CAG on IAF purchases

The Rafale tender stole the political thunder in the Comptroller and Auditor General of India’s (CAG) assessment of 11 capital acquisitions by the Indian Air Force over a time period that spanned both the UPA and Modi governments. Considering that previous CAG reports on coal and 2G had irrevocably damaged the credibility of the UPA government, the Modi government can consider itself fortunate to have escaped unscathed because of the inventiveness of the auditors. The CAG used a never-used formula (called alignment pricing) to declare the Modi tender cheaper than the UPA era’s now-cancelled 126 aircraft bid. An audit basically evaluates four criteria in a defence platform: quality, cost-effectiveness, delivery and objectivity. The CAG report gives conditional thumbs up on only two: cost-effectiveness and the delivery schedule. Even these are up for debate.

But the benchmark of objectivity, which includes intangibles such as transparency, fair play and integrity, stands in a grey zone. For instance, the comparison of UPA and NDA-era prices on the basis of a French index is debatable when payments are made in dollars. A dissent note alleging parallel negotiations (dismissed by then Defence Minister Parrikar as an overreaction) went unchallenged, while there was just a mild rap for not signing an integrity pact and succumbing to French refusal on opening an Escrow account. The Modi government was also easily let off the hook for failing to respond to a 20 per cent price cut by a Rafale competitor. Who knows whether Rafale would have still played tough if it had not been the single vendor.

Rafale was one of the 11 purchases studied by CAG and the common tale that emerges is of overambitious services whose requirements are frequently changed, leading to several vendors dropping out; the contract negotiations committee that rarely establishes the benchmark price, which, in turn, makes it difficult to establish the reasonability of the price. Complex and multi-level approval processes further add to the delays. Overall, the existing capital acquisition system is unlikely to effectively support the IAF in its war preparedness and modernisation.