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NDA’s Rafale deal 2.86% cheaper than the one negotiated by UPA, says CAG in 157-page report

Rafale CAG reportRafale CAG reportOn India-specific enhancements, CAG said the NDA deal was 17.08% cheaper than the one negotiated by the then UPA government in 2007, while the weapons package offered in the new deal was 1.05% cheaper. (file)

Each Rafale fighter aircraft that New Delhi is purchasing from France’s Dassault Aviation under the deal struck by the Narendra Modi government in 2016 would come in 2.86% cheaper than negotiated during the previous UPA regime in 2007, the much-awaited Comptroller and Auditor General (CAG) report showed on Wednesday, giving government managers ammunition to refute the Opposition’s criticism of the deal.

In its 157-page report tabled in Parliament, the top auditor, however, skirted the controversial issue of offset partners and faulted the Indian side settling for just a Letter of Comfort from the French government instead of sovereign guarantee.

Defence minister Nirmala Sitharaman had earlier said the Modi government’s deal was 9% cheaper than the offer made by French aircraft manufacturer in 2007; media reports had said under the NDA deal, the price of each fully-fitted combat-ready aircraft had gone up by over 41%.

The CAG did not provide the price of the planes, in line with government policy of not providing details of arms purchases, but listed parameters on which it made comparisons, such as customisation of aircraft, engineering support and the weapons package.

After the release of the report, Union minister Arun Jaitley said the “lies of the Congress and opposition parties stand exposed as the CAG report outlines that 2016 deal terms were lower in terms of price, faster in terms of delivery, while ensuring better maintenance and lower escalation”. Even before the Wednesday release of CAG report, Congress president Rahul Gandhi had dubbed the CAG report on the Rafale deal as “Chowkidar Auditor General” report; the Congress stuck to its stance after the report was released and said the Public Accounts Committee of Parliament was likely to trash it. Modi made a surprise announcement during his April 2015 visit to France to abandon talks on buying 126 Rafale planes, including local production, and instead order the 36 Dassault jets in flyaway condition.

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Stating that for comparing the prices of June 2007 bid with that of May 2015, the scope of both the offers had to be first brought at par, the CAG said the aligned price worked out by the Indian negotiating team (INT) was “U1” million euros while that assessed by it was “CV” million euros which was about 1.23% lower than the INT-aligned costs. “This (“CV” million) was the price at which 2015 contract should have been signed if the prices of 2007 and 2025 were considered at par. As against this, the contract was signed in 2016 for “U” million euros which was 2.86% lower than the auditor’s aligned price,” the CAG said.

On India-specific enhancements, CAG said the NDA deal was 17.08% cheaper than the one negotiated by the then UPA government in 2007, while the weapons package offered in the new deal was 1.05% cheaper.

The Congress has been alleging corruption in Anil Ambani’s Reliance Group getting one of the offset contracts. It also argued that the price increased to Rs 1,600 crore per aircraft in the deal signed by the Modi government, as against Rs 520 crore during the UPA time.

The CAG also noted that the deal which was being negotiated in 2007 included a 15% bank guarantee against advance payments. The training aspects covered under the NDA deal is also 2.68% expensive than the 2007 offer, the report said. 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.

According to the CAG, it was informed by the defence ministry that the “unsolicited” proposal of 20% discount by aerospace major EADS on the Eurofighter Typhoon jet, a competitor of Dassault, had “factual inaccuracies”. In July 2014, EADS had offered the discount and also proposed enhancing the transfer of technology process. This was done when Dassault Aviation had reached a deadlock when the Cost Negotiating Committee realised that if Indian man hours are applied to the cost of production by Hindustan Aeronautics quoted by it, the price of the aircraft would be substantially higher, according to the CAG report.

(With agency inputs)

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Source: Financial Express