Updated: September 29, 2020 7:22:34 am
Regarding the Rafale deal, the CAG said that compensation obligations would take effect from September 2019.
Changes made to the Defense Procurement Policy in April 2016 allowed Rafale fighter jet suppliers to declare no compensation partner when India and France signed an agreement in September that year to buy 36 planes.
the Comptroller and Auditor General of India, in its Report No. 20 of 2019 that was presented to Parliament last week, said that the changes in the compensation policy introduced by the government in 2015 were “duly incorporated” with effect from April 1, 2016.
This policy change meant that, in the case of the Rafale deal, the foreign supplier did not have to declare a clearing partner at the time the contract was signed in September 2016.
On the Rafale deal, the CAG said the compensation obligations would take effect from September 2019. The first annual commitment, it said, should have been completed this month and the Ministry of Defense (MoD) should obtain details.
The 2013 Defense Procurement Policy established that a Technical Compensation Evaluation Committee (TOEC) will review technical compensation proposals “to ensure compliance with compensation guidelines” and the foreign supplier may be recommended “to make changes so that their compensation proposals are in accordance with the compensation guidelines. ”The policy stated that” the TOEC is expected to present its report within 4-8 weeks after its constitution. “
Under commercial evaluations, the 2013 DPP stated: “The Commercial Offset Offer will contain the detailed offer specifying the value of the offset components, with a breakdown of the details, phases, Indian Offset Partners and proposed bank offset credits to be used. . The compensation business offer will be opened along with the main commercial offer once the TOEC (Acquisition) report has been accepted by the CEO. The commercial offer of compensation will not influence the determination of the L-1 supplier. “
Ambala: Defense Minister Rajnath Singh and French Armed Forces Minister Florence Parly during the ‘Sarva Dharma Puja’ at the Rafale Induction Ceremony, at the IAF Ambala Air Base.
The policy amended in 2015, which went into effect on April 1, 2016, did not change the business evaluation portion of it. But it amended paragraph 8.2 under the Defense Compensation Guidelines and added, “If the provider cannot provide these details at the time of TOEC (Technical Compensation Evaluation Committee), they can be provided to DOFW (Defense Management Wing). defense compensation) either in the time of seeking compensation credits or one year before complying with compensation obligations, ”the CAG noted.
The amended DPP, the CAG said, was applicable with immediate effect to all clearing contracts and ongoing procurement cases, regardless of the applicable DPP, and was “duly incorporated into the 2016 DPP.”
On the Rafale deal, the CAG noted that the Indian government had signed an Intergovernmental Agreement (IGA) on September 23, 2016 with the French government to purchase 36 Rafale Multi-role Medium Fighter Jets (MMRCA), and compensation obligations were signed. by suppliers Dassault Aviation and MBDA.
Article 12 of the IGA, the CAG said in its report on compensation policies, “stated that the French side would facilitate the implementation of the Make in India initiative through offsets to the value of 50 percent of the supply protocols. minus the value of performance-based logistics and simulators and Annual Maintenance Aid training ”.
The initial negotiation report for the India Negotiating Team (INT) on May 12, 2015 and India’s broad expectations stated that “the terms of the offsets will also address the installation of warehouse in India and the manufacture of spare parts to supply our requirements and integrate into the global supply chain ”of the original equipment manufacturers.
The CAG noted that “consequential changes in line with the amendments were not made in the related clauses and model formats.” This, he said, “is explained through an examination of the amendment made to DPP in August 2015 and further illustrated in the case of the offset agreement with M / s Dassault Aviation and M / s MBDA in the acquisition of 36 MMRCA. ”.
The Ministry of Defense, the CAG said, informed it in May 2019 that the compensation obligations were to start from September 2019. “Since the discharge period has started, the Ministry of Defense needs to obtain the details of the products. / specific services offered to discharge compensation, monitor and ensure that compensation objectives are achieved, ”said the auditor.
Although the DPP was modified for the compensation policy, the CAG said the template format for submitting technical and commercial compensation offers, including the name, IOP profile, and eligible compensation products and services, was not changed in August. 2015, nor the compensation model. modified contract, which required that compensation contracts be provided to DOMW “within 90 days from the contract date.”
“Audit noted that this ambiguity created uncertainty in the minds of providers about the exact details that will be provided to the ministry,” he said.
When asked, the Ministry of Defense responded to the CAG in May and October 2019 that the Frequently Asked Questions (FAQ) that “illustrate the details to be provided by providers” had been submitted and therefore “not considered. no requirement to modify the formats ”.
Unimpressed with the response from the Ministry of Defense, the CAG said that this “is not convincing as the FAQ is a subsidiary document of the Compensation Guidelines and therefore the FAQ cannot override it.”
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