While the Supreme Court has reserved its judgement in the controversial Rafale case, NewsCentral24X7 has learnt that the decision to increase the benchmark price from Euro 5.2 billion to Euro 8.2 billion was approved by a committee headed personally by Prime Minister Narendra Modi.
The increased ‘benchmark’ price allowed the Modi government to sign the deal for 36 Rafale fighter aircraft with France in September 2016 for Euro 7.87 billion, which as per media reports was 40% higher per aircraft than the UPA-era tender for the same aircraft. If the benchmark price had been fixed at Euro 5.2 billion, as recommended by the defence ministry official who calculated the benchmark price and supported by two other officials, the deal would have to be signed at a price lower than that. It would have then saved the Indian tax-payer Euro 3 billion.
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Defence Procurement Procedure (DPP) states that “In case of procurement of new equipment on single vendor/resultant single vendor basis, CNC should establish a benchmark and reasonableness of price in an internal meeting before opening the commercial offer. Once the commercial offers are opened and the price of the vendor is found to be within the benchmark fixed, in the internal meeting, there should be no need to carry out any further price negotiations.”
As per a defence ministry document reviewed by NC24X7, the benchmark price in this case was calculated by MP Singh, Advisor (Cost) in the ministry. He did the detailed calculations to arrive at Euro 5.2 billion for the deal. This benchmark price was then taken to the Indian Negotiating Team (INT), headed by the Deputy Chief of Air Staff. Singh was also part of the 7-member INT, and his price was supported by JS & AM (Air), Rajeev Verma and FM (Air), Anil Sule.
The head of INT, however argued, supported by three other members, that the benchmark price fixed by Advisor (Cost) was “unreasonably low and unjustifiable,” the document shows. It then “further recommended that an aligned cost table be worked out based on the price discovered during the 126 MMRCA bid by catering for inflation and enhancement of deliverables.”
However, an aligned cost table or “discovered” price cannot be there when a contract has not been signed, as was the case of the 126 MMRCA bid. This is a point reiterated by Modi government in the Supreme Court, that the UPA government could not sign the contract till 2014.
The DPP is clear on such matters, wherein it states: “Cases for which contracts have earlier been signed and benchmark prices are available, the CNC would arrive at the reasonable price, taking into consideration the escalation/foreign exchange variation factor.”
As the contract for 126 Rafale was never signed, there was no question of price discovery based on an aborted tender but it was resorted to. This price discovery, unsurprisingly, was for an “aligned cost” of Euro 8.2 billion, an increase of 57.7%.
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This new benchmark price was then sent to Defence Acquisition Council (DAC), headed by the defence minister. “The aligned cost table was approved by the DAC and CCS approval was also obtained,” the ministry document states.
While the DAC is the final decision-making authority in these matters, then defence minister Manohar Parrikar still chose to seek the approval of the CCS or the Cabinet Committee on Security, which is chaired by Prime Minister Narendra Modi. This is highly unusual and besides pointing to Parrikar’s discomfort with the increased benchmark price also shows that PM Modi was keen to sanction an increased price even before the negotiations had begun with France.
The questions being raised over the Rafale scam are not merely about the offsets given to Anil Ambani or the violation of procedure by PM Modi and his NSA, Ajit Doval. There are serious payments from the Indian treasury involved which need to be scrutinized and answered. The integrity of such a scrutiny by the CAG has been shrouded in doubt, as highlighted by retired senior bureaucrats and diplomats. It is now up to the Supreme Court to look into the pricing issue, and let the truth of a 57.7% higher price come out. There is no other option before the apex court but to act on this grave matter.
Also Read: Govt Note to SC Throws up More Modi Wrongdoing in Rafale Scam