CAG’s mysterious maths adds to growing confusion on Rafale pricing

The much-anticipated CAG report on Rafale deal, submitted and tabled on the last day of the Parliament on Wednesday, has turned out to be a damp squib for more reasons than one.

• The report is not on just Rafale but on as many as 11 defence acquisitions.
• The report discloses the pricing on all the acquisitions except Rafale.
• The CAG report mentions in its preface that the pricing details on Rafale were withheld at the request of the Defence Ministry.
• The report records the Defence Ministry’s reservations on non-disclosure of pricing of Rafale but after recording its uneasiness, the CAG went ahead and complied with the request.
• Strangely, the government had informed the Supreme Court in a sealed cover that it had shared the pricing details with the CAG and that it would in turn be shared with Parliament. This clearly has not happened.
• Since pricing details of all other 10 acquisitions are mentioned prominently in the report and only the pricing of Rafale is blacked out, it is not difficult to deduce the price of the Rafale deal !
• The most contentious part of the CAG’s report is where it claims that the deal for purchasing 36 Rafale planes turned out to be cheaper by 2.8 percent than what was negotiated by the earlier government.
• Experts have been quick to point out that the CAG has arrived at this conclusion by ignoring the cost of bank guarantee, which alone would have added seven percent to the cost.

The report, which admits that the French company Dassault gained a profit by not having to give a bank guarantee, is even more curious when one takes into account the various claims made by union ministers earlier on the price of the deal.

The report also claims that India managed to save 17.08 per cent cost for India Specific Enhancements.

Several union ministers in the past one year have made different claims about the pricing of Rafale, suggesting that the deal signed under Modi government was far cheaper than what was offered in 2007 by Dassault Aviation.

• On September 17 last year, Union Minister of State for External Affairs VK Singh claimed India was getting the Rafale fighter aircraft at around 40 percent cheaper price.
• On August 29, 2018 Union Finance Minister Arun Jaitley claimed that the price of a fully weaponised combat jet as negotiated by the Modi government was 20 percent cheaper than the price negotiated by the Congress-led UPA government.
• Even the price of the basic aircraft (without weapons and India-specific add-on) was 9 percent cheaper in the new deal, Jaitley said in a blog post.
• On January 2, Jaitley had told the Lok Sabha: “Without fear of contradiction, I can say that the price of the basic aircraft in 2016 was 9 percent cheaper than the UPA deal and the weaponised aircraft was 20 percent cheaper.”
• Defence Minister Nirmala Sitharaman has also repeatedly maintained that the NDA government was getting the Rafale fighter jets at a rate 9 percent cheaper than what the UPA had agreed upon.