This doesn't surprise me a lot, as Kaveri was expected to power the Tejas Mk I version but with the later GSR of more powerful Mk II where engine power requirement have be increased to 98-100 kn class, the K-9 Engine falls no where near to it, as it was struggling to reach its pre specified 80 kn, while the report says nothing about the K-10 project, I don't keep much expectation from it either where we have no reports of its development.Anyways, I dont think the report means abandoning the project as a whole, it says it wont power the Mk II, but as far as I know K-9 would be tested on Mk I version even it is not inducted into the armed force.
The engine development process have not stopped at all, their are reasons behind it, for developing UAV and UCAV specially the later one the engine would be needed, An UCAV with a payload of <500 kg and a range <300 km would violate the MTCR rules and if we want to have a UCAV we need to have a domestically produced engine. High altitude test for K-9 was not performed in a vain, although we should accept that the development process have taken very long and failed to perform its primary objective, that is to power the Tejas.