THE GIST of Editorial for UPSC Exams : 15 FEBRUARY 2019 (Auditor’s account: on Rafale deal (The Hindu)

Auditor’s account: on Rafale deal (The Hindu)

Mains Paper 1: Polity
Prelims level: CAG
Mains level: Key highlights of the CAGs report on rafale deal

Context

•  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 regime.

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 qualitative requirements.
•  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.

Conclusion

•  However, it chose the IGA route with France, possibly for diplomatic reasons.
•  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.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

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

Answer: B

Mains Questions:
Q.1) What are the key highlights mentioned in the CAGs report on the issues of Rafale deal?