Auditor’s account: on Rafale deal (The
Mains Paper 1: Polity
Prelims level: CAG
Mains level: Key highlights of the CAGs report on rafale deal
- The report of the Comptroller and Auditor-General of India tabled
in Parliament comes in the midst of a vigorous campaign by the Opposition
that is questioning the process, based on media revelations about possible
lapses and deviations and significant points raised by dissenting members of
the Indian Negotiating Team (INT).
- The Modi government can draw comfort from the fact that the CAG
report concludes that the 2016 agreement is slightly better in terms of both
pricing and delivery than what was under negotiation in 2007 during the UPA
Key highlights of the CAGs report
- The report does not allay all doubts. Pegged at 2.86%, the price
advantage in the contract over the 2007 offer is marginal. It is a far cry
from the 9% saving claimed by the government.
- The delivery schedule is only one month sooner than the estimated
outer limit in the earlier process.
- The CAG has found fault with Dassault Aviation being allowed to
retain the gains made by the absence of a bank guarantee, which, if
executed, would have come with significant charges.
- Disappointingly, the CAG has not quantified this amount, though it
declares that it should have been passed on to the Defence Ministry.
- The 2007 price offered by Dassault included bank charges, and its
absence in the 2016 contract is a clear benefit to the company. In other
words, the ‘advantage’ is lower than the 2.86%.
The real issues
- While the key question of pricing is sought to be resolved by the
CAG by comparing the auditors’ aligned price with the INT’s computation,
some issues remain unaddressed.
- The original issue of bringing down the total acquisition from 126
to 36 aircraft does not draw much comment.
- Also, the huge outgo on the India-Specific Enhancements (ISEs),
despite the final figure being projected as a 17% saving on the aligned
offer, is something that requires deeper examination.
- While auditing the earlier process, the CAG found that ISEs were
upgrades allowed to be made so that Dassault’s bid would be compliant with
- Even a team of Ministry officials that examined in March 2015 the
integrity of the earlier process concluded that “the acceptance of [Dassault’s]
additional commercial proposal after bid submission date was unprecedented
and against the canons of financial propriety.”
- Dassault was not the lowest bidder in the earlier process, and its
technical bid had been rejected. Perhaps, this presented an opportunity to
the present regime to reopen the entire process to buy Medium Multi-Role
Combat Aircraft (MMRCA) and invite fresh bids.
- However, it chose the IGA route with France, possibly for
- The CAG identifies as a major problem the fact that the technical
requirements are too narrowly defined for most vendors to comply with.
- The message from the report is that defence acquisition processes
require reforms and streamlining.
Q.1) With reference to International Centre for Integrated Mountain
Development (ICIMOD), consider the following statements:
1. It is a knowledge sharing centre for eight regional countries of the
Hindu Kush Himalayas.
2. It aims to assist people in adapting to the influence of climate change.
3. India is a founding member of ICIMOD.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 1, 2 and 3
(c) 2 and 3 only
(d) 1 and 3 only
Q.1) What are the key highlights mentioned in the CAGs report on the issues of