Rafale CAG report: A mixed bag for both opposition and government

CAG of India

The much-awaited CAG report on the Rafale deal is a mixed bag for the opposition and government, providing them both enough ammunition to ensure that the politics around the fighter jets will not die down anytime soon.

Deposited on the last day of the parliament session, the report broadly states that the deal under NDA at 7.87 billion euros for 36 jets was 2.86 percent cheaper than the price that was being negotiated by the UPA in 2012.

While this could be seen to validate the government’s position that better terms have been achieved, the number falls well short of the nine percent reduction that top ministers have claimed publically in the last few months.

The CAG has also stated that money saved by the removal of banking and performance guarantees – winning companies have to give these in standard commercial contracts – has not been factored in and that the benefits of these would be accrued by Dassault Aviation. The CAG essentially states that the price finally agreed to by the Indian side should have been even lower as the banking charges had been waived off.

In terms of faster delivery, the CAG gives the government little credit for shaving off just one month in the delivery time for the jets that were bought for urgent needs. The CAG has also stated in the report that the government could have used comparative pricing from the unsolicited offer by Eurofighter to determine a better price.

On the lower price of the Rafale jets under NDA, the CAG finding seems to indicate that the major savings were made under the India Specific Enhancements section – money spent on making the fighter jet compatible with special requirements of the air force that covering taking off from high altitude runways.

The decreasing of 17 percent achieved in this contributes the most to the lower price of the jet deal. These enhancements had cost upwards of 1.3 billion euros in the contract, as reported by ET.

On other matters, the CAG said that the basic price of the aircraft was similar in both the deals being negotiated.

On argument resolution and safeguards, the CAG report says that India will have to go into arbitration with the French vendors if any trouble comes its way in terms of deliveries or quality of work and that the French government will only ensure that the vendors pay up if the Indian side wins these arbitration proceedings. This is contrary to the earlier safeguards proposed that the vendors banking guarantees can be encashed if any violations are found.

The CAG report did not look into the offsets yet as those are to be deposited to the government by Dassault only in October this year.