Then French Defence Minister Jean Yves le Drian (left) and India’s former Defence minister Manohar Parrikar after signing the deal to purchase 36 French Rafale fighter jets in September 2016. (Source: PTI) 

CAG Report On Rafale Deal: More Questions Than Answers

The entire deal to purchase French warplanes was done in a “slipshod manner, not just by the ruling government but also by previous governments”, according to defence expert Ajai Shukla.

That comes when the national auditor said in a report that the 36 Rafale jet deal negotiated by the Narendra Modi government was 2.86 percent cheaper than the original 126 aircraft negotiated by the United Progressive Alliance. The Comptroller and Auditor General of India added that the delivery schedule is also one month earlier compared with the UPA deal.

This offered reprieve to Prime Minister Narendra Modi who has been under pressure in the run up to general election to disprove the Congress-led campaign that alleges the jets were bought at a higher price.

But Shuka said that “translating the deal from 126 aircraft to 36 aircraft was the biggest blunder”.

Are there some serious flaws in the procurement process as well as the final inter government agreement between India and France? What does a close reading of the CAG report reveal? BloombergQuint spoke with the defence expert to understand some details in the report and what do they mean for the country’s defence procurement process.

Indian Air Force Never Wanted The Rafale

The Indian Air Force initially asked for the Mirage 2000-II aircraft to be purchased directly from Dassault Aviation, according to the CAG report.

Given India’s familiarity with the Mirage fighter jet, the Indian Air Force felt that a single-source deal would be cost-effective. That proposal, however, was turned down, as the government wanted a bidding process and not a single-source deal.

“Then Defence Minister George Fernandes, who was part of the Vajpayee-led National Democratic Alliance government, did not want to risk another corruption scandal as the Tehelka scam was still fresh in memory,” Shukla told BloombergQuint.

Fernandes wanted to play it safe, he said. “It would have been much cheaper if they bought the Mirage 2000-II. France was ready to transfer the factory lock stock and barrel to India.”

CAG Report On Rafale Deal: More Questions Than Answers

Dassault Bid: Three Strikes

The CAG report on the Rafale deal clearly stated that Dassault’s bid was rejected not once but thrice between 2008 and 2009 by the technical evaluation committee. That’s because the Rafale aircraft did not meet nine air staff qualitative requirements. Dassault also didn't submit information on manufacturers for spare parts and an engineering support package.

Not just that, a report by a panel of independent external monitors in 2015 highlighted issues relating to the calculation of manpower costs and lack of performance guarantees of manufacturing the Rafale aircraft at Hindustan Aeronautics Ltd. All these observations mean that Dassault was never the lowest bidder in the first place.

CAG Report On Rafale Deal: More Questions Than Answers

Lack Of Bank Guarantee

A big difference between the 2007 deal and the one that the Modi government negotiated was the absence of a bank guarantee.

A bank guarantee had to be embedded in the final bid, as per the procedure. Dassault would have to pay the bank a charge to hold this guarantee till the terms of the contract were fulfilled. But since the 2015 deal had no such provision, Dassault didn't have to pay any charge to the bank. This, according to the CAG report, resulted in savings for Dassault Aviation. These savings should have been passed on to India, said the CAG report.

Doubts Over India-Specific Enhancements

At least four of the India-specific enhancements that the government asked the Rafale aircraft to be retrofitted with weren't needed, the CAG report said.

Moreover, the India-specific requirements weren't exclusive to the Rafale fighter jet. Some of them, such as the helmet mounted display, were available in five other aircraft that were being evaluated.

“At the end of it all, translating the deal from 126 aircraft to 36 aircraft was the biggest blunder,” said Shukla. “The entire deal could not have been done in a more slipshod manner.”

Watch the full interview here: