CAG Report on Rafale: NDA’s Deal 2.86% Cheaper & Other Takeaways

In terms of engineering support package and performance based logistics, NDA’s deal was 6.54% more expensive

The Rafale deal negotiated by the NDA government to procure 36 fighter jets was 2.86 percent cheaper than UPA's 2007 offer, the Comptroller and Auditor General said in its report.

With regard to India Specific Enhancements, the deal was 17.08 percent cheaper, according to the CAG report, which was tabled in Parliament on Wednesday, 13 February.

In terms of engineering support package and performance-based logistics, the deal was 6.54 percent more expensive than the Congress-led UPA’s offer, it stated.

The report gives relief to the Narendra Modi-led government, which has been facing fervent attacks by the Opposition parties over the fighter jet deal.

The Quint, which has a copy of the CAG report, lists key takeaways from the document:

The Quint decodes the CAG report on the controversial Rafale fighter jet deal that was tabled in the Rajya Sabha on Wednesday, 13 February, on the last day of the ongoing Budget Session.

Posted by The Quint on Wednesday, February 13, 2019

• Volume II of the CAG’s report on Capital Acquisitions in Air Force deals with the Rafale deal
• It includes a comparison of the prices in the original 2007 offer for 126 aircraft as against the deal signed in 2016 for 36 aircraft (based on an offer made in 2015 during PM Narendra Modi’s visit to France)
• Since the number of aircraft in flyaway condition was different in the deals, the CAG had to come up with an “Aligned Price” to conduct the comparison. In the 2007 offer, only 18 aircraft were to be in flyaway condition (108 were to be built in India by Dassault and HAL), while in the 2015 offer, all 36 aircraft were to be in flyaway condition
• The Aligned Price was, therefore, an estimate of what 36 aircraft would cost in 2015 if prices were the same as they were in 2007. This was arrived at after using a price escalation formula that factored-in inflation in France
• The deal always involved additional elements to just the price of the planes: it was always supposed to include ‘India Specific Enhancements’, logistical support, training, etc. The CAG’s comparison took all of these into account
• In its final comparison, the CAG found that the overall price agreed in 2016 was 2.86 percent lower than the overall Aligned Price. This means that according to them, the 2016 contract was 2.86 percent cheaper than the 2007 offer, when adjusted for inflation, etc. The CAG has expressly countered the Ministry of Defence’s claim in January 2019 that the price was 9 percent cheaper, noting this was based on certain provisional figures

• However, not all elements of the 2016 deal are cheaper.
• The price of the flyaway aircraft itself is exactly the same.
• The 2016 deal is cheaper when it comes to India Specific Enhancements (17.08 percent cheaper), operational support equipment (4.77 percent cheaper) and the weapons package (1.05 percent cheaper)
• The 2016 deal is more expensive when it comes to the engineering support package (6.54 percent more), performance-based logistics (6.54 percent more), ground equipment (0.15 percent more), and training of pilots and technicians (2.68 percent more)
• According to CAG, the absence of a Bank Guarantee represents a saving for Dassault when compared to its previous offer – contradicting the Ministry of Defence, which had claimed this as a saving to the ministry.
• The CAG also notes that the schedule would see all 36 aircraft delivered in 71 months – not 67, as first assessed by the negotiating team. This delivery schedule is one month better than the time it would have taken for the first 36 aircraft to be delivered under the 2007 offer, though, in that case, only the first 18 would have come from France, while the next 18 would have been built in India