CAG's Rafale report raises many questions

The report of the Comptroller and Auditor-General (CAG) on the purchase of Rafale fighter jets from France — which has become a matter of deep controversy — doesn’t provide satisfaction on points of discord. There can be little doubt that the CAG will need to expand its present effort to be more comprehensive if its work is to carry conviction. This should ideally happen before the next Parliament has a chance to debate its report. The report, presented to Parliament on Wednesday, fails to shed light on some key questions, first raised by Congress president Rahul Gandhi, who made serious allegations that were amplified by carefully documented and well-sourced reports in the media along with defence ministry documents.

The CAG report makes two principal assertions. The first is that the price contracted by the present government to buy 36 Rafale jets is 2.86 per cent cheaper than that negotiated to buy 136 of the same aircraft by the UPA government earlier. The basis for the calculation is not presented as the CAG has excised the price data. However, a media report by a credible defence analyst relying on sources involved in the negotiations suggests the price offered by Dassault Aviation in 2016 for 36 aircraft was 40 per cent higher than its offer in 2012 for 126 aircraft.  The package cost was 19.5 billion euros in 2012, and this included the cost of aircraft, technology transfer (to HAL, the then Indian partner), India-specific enhancements, weapons systems on board, spares and maintenance guarantees. This works out to Rs 1,000 crores per aircraft. In contrast, the 2016 price was Rs 1,600 crores per aircraft.

The second key point made by the CAG is that the delivery schedule offered in 2016 was five months quicker than the one proposed in 2012. For scrapping the UPA-era negotiations and signing a fresh contract by jettisoning HAL and introducing a practically-bankrupt Indian businessman into the proceedings, the Narendra Modi government cited the reasons of better price and faster delivery (to bolster security needs). But the CAG itself casts doubts on the government’s claimed five-month time advantage. It also criticises the government for not going for a fixed price formula, a point also made in a strong dissent note by the three “domain experts” in the Indian negotiating team, and accepting the French formula of price escalation instead. To be comprehensive, the CAG should have referenced the dissent note, which carries multi-dimensional insights. The CAG report will also be found wanting for not alluding to the gross violation of Defence Purchase Procedure 2013 and 2016, which resulted in the PMO conducting “parallel negotiations”, undercutting the official Indian negotiators, a point made by the then defence secretary in a note to then defence minister Manohar Parrkiar, allowing scope for possible legal action.