Tag: Rafale controversy

Supreme Court rejects PIL for probe into Rafale deal between Indian and France

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Supreme Court on Monday refused to entertain a PIL seeking a fresh probe into the deal between India and France for the procurement of 36 Rafale jets.

A bench comprising Chief Justice Uday Umesh Lalit and S Ravindra Bhat considered lawyer M L Sharma’s submission that a direction for issuing a letters rogatory to collect fresh evidence relating to the deal be issued. He also referred to some media reports alleging that one billion Euros was paid by Dassault Aviation to a middleman to get the deal in its favour.

The bench refused to consider the fresh PIL. Sharma then decided to withdraw the PIL. On December 14, 2018, the apex court had dismissed a batch of PILs challenging the deal between India and France for the procurement of 36 Rafale jets, saying there was no occasion to “really doubt the decision making process” warranting setting aside of the contract.

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Rafale deal: Anil Ambani’s Reliance Group decides to withdraw defamation suits filed against Congress

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Anil Ambani’s Reliance Group has decided to withdraw the Rs 5,000-crore civil defamation suits filed in an Ahmedabad court against Congress leaders and National Herald newspaper over their statements and an article on the controversial Rafale fighter jet deal.

The suits were being heard in the court of city civil and sessions judge P J Tamakuwala.

“We believe that the defamatory statements by certain individuals and corporate bodies with regard to the offset agreement between Reliance Group and Dassault Aviation were made for political purposes in the run-up to the Lok Sabha election 2019 that have concluded on Sunday, 19 May, 2019. Besides, the subject matter is pending for adjudication before the Hon’ble Supreme Court,” a spokesperson of Reliance Group said in a statement.

“Therefore, the group has decided to withdraw the defamation suits filed by it against these individuals and corporate bodies,” he added.

“We have intimated the defendants that we are going to withdraw the suits against them,” the complainant’s lawyer, Rasesh Parikh, said.

P S Champaneri, the lawyer representing the National Herald and some other defendants, said he was told by the Reliance Group’s counsel that he received instructions from his client to withdraw the defamation suits against them.

The formal process to withdraw the suits will be taken up in the court when it resumes after the summer vacation, Champaneri said.

Reliance Defence, Reliance Infrastructure and Reliance Aerostructure — part of the Anil Ambani-owned Reliance Group — had earlier filed civil defamation suits against Congress leaders including Sunil Jakhar, Randeep Singh Surjewala, Oommen Chandy, Ashok Chavan, Abhishek Manu Singhvi, Sanjay Nirupam and Shaktisinh Gohil, and some journalists and news organisations like the National Herald.

The defamation suits were also filed against the National Herald’s editor Zafar Agha, and Vishwadeepak, the author of a news article published by it.

(Inputs from PTI)

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CAG report on Rafale raises concerns on Letter of Comfort over sovereign guarantee

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Comptroller and Auditor General (CAG), in its report on the Rafale fighter jet deal with France, has highlighted the drawbacks of settling for a ‘Letter of Comfort’ rather than a sovereign guarantee by the French government.

The report, tabled in Parliament on Wednesday, noted that the 2007 UPA deal included a 15 percent bank guarantee against advance payments.

Highlighting its concerns, the CAG observed that in case of a breach of an agreement, India would now have to first settle the matter through arbitration directly with the French vendors.

If the arbitration award goes in favour of India and Dassault Aviation, the makers of the Rafale jet fails to honour it, India will have to exhaust all available legal remedies, it said. Only after that will the French government make the payments on behalf of Dassault Aviation, it added.

Follow our Parliament live blog on CAG’s report for more updates. 

India for the first time signed an Intergovernmental Agreement (IGA) with France to procure 36 Rafale fighter jets. It has earlier signed similar IGAs with the US, the UK and Russia.

“In case of IGA for 36 Rafale, the offer of M/s DA (Dassault Aviation) in 2007 had included 15 percent Bank Guarantee against advance payments, 5 percent each for Performance Guarantee and Warranty. A Bank Guarantee gets directly and automatically invoked in case of breach of contract by the seller,” the CAG said.

