Rafale: What CAG found – and should have found

The Comptroller and Audit General (CAG) report on the Rafale fighter aircraft deal can be said to be endorsing,  at least partially the Central Government.  It was one of the main allegations against the agreement that the price was higher than the one signed earlier by UPA government.  CAG makes a summary statement that the NDA deal price is lower by 2.86 per cent than the previous agreement.

However,  this report cannot be deemed adequate to clear doubts and allegations.   In fact the tabling of the report was extended till the last day of parliament's final session,  leaving no room for any debate on the report.  And committees of the current parliament have no opportunity to examine it either.  These are enough to leave suspicions.  Although the Rafale purchase transaction occupies nearly half of the report regarding the procedure for Air Force's asset procurements in general,  it was not CAG's brief to scrutinise the allegations raised specifically about that deal in isolation.    Further,  the price determination details were not examined by CAG.

The government's holding the price confidential has been questioned.  Not scrutinising the facts regarding military secrets is quite understandable.  But without auditing the commercial aspects of the deal,  how can the report be complete?  And how can the conclusion that the cost was 2.86 per cent lower,  be credible if there was no review of the price?   Defence Minister Nirmala Sitharaman had claimed in the Lok Sabha that the cost of the deal was nine per cent lower,  which has now been proved wrong and far from the actual.  Dassault Aviation has charged a heavy price in the name of India Specific Enhancements (ISE),  but CAG has pointed out that most of these enhancements are not essential.  And a major deficiency in the new deal is that there is no bank guarantee.  CAG says that by being exempt from this,  Dassault  made a financial gain,  but CAG stops short of figuring out how much this would be.   But a note prepared by the Indian team, has been disclosed by the Hindu newspaper.   According to that India's loss is estimated at Rs 57.4 crore.   If we add this yo the total loss,  the new agreement has to be seen as more expensive in effect.  It is not clear why CAG did not take this into account.  And the computation that the cost is 2.86 per cent lower,  is not accepted by three experts who were part of the expert team of negotiation with France.

In fact the loopholes for corruption lie in aspects not considered by CAG.   Price is one of them.  Similarly,  even as the Air Force was badly in need of fighter planes,  the rationale of reducing the number of aircraft from the original 126 to 36,  has not been reviewed by CAG.  When the fighter equipment required for 126 was adjusted down to 36,   the beneficiary may have been Dassault,  which again was not subjected to scrutiny.   While it was without factoring in many items that CAG reached the conclusion of 'cheaper', CAG itself has doubts about the claim that the delivery time of the fleet has been reduced.   As per the deal signed by UPA government,  the delivery time requested by Dassault for 36 aircraft was 72 months,   while the NDA deal says 67 months.   When Air Force is in urgent need of aircraft,   the issue is not merely of the delay caused by a change of agreement.  Although the agreement mentions 67 months,  CAG's assessment is that this is not feasible.  For Dassault has already a commitment to supply 83 planes which are yet to be built.  And the company's production rate is 11 per year.   Thus,  to deliver the outstanding orders alone,  the company needs seven years.  Despite that  the government is affirming that the aircraft will be delivered five months earlier than in the earlier agreement.  And if the company fails to deliver,  only dispute resolution mechanism available is arbitration.  In other words,  a resolution depends on good luck alone.

Most of the controversial issues about Rafale deal remain unaddressed.  The procedures followed for the signing,  the rationale for involving Anil Ambani's Reliance in the contractual framework,  the basis for keeping Hindustan Aeronautics Limited (HAL) out of the deal,   the veracity of allegations about the Prime Minister's Office involving itself directly and holding 'parallel negotiations',  transparency in the procedures of concluding the deal and  the justification for keeping the price details confidential are all still a mystery.   They are subjects that should be examined by a parliamentary committee or a judicial panel.

Was the benefit gained by Dassault through not providing a bank guarantee a kick back?  And who misled the Supreme Court into concluding that CAG report was seen by the PAC and for what?   Given that the Supreme Court verdict of December was based on misleading information,  who were responsible for that?  This question alone merits a judicial investigation.  However,  it is now certain that none of these serious matters would be probed before the elections.   Some people are definitely particular that matters should not be that clear.