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Much awaited CAG report on Rafale likely to be submitted to the President tomorrow

Feb 10, 2019

The Comptroller and Auditor General of India (CAG) will likely submit to the President on Monday a much-awaited report on its audit of big-ticket military procurements in the last few years, including the controversial Rafale jet fighter deal, officials familiar with the development said on Saturday.

“Report is ready to be submitted to the President. A copy of the report will be submitted to the government as well. The President will forward the report to the presiding officers – speaker of Lok Sabha and chairman of Rajya Sabha – who will lay it in the Parliament,” a government official said on condition of anonymity.

Given the short time frame, the report is likely to be tabled in the Parliament on Wednesday, the last day of the last session of the 16th Lok Sabha before general elections due in the spring, the official said.

Officials in the CAG explained that it was a performance audit wherein the CAG looked into procurement systems. “As is the case with all audits, it also started with an “Entry Conference” wherein the auditee was informed of the scope and objective of the audit and how the teams of auditors are going to collect samples for survey. The entry conference isthe initiation point of an audit,” said a CAG official who also requested anonymity.

Following the audit, an exit conference also took place and it was presided over by the director general of defence audit, which is considered a field office of CAG.

According to the audit guidelines of the CAG, an exit conference serves as a platform to arrive at an agreement with an auditee about audit conclusions and recommendations; an attempt is made to get the audited entity to respond directly to each recommendation so that the responses can be published in the final audit report.

As far as the Rafale deal is concerned, the process of buying 126 fighter jets for the Indian Air Force (IAF) began in June 2001 when the previous National Democratic Alliance (NDA) government under Atal Bihari Vajpayee was in office. Under the original proposal, 18 warplanes were to be procured in a fly-away condition and the remaining 108 aircraft were to be manufactured by state-owned Hindustan Aeronautics Limited (HAL) under licence.

The bidding process commenced in August 2007, when the Congress-led United Progressive Alliance (UPA)was in office, but it was completed only five years later when Dassault Aviation of France, the maker of Rafale fighter planes, emerged as the front-runner ; the government started negotiations with the company which went on until 2014, when the UPA government lost elections and a new NDA dispensation took charge under Narendra Modi.

The NDA government’s decision to enter an $8.7 billion government-to-government deal with France to buy 36 Rafale warplanes was finally announced in April 2015, with an agreement signed a little over a year later. This replaced the UPA-era decision to buy 126 Rafale aircraft.

The deal has become controversial with the opposition, led by the Congress, claiming that the price at which India is buying Rafale aircraft now is Rs 1,670 crore for each, three times the Rs 526 crore, the initial bid by the company when the UPA was trying to buy the aircraft. It has also claimed the previous deal included a technology transfer agreement with HAL.

The NDA has not disclosed details of the price, but the UPA deal, struck in 2012, was not a viable one, former defence minister Manohar Parrikar has previously said, implying that it would have never been closed and that, therefore, any comparison is moot. Indeed, the UPA was not able to close the deal till 2014, largely over discussions related to pricing of items not included in the initial bid.

The deal has also become controversial on account of the fact that one of the offset deals signed by Dassault is with the Reliance Group of Anil Ambani. The Congress claims the earlier deal was scrapped and a new one signed just to provide Ambani this opportunity for an offset deal. Both the government and Reliance Group have repeatedly denied this.

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