In the 2015 offer with the present government, the French vendor did not furnish any financial and performance bank guarantees, the report stated.

Since about 60 percent of advance payments were to be made to the French vendors, the Ministry of Law and Justice advised that a government/sovereign guarantee should be requested in view of the value of the proposed procurement, the report said.

However, the French government and Dassault Aviation neither agreed to furnish the bank guarantees nor a government/sovereign guarantee, it stated.

“Instead it provided a ‘Letter of Comfort’ signed by the French Prime Minister in lieu of the Bank Guarantee,” the report said.

The issue on the sovereign guarantee and ‘Letter of Comfort’ was submitted to the CCS in September 2016 for consideration.

The CCS gave its acceptance along with other associated guarantees/assurances provided in the IGA in lieu of bank guarantee subject to payments through an escrow account or “any other safeguards which the ministry was to work out in consultation with the French Government with the assurance by the French Government that they shall provide effective oversight on the utilization of payments released to the French Industrial suppliers”, the CAG report noted.

The French government, the report said, did not agree to an escrow account as it felt “the guarantees already provided by it were far-reaching and unprecedented”.

“In case of any breach of agreement Indian party (Ministry) would have to first settle it through Arbitration directly with the French vendors. If the Arbitration award were in favour of Indian party and the French vendor fails to honour the award (make the payment’s claim), Indian party should exhaust all available legal remedies. Only then the French Government would make these payments on behalf of the vendors,” the report said.

The CAG report comes at a time the government has been facing attacks by the Congress over settling for a ‘letter of comfort’ instead of a ‘sovereign guarantee’.

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Here are the key highlights from the CAG’s report on Rafale jet deal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Rafale deal negotiated by the National Democratic Alliance (NDA) government to procure 36 fighter jets was 2.86 percent cheaper than the United Progressive Alliance’s (UPA) 2007 offer, the Comptroller and Auditor General (CAG) said in its report.

The report gives much relief to the Narendra Modi government, which has been facing fervent attacks by the Congress and other opposition parties over the fighter jet deal.

The centre has repeatedly denied allegations by the opposition parties in the Rafale issue inside and outside the Parliament.

Follow our Parliament live blog on CAG’s report for more updates. 

Key highlights from the CAG report on the Rafale Jet deal

• On Delivery Schedule: The CAG report said there was an improvement of one month in the delivery schedule of the 2016 contract versus 2007. The Indian Negotiating Team (INT) had apprehensions about the achievements of even this delivery schedule.

The contracted schedule for 36 Rafale jets was 71 months late as compared to the 72 months delay in 2007 during the UPA rule.

• On Cost Of Procurement: The report added the basic flyaway aircraft was bought at the same price as the 2007 UPA aircraft.

Background: The offer of 2007 had two distinct packages – 18 flyaway aircraft package and pricing for transfer of technology (ToT) package of 108 aircraft to be produced in India. The offers made in 2015 was only for 36 flyaway fighter aircrafts. For comparing the prices of 2007 and 2015, the scope of both offers had to be brought at par.

Findings: Overall the 2015 deal price was 2.86 percent cheaper than the 2007 price, the CAG report said, adding that the offer made on the missile procurement implied a cost saving of 17.08 percent.

The vendor charged an excess of 6.54 percent more in the area of engineering support package (ESP) and in the area of performance based logistics.

The vendor also charged 2.68 percent more in the area of training and 1.05 percent less in the area of weapon package.

• On India Specific Enhancements: During the negotiations of 2015 for 36  aircraft, the defence ministry rejected INT’s proposal to reduce the number of India specific enhancements by six. Four of the India specific enhancements (14 percent of the total cost of enhancements) were found to be unnecessary by technical and staff evaluations, the report added.
• On Bank Guarantee: The offer made in 2007 had included 15 percent bank guarantee against advance payments. In the 2015 offer, there were no financial and performance bank guarantees.

