Randeep Surjewala: CAG i.e. ‘Chowkidar Auditor General’ report on Rafale deal is a mere ‘eye wash’

The Congress leader Randeep Singh Surjewala on Wednesday pointed out the incongruities in the Comptroller and Auditor General of India (CAG) report on the Rafale deal that was tabled in the Rajya Sabha. He said that the report is a mere ‘eyewash’ which as a matter of fact has been prepared by the ‘Chowkidar Auditor General’.

Saying that the report doesn’t even mention the price of the Rafale aircraft, Randeep Singh Surjewala pointed out the discrepancies in what the Modi government has been saying:

• On 19th August 2018; Defence Minister, Nirmala Sitaraman said that 36 Rafale Aircrafts purchased by Modi Government is 9% cheaper than 126 aircrafts UPA deal.
• On 29th August 2018; Finance Minister, Arun Jaitley said that the 36 aircrafts purchased by Modi Government is 20% cheaper than UPA 126 aircrafts purchase.
• PM Modi, finance minister (03.01.2019) and defence minister (04.01.2019) in Parliament reiterated this in Parliament calling the NDA-Modi purchase as 9%-20% cheaper.

This, Surjewala said only proves that even the ‘manufactured figure’ of 2.86% cheaper by CAG is horribly ‘fake & false’.

The CAG report, Surjewala pointed out, records but does not include the following charges/payments:

• CAG Report clearly records that ‘Performance Guarantee and Warranty’, as offered by Dassault Aviation in the 2007 Contract was equivalent to 10% of the total value of the contract. The dissent note dated 01.06.2016 of the Indian Negotiation Team appearing in The Hindu on Wednesday puts the value of bank guarantee at €574 Million.

CAG Report clearly records that this was a saving for Dassault Aviation. However, this value is not included to determine the total cost of the aircraft.

• The ‘Design & Development’ cost i.e. cost of ‘India Specific Enhancements’ for 126 aircrafts with ‘Transfer of Technology’ was €1400 Million i.e. €11.11 Million per Rafale Aircraft.
• The ‘Design & Development’ cost i.e. cost of ‘India Specific Enhancement’ for 36 Rafale in fly away condition without ‘Transfer of Technology’ is €1300 Million i.e. €36.11 Million per aircraft.
• The CAG does not factor the 300% increase in the cost, despite there being no ‘Transfer of Technology’.
• Even if these two costs are included, cost of 36 Rafale aircrafts will go up manifold.

CAG admits to failure in delivery schedule of the 36 Rafale Aircrafts:

CAG categorically notes the apprehension expressed by ‘Indian Negotiation Team’ about non-delivery of Rafale Aircrafts as per the schedule. CAG notes that Dassault Aviation has an order backlog of 83 aircrafts and can only manufacture 11 aircrafts in a year. CAG also notes that clearing the backlog will take over 7 years or nearly 8 years.

The Modi Government utterly failed to respond to this finding. The entire purpose of ‘Emergency Purchase’ of Rafale aircrafts by sacrificing the UPA deal, thus, stands demolished comprising India’s National security.

CAG admits Modi Government’s failure on ‘Bank Guarantee’, ‘Sovereign Guarantee’, ‘Escrow Account’ and ‘Arbitration’ clause, thereby seriously jeopardising India’s National interest:

• CAG clearly records that in the UPA deal, Dassault Aviation had agreed to give 15% Bank Guarantee against advance payment, 5% for Performance Guarantee and 5% for Warranty. CAG also records that despite 60% advance payment under the Modi Government purchase of 36 Rafale Aircrafts, there will be neither a Bank Guarantee nor a Sovereign Guarantee or a Performance Guarantee.
• CAG admits that the condition of Bank Guarantee/Sovereign Guarantee was waived by Prime Minister in the Cabinet Committee on Security (CCS) in September, 2015 subject to payment to be made through an ‘Escrow Account’. CAG admits that the French Government even refused to agree to an ‘Escrow Account’.
• CAG admits that Indian Government will have to enter into an arbitration with Dassault Aviation and not the French Government in case of default. CAG also admits that Indian Government will have to permit Dassault Aviation to go through and exhaust all available legal remedies and only at the end of this protracted litigation, which may take a few decades, will the French Government step in to honour the commitment to make the payment.

CAG admits to ‘Cost Escalation’ in the purchase deal of 36 Rafale under Modi Government vis-à-vis ‘Firm and Fixed Price’ of 126 Aircrafts in the purchase deal by the UPA Government:

• Admittedly, 126 aircrafts MMRCA deal in its RPF of 2007 asked for ‘Firm and Fixed Price’ and Dassault Aviation submitted the price of aircrafts on ‘Firm and Fixed’ basis.
• In the 36 Rafale Aircrafts purchase deal by Modi Government, Dassault Aviation turned around and sought ‘Price Escalation’ to get beneficial term. Admittedly, even this ‘Price Escalation’ is fixed at 3.5% per annum, while the inflation rate in France is only 1.22%.
• The fact that no delivery is possible for a period of 8 years makes it clear that there would be a price escalation of nearly 28% over and above the already high prices of 36 Rafale Aircrafts, causing a serious loss to the exchequer.
• The justification of conversion from ‘Firm and Fixed Price’ to ‘Escalation Cost’ by the Modi Government only helps Dassault Aviation get millions of Euros, thereby causing a loss to public exchequer.

Even CAG admits the ‘additional cost and price increase’ under multiple heads in the 36 Rafale aircrafts purchase deal by Modi Government:

CAG admits that

• There is a 6.54% increase in the cost of ‘Engineering Support’ package in Modi Government purchase of 36 Rafale Aircrafts over the UPA deal.
• There is a 6.54% increase also in ‘Performance Based Logistic’ package in the 36 Rafale Aircrafts deal by Modi Government, compared to the 126 aircrafts deal by UPA.
• There is 0.15% price increase in the ‘Tool Tester and Ground Equipment’ package in the 36 Rafale Aircrafts compared to 126 aircrafts deal by UPA.
• There is a 2.8% increase in the ‘Training’ Package of 36 Rafale Aircrafts, as compared to 126 aircrafts purchase deal of UPA.