Senior Defence Ministry Official Raised Objections Over Rafale Deal’s Pricing: Report

Concerns over the 36-aircraft deal's benchmark price were placed on record by the JS & AM (Air). This dissent note is currently with the CAG, which is examining the deal.

New Delhi: A senior defence ministry official raised objections over the pricing of the 36-Rafale deal just before it was sent to Cabinet for approval, according to a report published in The Indian Express on Thursday.

According to the report, which quotes anonymous sources, the joint secretary and acquisition manager (Air) in the ministry, who had been part of the contract negotiations committee (CNC) raised questions over the 36-aircraft deal’s benchmark price and put his objections on record.

This dissent note was taken up for a consideration a defence acquisition council (DAC) meeting chaired by the-then defence minister Manohar Parrikar in mid-August of 2016. The report notes that this DAC meeting was scheduled to approve the Rafale deal and send a note for the approval of the Cabinet.

According to the Indian Express, the objections that were raised in the joint secretary’s note were eventually overruled by another senior defence ministry official, the director general (acquisition).

The dissent note is currently with the office of the Comptroller and Auditor General (CAG), who is examining the deal, which has over the last six months been a source of fierce political debate.

Quoting sources, the report notes that the CAG is likely to submit its report on the Rafale deal by the winter session of Parliament and will refer to the objections raised on the note and how they were overruled.

What were the issues over pricing?

According to the report, one of the crucial objections raised by the joint secretary was that the benchmark price for the 36-aircraft deal was higher than the price for the shelved 126-fighter-jet contract.

The term ‘benchmark price’ is used to determine whether a quote offered by a supplier is reasonable or not.

In this case, the defence ministry official pointed out that the EADS, Germany – which makes the Eurofighter, an aircraft that had also qualified in the IAF’s trials – had offered a 20% discount on its bid price to the Modi government in July 2014.  Consequently, the note argued, a similar 20% cut should be applied to the 36-Rafale deal.

Another objection raised was that the Indian air force could get more Russian-made Sukhoi aircraft from Hindustan Aeronautics Limited for the same amount that was being paid to Dassault Aviation.

The Indian Express report notes that these objections were overruled by the DG (Acquisition) on the ground sthat the benchmark price for the 36-Rafale deal had to be compared with what was offered for the 18 Rafale jets (part of the earlier MMRCA proposal) which were to come in a flyaway condition from France.

The official also over-rode the Sukhoi objection by stating that the IAF had justified the need for Rafale aircraft.

“The JS & AM (Air) then proceeded on a month’s leave and the 36-Rafale deal was approved by the DAC in first week of September 2016.Finally, the Cabinet note was initiated by another official holding charge of JS & AM (Air) and was approved by the Cabinet in third week of September 2016. This led to the Rs 59,262-crore deal being signed between Parrikar and Le Drian on September 23, 2016,” the report notes.