The French government and vendor provided a Letter of Comfort signed by the French Prime Minister despite the law ministry advising that a government or a sovereign guarantee be procured, the report added. 

The savings made on the ‘No Bank Guarantee’ went to the vendor and not to the Indian government, the report added. The total savings accruing to the vendor by not having to provide guarantee was to be passed on to the government.

The audit found that this was actually saving for the vendor when compared with its previous 2007 offer.

• On Price Comparison: “Comparison of prices under 2007 and 2015 offers has posed its own difficulties because the package it offered in 2007 included the price of license production of 108 aircraft in India while the 2015 offer included only direct flyaway aircraft, which was compared costs of 18 flyaway aircraft. Costs are fungible,” the report said.

The report further said, “The difference between the aligned price estimated by INT and audit could be attributed to inconsistent price variation factors adopted by INT, alignment of the quantities or scope of the two offers and the difficulties of alignment itself as stated earlier.”

• With regard to India specific enhancements, the deal was 17.08 percent cheaper, said the CAG report, which was tabled in Parliament on Wednesday.
• In terms of engineering support package and performance-based logistics, the deal was 6.54 percent expensive, it stated.
• The NDA deal was 2.86 percent cheaper than the one negotiated by the UPA government in 2007, according to the report.

(With inputs from agencies)

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Rafale Deal: Defence ministry needs to revisit the entire acquisition process, says CAG

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Comptroller and Auditor General (CAG) of India suggested the union defence ministry revisit the entire process of acquiring for the Indian Air Force, including the 36 Rafale jets, in order to simplify the process as the auditor said the acquisition wing was unable to weed out the redundant activities.

“The acquisition wing, headed by the DG (Acquisition) was envisaged as an integrated defence organisation. In reality, this has perhaps not happened, with the bulk of the acquisition-related activities still carried out in Services Headquarters,” the CAG statement said.

The report said IAF did not define the Air Staff Qualitative Requirements (ASQRs) properly, due to which none of the vendors could fully meet the ASQRs. It added that ASQRs were changed repeatedly during the procurement process, which created difficulties during technical and price evaluation and affected the integrity of competitive tendering. This led to the delays in the acquisition process, the report added.

According to the report, the vendor response to the solicitation of offers was low, which restricted competition. The number of vendors who responded to the Request For Proposal (RFP) was far less than the number of vendors who were invited to bid, it noted.

Parliament LIVE: Modi government’s Rafale deal 2.86% cheaper than UPA’s, says CAG report tabled in Rajya Sabha

The auditor watchdog said that instead of the ‘Lowest Price Technically Acceptable (LPTA)’ method for bidding which had been used for this deal, the ‘Best Value Method’ should have been used as Rafale is a highly technical product.

The report said that there have been several delays at various stages of the acquisition process.

“Against three years envisaged in Defence Procurement Process, four cases took more than three years and seven cases took more than five years to reach the contract conclusion stage. Delays in the acquisition were essentially due to a complex and multi-level approval process, where objections could be raised at any stage,” the statement said.

The capital acquisition system, the report said, is unlikely to effectively support the IAF in its operational preparedness and modernisation.

In December, the Supreme Court gave a clean chit to the NDA government dismissing all petitions calling for an investigation into the purchase of Rafale warplanes.

The Rafale deal is a defence agreement signed between the government of India and France for Rafale fighter, a twin-engine Medium Multi-Role Combat Aircraft (MMRCA) manufactured by French aerospace company Dassault Aviation.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s the full text of the executive summary of CAG’s Rafale report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government’s Rafale deal is 2.86 percent cheaper than that of the UPA government, showed the Comptroller and Auditor General of India (CAG) report which was tabled in the Parliament on Wednesday, reported CNBC-TV18’s Rituparna Bhuyan.

The CAG report stated that the delivery schedule of the first 18 Rafale aircraft is better than the one proposed in the 126 aircraft deal.

Follow our Parliament live blog on CAG’s report for more updates. 

