Govt scrapped anti-corruption clause before Rafale Deal

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The central government waived off critical provisions for anti-corruption penalties as well as overruled financial advisers’ recommendations for making payments through an escrow account just days before it signed the inter-governmental agreement with France to acquire 36 Rafale jets, The Hindu reported. 

The particular move will have significant implications on the Narendra Modi government which is due to fight in the Lok Sabha election later in the year as it has made eliminating corruption as one of its main planks for governance. 

The revelation also comes just days after another Hindu report stated that ministry of defence officials had objected to the Prime Minister’s Office holding parallel negotiations with the French government as it “undermined” the position of the Indian Negotiating Team. 

The newspaper said the high-level political intervention days before the Rs 58,000 crore Rafale deal was signed meant that standard Defence Procurement Procedure (DPP) clauses on “Penalty for use of Undue Influence, Agents/Agency Commission, and Access to Company accounts” of Dassault Aviation and MBDA France were dropped by the Indian government in the supply protocols. 

While Dassault is the supplier of the Rafale aircraft package, MBDA France is the supplier of the weapons package to the Indian Air Force.

This was done by the Defence Acquisition Council (DAC), chaired by the then Defence Minister, Manohar Parrikar, in September 2016, after the IGA and associated documents had been approved by the Cabinet Committee on Security (CCS), chaired by PM Modi on August 24, 2016.

The report further states that three members of the negotiating team – M.P. Singh, Adviser (Cost), A.R. Sule, Financial Manager (Air), and Rajeev Verma, Joint Secretary and Acquisitions Manager (Air) – had strongly objected to dropping the clauses, but were overruled. 

Their dissent note said that the deal involved direct dealing with commercial suppliers – Dassault and MBDA France – under cover of an IGA and dropping the clauses was not prudent, The Hindu reported. 

“Notwithstanding the fact that the procurement is on Government-to-Government basis, the IGA involves ‘Transfer of Rights and Obligations’ relating to supplies of equipment and related industrial services by French Government to the French Industrial Suppliers, and the payment is also being made to the French Industrial Suppliers and not to the French Government; therefore, it is not advisable to sacrifice the basic requirement of financial prudence,” they had stated in a note. 

This assumes particular importance as 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.

An escrow account would have been an important financial safeguard as it would have allowed the Indian government to release money to the French government, which would then make timely payments to the two private firms. 

Former finance minister and senior Congress leader P Chidambaram said the “Rafale deal is unravelling faster than the government thought” after the latest Hindu report came out. 

“No sovereign guarantee, no bank guarantee, no escrow account, yet a huge amount was paid as advance. No penalty clause for undue influence, no clause against agency commission, no clause for access to suppliers’ accounts and Dassault goes laughing all the way to the bank,” he tweeted.

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