Rafale Deal Agreed by Modi Govt Costlier and Slower on Delivery Than UPA-Era Offer, Negotiators Said: Report
These findings contradict the NDA government’s two main claims of a cheaper deal and faster delivery of fighter jets to meet immediate needs of the Indian Air Force.
File photo of a Rafale fighter jet. (Getty Images)
New Delhi: The deal signed by the Narendra Modi government to acquire 36 Rafale jets was not on better terms than the offer made by its maker Dassault Aviation to the erstwhile UPA government for the procurement of 126 aircraft, a dissent note by three senior defence ministry officials said.
A report in The Hindu states that the three officials, who were domain experts on the seven-member Indian Negotiating Team (INT) for the Rafale deal, had concluded that the delivery schedule of the first 18 of the 36 flyaway Rafale aircraft “was slower than the one offered for the 18 flyaway aircraft in the original procurement process”.
The officials had also pointed out in their eight-page note that the cost of the deal was 55.6 per cent higher than the benchmark price finalised by the INT. The benchmark price, which is discovered in advance by financial experts to act as a ceiling for the whole package, was set at €5.06 billion. However, the dissent note revealed that the final price for the whole Rafale package shot up to €7.87 billion.
These findings contradict the NDA government’s two main claims of a cheaper deal and faster delivery of fighter jets to meet immediate needs of the Indian Air Force. The Centre had even affirmed these claims before the Supreme Court in its official submissions when it heard petitions against the decision making process.
The three experts – MP Singh, Adviser (Cost), a joint secretary-level officer from the Indian Cost Accounts Service; AR Sule, financial manager (Air); and Rajeev Verma, joint secretary & acquisitions manager (Air) –recorded their views in a strong note of dissent on June 1, 2016, The Hindu reported.
The note was submitted to the Deputy Chief of Air Staff (DCAS), who was the chairman of the negotiating team, at the end of Rafale negotiations.
They also voiced serious concern over the government agreeing to a letter of comfort from the French government instead of a sovereign or bank guarantee, offset issues, legal issues relating to the Inter-Governmental Agreement and Dassault Aviation’s restrictive trade practices.
The dissent note further gave details of how the final price for the whole Rafale package shot up to €7.87 billion, or Rs 58,000 crore.
“It is highlighted that the initial commercial offer from the French side was for firm and fixed price which was converted to price based on escalation formula during the price negotiations. The benchmark price prepared by INT was for firm and fixed price and not adjusted to price based on escalation formula,” the note, accessed by Hindu, read.
“The final price offered by the French Government (which is escalation based) is 55.6% above the benchmark (which is for firm and fixed price). Considering the future escalations till the time of delivery, the gap in the benchmark and the final price would further increase,” it added.
“To establish ‘better terms for price’,” the note goes on to narrate, “the French side was repeatedly asked to align the commercial offers submitted by Industrial Suppliers in MMRCA process to the scope of supplies as per 36 Rafale procurement.” However, “the French side refused to take cognizance of this aspect.”
On the other claim made by the NDA that it negotiated faster deliveries, the note stated that the delivery schedule incorporated in draft IGA was T0+37 months to T0+60 months, but “the delivery schedule finally offered by the French side is T0+36 months to T0+67 months.”
It added that in the MMRCA process under the UPA, the first 18 flyaway aircrafts were being delivered between T0+36 months to T0+48 months, whereas in the delivery schedule offered to the Modi government by the French side, first 18 aircrafts will be delivered between T0+36 months and T0+53 months.
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