Thanks to the audacity and obstinacy of the grand old party of India and a few disgruntled elements in the political system, the controversy on Inter-governmental Agreement (IGA) signed in September 2016 between India and France for the supply of 36 Rafale fighter jets refuses to die down despite a clean chit given by the Supreme Court in December 2018 and the Comptroller and Auditor General (CAG) in their Audit Report submitted to the Parliament. The recent order of the Supreme Court on 10 April on the admissibility of certain leaked classified intermediary documents has given a fresh leash and ammunition to the chief opposition party in the country’s politically charged atmosphere on the eve of the Parliamentary elections.
Review Petitions
In the Review Petitions, the petitioners had relied upon the documents, some of which were either deliberately stolen or leaked and normally would not be available in public domain. The Central Government raised an objection that while considering Review Petitions, the said documents may not be considered as they are classified. In the Order passed by the Supreme Court, the Court has decided to look into these documents also while deciding the Review Petitions. The Review Petitions have not come till now for hearing, the time and date for which is to be decided by the apex court.
The current order of the Supreme Court about the admissibility of the leaked classified documents of the Ministry of Defence on Rafale fighter jets may be a cause of rejoice for some and gloom for others in a politically charged atmosphere where the chief opposition party is already relying heavily on the slogan “Chowkidar Chor Hai” (The Guard is a thief) in the absence of any credible and substantive issues against the incumbent prime minister and his government. So far other than raising the misleading rhetoric and some procedural issues, the detractors of this defence deal have not been able to produce any substantive evidence or argument against it, the government’s handling of the case in the context of the classified stolen or leaked documents shows the lack of acumen, institutional memory and professionalism of the officials in the dealing Ministry.
Once a case has come in the public domain, thanks to the ulterior motives of some serving and/or retired officials of doubtful credentials and integrity, it was a superfluous and futile attempt to defend the case under the “Official Secret Act” as done by the government. They should have instead dealt with professionally the issues in a transparent manner by rendering specific clarification and details on each issue which are handy and readily available. It needs to be realized that the judiciary and audit are seldom concerned with the end (Objective); instead, they focus at the means and frame opinion accordingly. Then judges too are human beings susceptible to their own perceptions and interpretations why else the same set of documents and witnesses often lead to diagonally opposite interpretations and inferences in different courts, and at times different judgments are delivered by the judges in the same panel.
Some Core Realities
Procurement of the state of art equipment and warfare systems for the security needs of the country is not a luxury but a compulsion particularly when the country is surrounded by with two potential enemies (and not adversaries) on its Eastern and Western flanks. On one hand, the nation must maintain an edge over its Western neighbour in conventional warfare; on the other hand, it should sincerely endeavor at least to maintain parity with the Eastern neighnour, when there is always a risk of hostilities breaking out. The risk is not imaginary but real because both China and Pakistan eye and stake not only their claim on the substantial Indian territories but also commit constant territorial violations perennially.
One would not want to sound political but may feel compelled to bring out certain underlying hard facts. While the constant chest thumping is done by the politicians of the grand old party of this country on the issues of the national security but their track record of providing funds and decision taking on matters relating to security and allied issues has been far from satisfactory for most of the time. Even in the Rafale case, go ahead decision i.e. acceptance of necessity in official jargon was taken by the Bajpai government in 2000-01, the case dragged on for almost fifteen years on account of procedural issues and indecision, and finally the decision was taken by Modi government in September 2016 on procurement of reduced numbers of the fighter aircrafts due to various compulsions.
The Core Issues and Facts
Thereagainst Instead of focusing on the personal conduct involving moral turpitude of some retired and/or serving government servants responsible for the alleged theft or leak of the classified documents into media and press, let’s see the real issues and their factual position after “The Hindu” published report in installments and some politicians and activists chose to capitalize on it by approaching the Supreme Court with review petitions. At the outset, it must be understood that report itself was based on the leaked “intermediary classified MOD documents” with its’ vital parts/remarks selectively obliterated by the editor of the said national daily. When specifically queried about it in-camera, he justified this manipulation as his “prerogative”. Now let’s follow the issues:
The first issue is that Prime Minister’s Office (PMO), specifically National Security Advisor Ajit Doval, had conducted parallel negotiations that weakened the negotiating position of the Indian Negotiating Team (INT). The leaked internal note of a Deputy Secretary was submitted by the Defence Secretary to Defence Minister who overruled the contention as “overreaction” and asked the Secretary to resolve the matter, if any, with the Principal Secretary in PMO. The retired bureaucrat (Secretary) has already clarified it in the press/media that when the case is handled at different levels by different people, such differences do evolve and get resolved in time.
