CAG finds NDA deal for 36 Rafale jets cheaper than UPA’s 2007 offer
The Comptroller and Auditor General has said that the NDA government’s Rafale deal to acquire 36 fighter jets in a flyaway condition is 2.86% cheaper than the price offered to the UPA government in 2007 by Dassault Aviation.
The CAG report on Capital Acquisition in the Indian Air Force (IAF), containing a comprehensive evaluation of the 2016 Rafale deal, was tabled in Parliament on Wednesday. Though the federal auditor has said that the deal is cheaper than the offer made in 2007, it has pointed out several concessions made by the NDA government to the French side which could have enhanced the cost.
The auditor rejected defence ministry’s argument that 2016 contracted price of 36 basic flyaway aircraft was 9% lower than the price offered in 2007. It said that the contract for Rafale consisted of six different packages with a total of 14 items. The contracted price of seven items was higher than the aligned price, the price at which the contract should have been signed.
“Three items, including the basic aircraft, were procured at the same price. Four items were purchased at lower than the aligned price,” the auditor has said. The audit pointed out that the NDA government agreed with the refusal of the French side to provide a “sovereign guarantee” and instead accepted a “Letter of Comfort”.
The French side also did not agree to the ministry of defence (MoD) request for opening of an Escrow account to manage the payments as a measure of safeguard.
The period fixed for delivery of the aircrafts were almost similar in both the offers. In the 2007 offer, 18 aircraft were to be delivered by 50th month of signing the contract and the next 18 were to be licensed produced in HAL and to be delivered from 49 to 72 months of the contract signing.
However, in the 2016 contract, the first 18 aircraft would be delivered between 36 to 53 months after signing of IGA (Inter-governmental agreement) and the remaining 18 to be delivered by 67 months.
The CAG noted in its report that in the 2007 offer, Dassault Aviation had provided performance and financial guarantees which was about 25% of the total value of the contract.
“The vendor had embedded the cost in its bid price. But in the 2016 contract there are no such guarantees/warranty. This led to saving for Dassault Aviation which was not passed on to India,” it observed.
The auditor has found that four of the Indian specific enhancements were not needed at all because in the technical evaluation of 2010, the IAF had pointed out these were not needed. However, they got included in the scope, despite IAF making several attempts to reduce these items, it said.