CAG report doesn't acquit NDA's Rafale deal, but Rahul Gandhi's political immaturity has given BJP the advantage
Rahul Gandhi destroyed his chance by calling the CAG 'Chowkidar Auditor General', its Rafale report 'worthless' even before the report was tabled in Parliament.
The CAG report points out several issues with NDA's deal that could make the government sweat
The biggest among these is the lack of a sovereign guarantee or a bank guarantee in the deal brokered by the Modi government
Rahul would have got enough talking points for the election season to challenge the Centre's Rafale's claims, but he destroyed his chance
In politics, timing is everything. For instance, the wily Mulayam Singh Yadav set the cat among the pigeons at the end of his speech in the Lok Sabha on the last day of the Budget Session. His endorsement of Narendra Modi came even as his son was protesting against the BJP and schmoozing with other mahagathbandhan partners. The media went into a tizzy. His one comment, made at an opportune time, has the potential to upset all calculations on the chessboard of Uttar Pradesh politics.
Congress chief Rahul Gandhi should learn a thing or two about timing from Mulayam, an old warhorse who single-handedly changed Uttar Pradesh's political equation and reinforced the importance of regional players in national politics by building a party from scratch, making it a dominant force in India's largest state.
The Congress president has launched a high-octane campaign on an alleged scam in the procurement of Rafale fighter jets from France and has not ignored any opportunity to criticise the prime minister. He has held Narendra Modi personally responsible for the so-called scam, called the prime minister a spy, schizophrenic and "middleman" for a "crony capitalist friend" and declared him guilty of treason against the State for "violating Official Secrets Act". These rabble-rousing statements make for good campaign rhetoric, but carry no weight without proof for backing, or even a smoking gun. These are blank fires.
And yet Rahul's strategy wasn't wrong. Defence deals in India have always been opaque and have historically been associated with corruption. If there indeed were irregularities — financial or procedural — in the procurement of the Rafale jets and the NDA government's claims do not tally with facts, as the de facto 'Leader of Opposition', Rahul has every right to highlight them. To hit the government where it hurts, all that the Congress chief needed was to anchor his charges on a smattering of facts. And he would have got a golden opportunity on Wednesday, when the report of the Comptroller and Auditor General (CAG) on defence acquisitions for the Indian Air Force, including the Rafale deal, was tabled in Parliament.
The much-awaited report had the exact price points redacted and gave the Modi government a slight advantage over the UPA-brokered deal in terms of savings, but it still gives the Opposition enough ammo with which to target the government. The CAG's forensic audit of the Rafale deal finds that the NDA government's €7.87-billion contract to procure 36 fighter jets in "flyaway" condition from Dassault Aviation is 2.86 percent cheaper than the deal negotiated by the UPA in 2007.
Although this tallies with the Modi government's claims that it had brokered a "better deal" in terms of pricing, it demolishes the NDA's previous claims of a 20 percent, or even a 9 percent, advantage over the UPA deal.
Union minister Arun Jaitley has claimed "vindication", perhaps because the report debunks Congress' outlandish claims over the pricing of the jets — the UPA's deal was 55 percent cheaper, for example — but Jaitley would know that the CAG report points out several issues with NDA's deal that could make the government sweat.
The biggest among these is the lack of a sovereign guarantee or a bank guarantee in the NDA-brokered deal with France. Instead, the Modi government settled for a Letter of Comfort from the French government. However, a Letter of Comfort provides the original equipment manufacturer — Dassault, in this case — with a lot of legal options, even if it fails to comply with the agreement.
"In case of an IGA (intergovernmental agreement) for 36 Rafale, the offer of M/s DA (Dassault Aviation) in 2007 had included a 15 percent bank guarantee against advance payments, 5 percent each for performance guarantee and warranty. A bank guarantee gets directly and automatically invoked in case of a breach of contract by the seller. In the 2015 offer, the French vendor did not furnish any financial and performance bank guarantees," the CAG report says.
"Therefore, the total savings... accruing to the vendor by not having to pay these bank charges should have been passed on to the ministry. The ministry has agreed to the audit calculations on bank guarantees but contended that this was a saving because the bank guarantee charges were not to be paid. However, the audit noted that this was actually a saving for M/s DA when compared to its previous offer of 2007."
These are legitimate red flags, and the government would be hard-pressed to explain why it did not push for a bank guarantee. The CAG also notes that the French side did not agree to an escrow account, which indicates that "in case of any breach of agreement, the Indian party would have to first settle it through arbitration directly with the French vendors".
"If the arbitration award were in favor of Indian party and the French vendor fails to honor the award (make the payment's claim), the Indian party should exhaust all available legal remedies. Only then the French government would make these payments on behalf of the vendors," the report says.
It also includes the NDA's response on this matter. "The ministry, in its reply, stated that the IGA had been signed between two strategic partners who are sovereign nations with a long-standing strategic relationship," it said.
Furthermore, it also turns out that the Modi government's 36-jet deal won't get the aircraft to India much sooner than the UPA's deal would have. The actual advantage would be of a month in terms of delivery. This technically tallies with the government's claims that NDA's deal will bring the jets home faster, but a one-month advantage isn't anything to write home about. However, it must be mentioned here that the delivery schedule of the first 18 Rafale aircraft will beat the UPA's deal by five months, according to the CAG report.
In sum, with this CAG report, Rahul would have got enough talking points for the election season to challenge the Modi government's claims on Rafale. But he destroyed his chance by calling the CAG "Chowkidar Auditor General", its report "worthless" and "Narendra Modi's report, written for the chowkidar, on behalf of the chowkidar and by the chowkidar", even before the report was tabled in Parliament.
This is sheer political immaturity, and for this sense of poor timing, the Congress president gave BJP the chance to interpret the CAG report, which is critical of the deal in various ways, as a "vindication" of the party's stance. Rahul doubled down on his claims by saying that the CAG report is "not worth the paper it is written on". But when someone tries to run down the credibility of every constitutional authority, including the Supreme Court and the CAG, the ultimate blow is self-inflicted.
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