Read the full text of the executive summary of CAG’s Rafale report: 

The Indian Air Force (IAF) is tasked to defend the nation and its airspace against air threats for which it must maintain high state of operational preparedness. Acquisition of the required air assets, at the right time, is critical for the preparedness and modernization of IAF. Audit, therefore examined the system of capital acquisition of air assets to assess its ability to meet the required capabilities, at the optimum price and the given timeframe. To acquire the right product at the right price, it is essential that the qualitative requirements (Air Staff Qualitative Requirements in the IAF-ASQRs) truly reflect the users functional need; maximum possible competition is generated; and technical and price evaluation is done objectively.

Audit noted that IAF, instead of defining in the ASQRs in terms of functional parameters, made it exhaustive and included detailed technical or design specifications. That had several consequences such as none of the vendors could fully meet the ASQRs; user needs were sometimes overridden; ASQRs were changed repeatedly during the procurement process; waivers had to be obtained for some ASQRs; and some ASQRs were shifted to Contract Negotiations Committee (CNC) to negotiate, though these were technical issues. The objectivity, equity and consistency of the technical evaluation process was consequently affected. This created difficulties during technical and price evaluation and affected the integrity of competitive tendering, and also became one of the main reasons for delays in the acquisition process.

Audit noted that the vendor response to the solicitation of offers was low, which restricted competition. The number of vendors who responded to the Request For Proposal (RFP) was far less than the number of vendors who were invited to the bid. The complexities and delays in the acquisition system, narrow, over defined ASQRs and selection on the basis of L1 rather than quantitative methods of the best value for money seem to be some of the reasons for poor response from vendors.

The CNC repeatedly failed in realistically estimating the Benchmark price, making it difficult to establish the responsibility of price. This also caused a delay in price evaluation and contract negotiations. The model used for calculating the life cycle cost of acquisition had several deficiencies and needs to be fine-tuned and improved further.

There were severe delays at various stages of the acquisition process. Against three years envisaged in Defence Procurement Process, four cases took more than three years and seven cases took more than five years to reach the contract conclusion stage. Delays in the acquisition were essentially due to a complex and multi-level approval process, where objections could be raised at any stage.

Overall the capital acquisition system, as it exists, is unlikely to effectively support the IAF in its operational preparedness and modernization.

Audit, therefore, recommends that IAF should improve its process of formulation of ASQRs to ensure that they correctly reflect the users’ functional parameters. Exhaustive ASQRs with detailed technical or design specifications should be avoided unless they are functionally necessary. In the process of acquisition, the involvement of academic experts, in relevant fields, such as aerospace engineering is advisable in the view of the fact that latest and most complex technologies, evolving rapidly, are being used in almost all defence systems and weapons. It would be impractical to expect that in-service officers, doing full-time jobs, can keep up with the rapid development to the extent that academicians, devoted to that subject, might.

Audit is of the view that it needs to be considered whether the present ‘Lowest Price Technically Acceptable (LPTA)’ method of bid evaluation wherein the contract is awarded to the lowest priced offer which is technically acceptable, is suitable for all procurements. For procuring highly technical products use of the Best Value method or a “Quality cum Cost” assessment may yield better value for money.

Ministry needs to revisit the entire process of acquisition, to weed out redundant activities and simplify the process. The acquisition wing, headed by the DG (Acquisition) was envisaged as an integrated defence organisation. In reality, this has perhaps not happened, with the bulk of the acquisition-related activities still carried out in the Services’ Headquarters; which is not unexpected and is needed. However, in that case, it needs to be seen if the Acquisition wing is serving the purpose it was set up for, or some Business Process Reengineering is required to achieve the purpose.

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Modi govt’s Rafale deal 2.86% cheaper than UPA’s: CAG report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government’s new Rafale deal is 2.86 percent cheaper than the UPA government’s unconcluded deal, showed the CAG report, which was tabled in the Parliament on Wednesday. With regard to India Specific Enhancements, the deal was 17.08 percent cheaper, said the report.

However, the report did not mention any details regarding the prices.

Though this comes as a big relief for the Modi government which has been under attack over the $8.7 billion Rafale deal, it has also provided ammunition to the opposition to continue the attack.

