A CAG report on the Rafale deal and a dissent note by the India negotiating team provide ammunition to both the government and the opposition for the upcoming elections.
- The CAG tabled its report on the Rafale deal on Wednesday, which analyses the terms and conditions agreed upon by the NDA and UPA governments.
- Interestingly, the report provides cannon fodder for both the government and the opposition for their political campaigns.
- The Congress has sought to discredit the report, as the CAG was the Finance Secretary when the Rafale deal was signed.
- Meanwhile, a dissent note by three members of the negotiating team adds another layer of complexity to the entire debate.
Amid the ongoing feud between the government and the opposition over the Rafale deal, a report by the Comptroller and Auditor General (CAG) was released in Rajya Sabha on Wednesday.
Led by the Indian National Congress, the opposition has levelled some serious allegations of corruption against the government in the deal. It has alleged that the government secured a much more expensive bargain with unfavourable terms and conditions for 36 aircraft as opposed to the original deal that was planned under the UPA government for 126 aircraft.
Congress President Rahul Gandhi has squarely blamed the Modi government for agreeing to this deal to benefit the PM’s ‘close friend’ Anil Ambani. A few days ago, a report in the Hindu newspaper citing objections from the Defence Ministry to parallel negotiations by the Prime Minister’s Office (PMO) have also come to light.
So whose argument does the CAG report favour?
A BETTER DEAL THAN UPA, BUT…
Here is the lowdown on what the report has revealed:
- The deal signed by the NDA government is 2.86% cheaper than that signed by the UPA. On the plus side, this would validate the Modi government’s claim that the NDA got a better bargain. Apparently, the savings happened in the India specific enhancements section. But on the flip side, this figure is much lower than the claim of 9% given by top ministers.
- Eurofighter had given an unsolicited price bid. CAG feels that this could have been used by the government to ascertain a better deal. Moreover, some of the India-specific enhancements were not needed by the airforce, so the price could have been even lower.
- Banking charges and performance guarantees had been waived off by the Modi government, which should have ideally been part of the contract. So the deal could have been cheaper.
- The CAG did not seem too impressed by the government reducing the delivery time by a month.
- It also criticises the government for removing earlier safeguards, where India could encash bank guarantees if there is any discrepancy in delivery or quality. The performance and financial guarantee in the UPA deal was 25% of the value of the contract. In the new deal signed by the Modi government, India will have to enter into arbitration proceedings and will only get paid by the French government if it wins the case. It also raised the issue of the French government providing a letter of comfort instead of a sovereign guarantee.
- The deal was rejected by the Medium Multi-Role Combat Aircraft (MMRCA) committee on March 27, 2015.
- The report does not talk about offsets, which is a major part of the controversy due to the award of one of the contracts to Anil Ambani’s firm. Dassault will be submitting these to the government by October.
THE COUNTER CHARGE
Another report that has been released in The Hindu yesterday has contested the assertion that the current deal is better than the one finalised in the UPA era.
According to the report, three senior officials of the Defence Ministry, who were domain experts and part of the seven-member Indian Negotiating Team (INT) had concluded that the Modi government’s deal was not better than the offer by to the UPA. Even the delivery schedule for the first 18 aircraft was slower than the original process. The officers were M. P. Singh, Adviser (Cost), a Joint Secretary-level officer from the Indian Cost Accounts Service; A.R. Sule, Financial Manager (Air); and Rajeev Verma, Joint Secretary & Acquisitions Manager (Air).
The government had made both these assertions (better price and delivery terms) in its submission to the Supreme Court. These officials have also registered their concern over the government agreeing to a letter of comfort rather than a government/bank guarantee.
This document was completed over a month after completion of negotiations and three months prior to the signing of the Inter-Governmental Defence Agreement. While the negotiating team was pressing for a fixed benchmark price, the French had changed it to an escalation formula.
With the escalation formula taken into account, the dissent note states that the price offered by the French government is 55.6% higher than the benchmark. It was also substantially higher than the one offered by Eurofighter Typhoon, the only other aircraft to qualify for UPA-era trials.
Moreover, the delivery schedule agreed by the French side was between 36-53 months as opposed to the original schedule of 36-48 months under the Medium Multi-Role Combat Aircraft (MMRCA) process.
THE MYSTERY IS STILL UNRAVELLING
The lies of ‘Mahajhootbandhan’ stand exposed by the CAG Report.
— Arun Jaitley (@arunjaitley) February 13, 2019
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 upto 10 yrs. for the 36 RAFALE jets to be delivered!
Watch &.Share this video. pic.twitter.com/yegK4wg9CS
— Rahul Gandhi (@RahulGandhi) February 13, 2019
Our Statement:- pic.twitter.com/nfGLBmMh1z
— Randeep Singh Surjewala (@rssurjewala) February 13, 2019
Air Marshal Sinha, head of the Indian negotiating team on Rafale, tells me: our final report was signed off by all members and went through a due process, you cannot go by the concerns of a few members to damn an entire deal with malicious intent .: #CAGRafaleReport
— Rajdeep Sardesai (@sardesairajdeep) February 13, 2019
The Modi government has claimed victory over the CAG report, and senior ministers have asserted that the truth has finally prevailed. The Congress, on the other hand, has contested the CAG report and also sought to discredit it on the grounds of conflict of interest as the CAG Rajeev Mehrishi was finance secretary when the Rafale deal was signed. Rahul Gandhi addressed a press conference soon after the release of the CAG report, where he claimed that the figure of ‘2.86%’ is an eyewash by the CAG.
The dissent note in The Hindu also puts the value of the bank guarantee at € 574 million, the absence of which would have benefitted Dassault. However, this has not been included in the CAG report. If you consider the two reports that have appeared on the same day, it further muddles the entire imbroglio on Rafale.
In summation, the CAG report doesn’t pick out a clear winner in the Rafale debate, and the dissent note adds another layer of controversy to the proceedings. As we had DKODED earlier, the Rafale horse is very much alive and kicking.