CAG report brings out ambiguities, political slugfest to continue

Dassault Aviation, the French company which makes the Rafale, had offered performance and financial guarantees worth 10 per cent of the total contract value in 2007.

Published: 14th February 2019 12:56 AM  |   Last Updated: 14th February 2019 09:32 AM   |  A+A-

Rafale fighter jet made by Dasault Aviation

Rafale fighter jet made by Dasault Aviation (File | AFP)

Express News Service

NEW DELHI: The much-awaited Comptroller and Auditor General’s report on the Rafale fighter jet deal says that the deal negotiated by the government in 2015 for 36 aircraft was 2.86 per cent lower than the original deal offered to the UPA in 2007, while the total delivery time was reduced by a month.

However, the report also brings out certain ambiguities in the purchase which ensure that political slugfest over the deal will not die down anytime soon.

For instance, Dassault Aviation, the French company which makes the Rafale, had offered performance and financial guarantees worth 10 per cent of the total contract value in 2007. Not only does the 2016 inter-government contract not have these guarantees, the money Dassault saved on this was not passed on to India.

READ | CAG report on Rafale does not mention dissenting note, not worth paper its written on: Rahul Gandhi

Second, the meagre 2.86 per cent is a lot lower than the 9 per cent. Defence Minister Nirmala Sitharaman had told the Lok Sabha in January that the price of UPA negotiated deal would work out to be 737 crore per aircraft in 2016, whereas the NDA got the aircraft for Rs 670 crore per aircraft in 2016, which is 9 per cent cheaper.

Also, in the case of the important India Specific Enhancements (ISE) that the government has been touting as an added benefit, the CAG report says that one of the missiles was excluded by the IAF in 2015 because it was being developed by Defence Research and Development Organisation (DRDO), and replaced by another cheaper missile which led to ‘a saving of 17.08 per cent’.

Again, the 1.05 per cent savings on the cost of the ‘Weapons Package’ is attributed to alignment in scope of various items in these packages.

Also, the Indian Negotiating Team headed by the then Deputy Chief of Air Staff proposed the ‘postponement’ of six other India Specific Enhancements, which could be included if more Rafale aircraft were procured in future. But this was not accepted by MoD because it would violate the stringent regulations which govern such purchases.

As per the report, “Audit noted that four of these enhancements were stated not to be required in the technical and staff evaluations. The cost of these four enhancements items was “IS4” M Euro constituting 14 per cent of the ISE contracted cost. The Ministry has stated that “scaling down the requirement to limit cash outgo cannot be considered as saving”.

“In case of IGA for 36 Rafale, the offer of M/s DA in 2007 had included 15 per cent Bank Guarantee against advance payments, 5 per cent each for Performance Guarantee and Warranty. A Bank Guarantee gets directly and automatically invoked in case of breach of contract by the seller.” The report said. The French government in the new deal had only offered ‘Letter of Comfort’.

However, Ministry of Defence in its reply said, “that the IGA has been signed between two Strategic Partners who are Sovereign nations with long-standing Strategic relationship. Further based on the advice of the Ministry of Law and Justice, the responsibility of the French Government and M/s DA was made “Joint and Several” in the IGA. This would make the French Government equally responsible to fulfil its obligations.

Congress president said The CAG report is a cover-up. It ignores the cost of the missing Bank Guarantee & glosses over the suspect costs for "India Specific Enhancements". But even the CAG couldn't hide that it may take up to 10 yrs. for the 36 RAFALE jets to be delivered!

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