The CAG also flags that there is unnecessary bureaucratic delay in completing the project.
The cost of the project revised from Rs 395 crore in May 2010 to Rs 4,007.22 crore in December 2017, which an increase of 914 per cent, the CAG finds in its report, sources said.
The auditor found that the land to construct the institution was acquired in September 2012, however, setting up of INDU is yet to fructify.
The CAG also flagged that the draft of Indian National Defence University legislation till August 2019 was lying pending for approval with Cabinet Secretariat since December 2017.
The Kargil Review Committee in 1999, recommended setting up a university to address deficiencies in India's security management system.
The Union Cabinet accorded in May 2010 an in-principle approval for setting up the Indian National Defence University at an estimated cost of Rs 395 crore.
Setting up a 'world-class' INDU was recommended to inject strategic culture in governance to have a platform for robust cross-linkages between the executive and academia.
All major countries, from the US to China, have national defence varsities to develop national security leaders as well as undertake long-term strategic studies and threat assessments.
The idea to set up such an institution was first mooted in 1967 and in 1980 Sethna Committee strongly recommended it. In 1980, the Chiefs of Staff Committee constituted a study group under then Vice Chief of Army Staff Lieutenant General A.M. Sethna.
On Friday, CAG laid the report on Union government (Defence Services)-Army in the Rajya Sabha, but failed to lay it in the Lok Sabha. This stopped the Rajiv Mehrishi, the Comptroller and Auditor General of India, from releasing the report.
( With inputs from IANS )