CAG finds NDA's Rafale deal 2.86% cheaper than UPA's, engineering support costlier by 6.54%: See full 157-page report

The performance audit report of the Comptroller and Auditor General of India on capital acquisition in Indian Air Force was tabled in the Rajya Sabha on Wednesday.

FP Staff February 13, 2019 20:42:10 IST
CAG finds NDA's Rafale deal 2.86% cheaper than UPA's, engineering support costlier by 6.54%: See full 157-page report
  • The CAG said that Rafale deal signed by the Modi government got 2.86 percent cheaper price than what was negotiated during the previous UPA regime in 2007

  • It also said the deal was 6.54 percent expensive in terms of engineering support package and performance-based logistics for the Indian Air Force

  • However, the 157-page report did not disclose pricing details in absolute terms

The performance audit report of the Comptroller and Auditor General of India on capital acquisition in Indian Air Force was tabled in the Rajya Sabha on Wednesday.

The report is divided into two volumes: one on the systematic issues prevalent in the acquisition process, with the examples of 10 acquisition contracts; and the other on the Rafale aircraft deal, comprising the controversial pricing angle specifically on the acquisition of the medium multi-role combat aircraft (MMRCA). The CAG report did not disclose the actual prices on the insistence of the Ministry of Defence because of the Indo-French Agreement of 2008 and the provisions of Inter-Government Agreement (IGA).

CAG finds NDAs Rafale deal 286 cheaper than UPAs engineering support costlier by 654 See full 157page report

The CAG report on the Rafale deal. Firstpost/Yatish Yadav

According to the 157-page report, the country managed to save 17.08 percent of the money in the India-specific enhancements in the deal for 36 Rafale fighter planes as compared to the proposed procurement of 126 combat aircraft during the UPA government while the weapons package offered in the new deal was 1.05 percent cheaper.

“Overall, it may be seen that as against the aligned price as estimated by audit of 'CV' million Euro the contract was concluded for 'U' million Euro, ie, 2.86 percent lower than the audit aligned price,” the CAG said. CV and U represent the redacted aligned price and contract price, respectively, for the Rafale package signed between France and India in 2016.

The report compared the aspects involved in the proposed acquisition of 126 MMRCA through tendering process by the previous UPA government with the details of the NDA government’s decision to procure 36 Rafale aircraft from French company Dassault Aviation through the IGA in 2016.

The CAG said a defence ministry team in March 2015 recommended the scrapping of the 126 Rafale deal, saying that Dassault Aviation (manufacturer of Rafale plane) was not the lowest bidder and EADS (European Aeronautic Defence and Space Company) was not fully compliant with the tender requirements.

Referring to the issue of 126 planes, the government auditor said the IAF did not define the ASQRs (Air staff qualitative requirements) properly and as a result, none of the vendors could fully meet the ASQRs. These ASQRs were changed repeatedly during the procurement process, the CAG said.

The CAG also said the deal was 6.54 percent expensive in terms of engineering support package and performance-based logistics for the Indian Air Force, while the training costs have got 2.68 percent expensive than the 2007 offer. In the 2007 offer of 126 fighter jets, Dassault Aviation was to provide basic training to 26 pilots and 76 technicians at a certain cost. In 2015 deal for 36 Rafale fighter jets, the IAF increased the scope of training to 27 pilots, 146 technicians and two engineers.

It said the defence ministry stated that although the scope of training had increased, the Indian Negotiating Team (INT) did not reckon this enhancement.

It said the ministry, in its response in January 2019, has accepted that the aligned price worked out by the INT and audit in case of basic aircraft were the same but argued that the negotiated price of 36 aircraft was 9 percent lesser than the price offered for the aircraft in 2007.

The ministry has stated that “had the bid been finalised and the contract signed in the MMRCA case in 2011, this would have been the fixed price of the aircraft”.

In its report, the CAG also highlighted the drawbacks of settling for a 'Letter of Comfort' instead of a sovereign guarantee by the French government in the 2016 deal. It noted that the deal which was being negotiated in 2007 included a 15 percent bank guarantee against advance payments.

Here's the full CAG report:

With inputs from agencies

Updated Date:

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