CAG report says NDA deal cheaper by 2.86 per cent from UPA deal

Last Updated: Wed, Feb 13, 2019 21:45 hrs

The deal for 36 Rafale combat aircraft reached by the Narendra Modi government with French company Dassault Aviation is 2.86 per cent cheaper than the 126 Rafale deal which was being negotiated by the UPA government in 2007, the CAG said in a much-awaited report.

The report tabled in the Rajya Sabha said the India Specific Enhancements in the Rafale deal of the Modi government were 17.08 per cent cheaper than the deal which was withdrawn in 2015 after it got struck due to multiple issues.

"It may be seen that as against the aligned price as estimated by the audit of 'CV million Euro' the contract was concluded for U million Euro that is 2.86 per cent lower than the audit aligned price," the CAG said, without divulging the exact prices involved in both the contracts. 

The figure of the NDA deal being 2.86 per cent lower than the UPA deal has come at a time when Congress President Rahul Gandhi has been claiming that price of each Rafale aircraft during the UPA times was coming to Rs 570 crore while the NDA bought the same planes at Rs 1,646 crore each.

The NDA government had also been claiming that its deal was nine per cent cheaper than the UPA deal.

The CAG report stated that the NDA government saved 1.05 per cent from the UPA deal while its price was 2.68 per cent more than what would have been paid for in training cost. 

Comparing the two contracts, the CAG said in the 2007 deal, the vendor Dassault Aviation was supposed to provide 15 per cent advance payments whereas the performance guarantee and warranty valuing 10 per cent of the total value of the contract were to be made but these things were not agreed upon to in the 36 aircraft deal.

The CAG report said this was the first instance when India and France had signed an inter-governmental defence deal, the Ministry of Law and Justice advised the government to seek a sovereign guarantee from France but the French government did not agree to it along with a suggestion to have an escrow account for the contract.

The CAG said in view of these considerations, the Defence Acquisition Council approved an arrangement which provided that the advance payments were to be made directly to bank accounts of French vendor that were opened in French government-controlled bank over which the French party was to exercise control. 

The issue on a sovereign guarantee and ‘Letter of Comfort’ was submitted to the CCS in September 2016 for consideration.

The CAG report compared the delivery schedule of the first 18 Rafales of the 2016 and the 2007 deals and found that the NDA era delivery schedule was better than the previous one by five months.

Commenting on the methodology adopted while doing the two contracts, the CAG said the 2007 deal was being done on the fixed and final price bids but the non-fix and final pricing seemed to be a better way of doing the deals.  

Commenting on the 126 aircraft deal, the CAG said a Defence Ministry team in March 2015 had recommended the scrapping of the 126 Rafale deal saying that Dassault Aviation was not the lowest bidder and EADS was not fully compliant with the tender requirements.

Finding issues in the UPA era 126 aircraft deal, CAG says Defence Ministry team had said in 2015 that the proposal of Dassault Aviation Rafale should have been rejected in technical evaluation stage itself as it was non-compliant with RFP requirements.

CAG pulled up the UPA era Defence Ministry saying it calculated the lowest bidder in the 126 multirole aircraft deal based on assumption and incomplete commercial proposal. Says process incorrect and not as per procedure.

The CAG said the Defence Ministry team in March 2015 recommended the scrapping of the 126 Rafale deal saying that Dassault Aviation was not the lowest bidder and EADS was not fully compliant with the tender requirements. (ANI)



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