In terms of engineering support package and performance-based logistics, the deal was 6.54 percent expensive, the report stated.

It highlighted that the govt claimed the deal was 9 percent cheaper, which was not the case. It said that the contract for Rafale consisted of six packages with 14 items in total, out of which, the price of seven items was higher than the aligned price.

The report also highlighted that the government settled for ‘Letter of Comfort’ instead of a “sovereign guarantee”.  It also noted that the delivery schedule of the 2016 contract improved by only one month in comparison to the 2007 offer.

“Audit, therefore examined the system of capital acquisition of air assets to assess its ability to meet the required capabilities, at the optimum price and the given timeframe,” stated the report.

The report said that IAF did not define the Air Staff Qualitative Requirements (ASQRs) properly, due to which the vendors could not fully meet the ASQRs. It added that ASQRs were changed repeatedly during the procurement process which created difficulties during technical and price evaluation and affected the integrity of competitive tendering. This led to the delays in the acquisition process, the report added.

“Overall the capital acquisition system, as it exists, is unlikely to effectively support the IAF in its operational preparedness and modernisation,” it said.

The war of words between the BJP and the Congress turned uglier on Tuesday with Rahul Gandhi calling CAG “Chowkidar Auditor General”, implying that the CAG was playing into the hands of PM Modi who in turn was acting as a “middleman” for Anil Ambani.

Gandhi on Tuesday came out with an email that he claimed revealed that Anil Ambani visited Paris to meet the defence minister of France 10 days before the deal took place

In December, the Supreme Court gave a clean chit to the NDA government dismissing all petitions calling for an investigation into the purchase of Rafale warplanes.

The Rafale deal is a defence agreement signed between the government of India and France for Rafale fighter, a twin-engine Medium Multi-Role Combat Aircraft (MMRCA) manufactured by French aerospace company Dassault Aviation.

Indian Air Force had advanced a proposal for 126 fighter aircraft in August 2007, under the UPA government and had floated a tender. Of these, 18 were to be delivered by Dassault Aviation in a flyaway condition and 108 were to be manufactured in India with Hindustan Aeronautics Limited (HAL) being the partner. However, the deal did not materialise under the UPA government.

After prime minister Narendra Modi came to power, an inter-government agreement (IGA) was signed by the defence ministers of both countries on Sept 23, 2016 for the purchase of 36 Rafale fighter aircraft in a flyaway condition and ever since the deal has been surrounded by controversies as Dassault chose Reliance group firm of Anil Ambani as an offset partner.

The deal triggered a political storm in India after Former French president Francois Hollande, who approved the deal when he was in office, said the Indian government influenced the choice of a local partner in the deal.

The government has, however, denied all the allegations.

Follow  our live blog on CAG report for more

(With inputs from agencies)

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Modi’s Rafale deal not on ‘better terms’ than the UPA’s offer: report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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NDA’s new Rafale deal was not on “better-terms” than the one decided under the UPA government, three senior defence ministry officials who were in the seven-member Indian Negotiating Team (INT) noted, as reported by The Hindu.

According to the paper, the findings by the defence ministry officials directly opposed the two main claims: cheaper deal and faster delivery of fighter jets.

In an eight-page note, M P Singh, adviser (Cost), a joint secretary-level officer from the Indian Cost Accounts Service; A R Sule, financial manager (Air); and Rajeev Verma, joint secretary and acquisitions manager (Air), expressed deep concerns over the terms of the deal, said the report.

The officials, as per the report, said that the delivery schedule of the first 18 out of 36 Rafale fighter jets was slower than the one offered for the original procurement process.

According to the report, the officials further “registered serious concerns over the Indian government’s acceptance of a ‘Letter of Comfort’ in lieu of a sovereign or government guarantee or bank guarantees, legal issues relating to the IGA, offset issues, and Dassault Aviation’s restrictive trade practices.”

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Parliament LIVE: Modi government’s Rafale deal 2.86% cheaper than UPA’s, says CAG report tabled in Rajya Sabha

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow