February 11, 2019
New Delhi : Key conditions for anti-corruption penalties and an escrow account for payments were dropped days before the Rafale deal was signed, The Hindu newspaper has reported, describing them as major and unprecedented concessions from a government that has repeatedly stressed on fighting corruption in defence deals.
The newspaper had earlier reported on defence ministry objections to “parallel negotiations” conducted by the Prime Minister’s Office.
According to The Hindu, the high-level political intervention meant that standard Defence Procurement Procedure clauses on “Penalty for use of Undue Influence, Agents/Agency Commission, and Access to Company Accounts” of Rafale jet-maker Dassault Aviation and missile-maker MBDA France were dropped by the government in the supply protocols.
Under the Inter-Governmental Agreement signed between India and France in Delhi on September 23, 2016, Dassault is the supplier of the Rafale aircraft package and MBDA France is the supplier of the weapons package to the Indian Air Force.
“Changes were made at the last minute. What is the interest behind the changes? Why would the Indian Air Force benefit from anti-corruption clauses being dropped and no escrow account?” N Ram, Chairman of The Hindu Publishing Group, said to NDTV on his exclusive report.
The Hindu has cited official documents that reveal that the Defence Acquisition Council chaired by then Defence Minister Manohar Parrikar met in September 2016 and approved eight changes in the inter-governmental agreement, supply protocols, offset contracts and offset schedules.
The agreement and the documents had been approved by the Cabinet Committee on Security (CCS) chaired by Prime Minister Narendra Modi before that on August 24, the newspaper reports.
The most significant among the eight changes, recorded in a note signed by Vice Admiral Ajit Kumar, the member-secretary of the Defence Acquisition Council, is at sub-para (c) that states: “Non-inclusion of the Standard DPP Clauses related to ‘Penalty for Undue Influence,’ ‘Agents/Agency Commission’ and ‘Access to Company Accounts’ in the Supply Protocols.”
The supply protocols were to be executed by Dasault and MBDA, both private companies.
Three members of the Indian negotiating team for the Rafale deal had voiced their objection in a note of dissent, according to the newspaper, saying: “…it is not advisable to sacrifice the basic requirement of financial prudence.””.
The Rafale deal was signed under the Defence Procurement Procedure of 2013, which stated that the Standard Contract Document would be the guideline for all acquisitions, but the government chose to remove the clauses from the supply protocols with the two private companies.
The Hindu says this was significant because the government also chose to do away with a sovereign or bank guarantee from France and settled for a letter of comfort, which is not legally binding, from the French Prime Minister.
The letter of comfort came after another last-minute intervention by the government in September, when the Cabinet Committee on Security issued a corrigendum to the note forwarded by the Defence Ministry for the CCS, doing away with the requirement for an escrow account operated by the French government to make payments to the two companies, The Hindu reports.
Congress leader P Chidambaram, in a series of tweets this morning, said the Rafale deal “is unravelling faster” than the government thought.
BJP leader Khemchand Sharma said, “The Congress and this newspaper are in tandem. The Congress is playing a dirty game and harming the military.”
The Congress alleges that the government finalised an overpriced deal for 36 Rafale fighter jets at an inflated price to benefit Anil Ambani, whose rookie defence firm was recommended as an offset partner for Dassault, the company manufacturing the aircraft. Both Dassault and the government have denied the allegations.