI) to register a case and proceed against the suspects, sources said.

The CAG has noted that the UAV machines are lying grounded as the satellite link purchased was not at all meant for dedicated transmission and the military personnel in NTRO put brakes on putting them in the sky as anybody could have downloaded the sensitive data sent from these UAVs.

The NTRO top brass not including the satellite link and electronic intelligence equipment in the proposal put before the CCS is itself intriguing as the UAVs bought at the high cost without them could be nothing more than the electronic-controlled aircraft children play.

The CAG has faulted the NTRO officials engaged in the dubious purchase for taking the Israeli vendor on his word that the "satellite link was successfully tested in Australia".