The CAG report on the Rafale deal tabled in Parliament Wednesday has revealed that a month before Prime Minister Narendra Modi announced India’s intention to buy the 36 fighter jets, a Ministry of Defence panel had found that Dassault Aviation was not the lowest bidder in 2012, and therefore a contract could not be signed with it.
This contradicts one of the main reasons given by the Modi government all along for selecting Rafale and not its competitors.
The Modi government and Defence Minister Nirmala Sitharaman have insisted that the deal was signed as an emergency purchase because Dassault had emerged as L1 (lowest bidder) in the UPA government’s Medium Multi-Role Combat Aircraft (MMRCA) tender.
Sources in the MoD, however, sought to explain the contradiction by saying that the deal for 36 Rafales was a government-to-government contract, and L1 or any other company does not come into play.
However, they did not explain why the government had in the past highlighted that Rafale was chosen as L1 in the UPA era whenever the opposition has questioned the 2016 contract.
After the determination of the L1 vendor in 2012, there were several complaints alleging irregularity in the price evaluation process, including some filed by Members of Parliament, the CAG report said.
Then defence minister A.K. Antony had, in June that year, set up a team of ministry officials to re-examine the process, to “derive complete assurance of the integrity of the procurement”, it said.
The CAG report stated that the team, in its report submitted on 27 March 2015, said Dassault Aviation was “not the L-1 and therefore contract (MMRCA) cannot be concluded with them”.
The panel also found that the bid of EADS, the consortium that makes the Eurofighter Typhoon, was also not in accordance with the Indian Air Force’s requirements. EADS had even offered a discount of 20 per cent to the government on 5 July 2014, but the government did not entertain it, saying it was a violation of the Defence Procurement Procedure (DPP).
The panel recommended the cancellation of the ongoing procurement programme (126 MMRCA), which the government did in July 2015.
However, PM Modi had already made the announcement for 36 Rafales in Paris in April 2015, a month after the panel filed its report.
Rafale would still have been cheaper, say MoD sources
MoD sources said that Hindustan Aeronautics Limited had sought 2.7 times the ‘man hour’ cost quoted by Dassault for the manufacture of 108 planes under the UPA term proposal, and “just” this addition would have made the Rafale costlier than EADS’ Eurofighter Typhoon.
They added that since HAL had never got into any negotiations with EADS, it would be wrong to presume that the price quoted by the European firm would not have gone up.
“Irrespective of the above, since the comparison of 36 Rafales under IGA (inter-government agreement) is with 18 Rafales in MMRCA, Rafale will be the L1 as there is no impact of the cost calculations on flyaway aircraft,” a source said.
Rafale technically flawed
The CAG, while going into the proposed UPA-era deal for 126 aircraft, also said the technical selection of the Rafale was flawed because the aircraft had failed to fully meet the prescribed requirements (Air Staff Quality Requirement).
“The aircraft should have been rejected at the technical evaluation stage (before field evaluation) itself,” the CAG report said, citing the MoD panel’s report.
Lacunae in process
The CAG audit of the MMRCA tendering has also highlighted various lacunae in the process.
Talking about the multiple concessions given to Dassault, the CAG noted “that the opportunity provided to M/s Dassault Aviation to significantly modify its technical and price bid was in violation of DPP”.
The ministry, in its reply, stated it was not a violation of the DPP, and that it was approved by the highest decision making body, the Defence Acquisition Council. However, Para 35 of the DPP allows for only minor deviations which do not affect the basic character of the bid, or materially change the bid.
“But M/s DA was allowed to bring about enhancements of 14 parameters which, ultimately was to cost over ‘XX’ million € [price redacted]. Hence, M/s DA was treated preferentially. The firm attributed these modifications to the unique requirements of the IAF and called them Indian Specific Enhancements (sic),” the CAG report said.
“However, Audit noted that the Indian requirements, while they might not have been available in Rafale, were not unique because most of these features were available in the other 5 aircraft that were evaluated. For instance, Helmet Mounted Display was available in all modern fighter aircraft including Eurofighter.”