On the last day of the Parliament session under the NDA government, a CAG report tabled in both houses stated that the Rafale deal signed in 2016 is 2.86 per cent lower than the 2007 deal by the UPA government. This is contrary to the dissent raised by three defence officials who were part of the seven-member Indian Negotiation Team (INT), who claimed that the price offered by the French side was about 55.6 per cent higher than the benchmark price estimated by the INT that negotiated with the French government in this matter.
Although the CAG report specified the benchmark prices or Aligned Prices estimated by the INT members as “unreasonable”, it did not specify how the auditors achieved their estimations.
The Hindu today published the dissent note of the three domain experts part of the INT, addressed to the INT chairman, deputy chief of Air Staff dated June 1, 2016. In the dissent note, the officials argued that the deal under the Narendra Modi government is “not cheaper” as per the 2015 Inter-Governmental Agreement (IGA) between the two nations. The three experts on the INT 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).
While the CAG report stated that the government signed procurement contract of 36 Rafale aircraft with weapons and associated systems based on the recommendations of the INT, the auditors argued that the benchmark price estimated by the INT as “unrealistic”.
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The main objective of the INT was to bring down the cost of acquisition of the 36 Rafale aircrafts as compared to the cost of the previous procurement of 2007. For this the INA arrived at an Aligned Price - the price of 36 flyaway aircraft in 2015, if the prices were the same as the bid of 2007. However, the CAG contradicted that the Aligned Price worked out by INA was not accurate and that the Aligned Price calculated by the Audit was “about 1.23 per cent lower than the INT aligned costs.” Furthermore, the audit stated that the 2016 contract was 2.86 per cent lower than the Audit’s aligned price.
The CAG claimed that it also used the same methodology adopted by the INT, but did not specify why there is a variation between the two calculations. However, in its report, CAG revealed that the bid price offered by the French government was 56.67 per cent higher than the benchmark price estimated by the ministry (This figure is in line with that raised by the officials of INT which was 55.6%).
Although the CAG report concluded that the controversial deal was on ‘better terms’ of the IGA, the crucial question of whether ‘better prices’ were reached remains to be unanswered, as the auditors did not specify how the INT estimations went wrong.
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