Irrespective of what story is spread in the media about the role of PMO, what has been stated by the former Defence Secretary is the ground reality in all important and big-ticket schemes. Here let me pose a counter question as to why it is so that the opposition, intellectuals and even common people invariably hold the prime minister of the nation accountable if anything goes wrong anywhere in the country. The fact is the review and monitoring of the schemes/projects/issues of national importance as also proactive intervention, where necessary, by the PMO is not an unusual feature in the government. Such interaction and involvement has always been there irrespective of which political party or alliance was in power. Rules and procedure driven bureaucracy involving multifarious agencies is often stuck up and in such case the PMO becomes converging point and their objective intervention helps to resolve issues rather than weakening the position as alleged by dissenting people. Such indulgence does not necessarily mean that the prime minister or his officers are involved in corruption or irregularity.
The second issue is about obtaining sovereign or bank guarantee in support of the commercial offer. It’s true that such an advice was made by the Law Ministry as also suggested by the Financial Advisor (Defence Services). The latter had also suggested a safeguard in terms of Escrow Account for making payments to the vendor. Such safeguards are normally considered necessary in the third party contracts which come handy in the event of defaults or breach of contract by the vendor. The spirit is well taken but let us understand that here the deal was not between the government and a private vendor but between two sovereign governments. One sovereign government cannot unilaterally impose conditions on the other and an agreement would occur on only on terms and conditions which are mutually agreeable by both the governments.
The Government of France had not agreed for a bank guarantee or sovereign guarantee as demanded by Indian negotiating officials; instead, they had proposed an alternative instrument of “Letter of Comfort” which they felt was as good and effective. The responsibility and duty of the Financial Advisor does not end merely by flagging the issue, instead he should also analyze pros and cons of the available alternative proposals and assist the Competent Financial Authority (Cabinet Committee on Security in the present case) in decision making through the Defence Acquisition Council. While the dirty linen has been washed in public by going to media and press but nothing has come out through the stolen/leaked documents to suggest what was done to assist political bosses in taking suitable decision.
Let’s see the chief difference between a Sovereign Guarantee and Letter of Comfort. A “Sovereign Guarantee” is a promise by one government to another government to discharge the liability if the primary obligor (third party) defaults in its obligations and this guarantee carry legal binding. On the other hand, the “Letter of Comfort” is basically a promise, guarantee or “given words of trust” by one country to another to carry out an obligation. It is more of a moral binding but way more powerful than any other guarantee bound by faith for any future deal or treaty. Thus the issue has been disproportionately escalated by the detractors on the premise as if the agreement would essentially be breached by the opposite party.
The Cabinet Committee on Secusrity ultimately approved the acceptance of the Letter of Comfort personally signed by the French Prime Minister along with other associated guarantees/assurances provided in the IGA. In lieu of suggested Escrow account, payments will be made to the bank account of the vendor opened in the French Government controlled bank, over which the French side shall exercise control and monitoring for effective implementation of the IGA and the supply protocols. Significantly, the CAG has not found any issues in this arrangement while auditing the IGA, a report on which has already been tabled in the Parliament. Incidentally, such Sovereign Guarantee also does not exist in any of the past agreements/pacts with other countries including Russia and United States.
The third issue is regarding the dissenting note by some members of INT and controversy about arriving at the benchmark cost. The selective leak of confidential details and lopsided versions of the internal discussions by detractors of the deal has given ammunition to the political opponents of the governments besides causing significant confusion and apprehensions in the minds of Indian masses. A misleading narrative of the “lightweights” and “domain experts” have also been cleverly devised with the allegation that the former prevailed over the latter in enhancing the benchmark price of the Rafale deal by Euro 3 billion.
Actually based on the conventional parameters like market study, sale price of the barebone jet from annual reports of the vendor, expected discounts, and so on, the so-called domain experts (Cost Advisor assisted by Finance Manager) had prepared benchmark price in 2007. This benchmark price was far below the price obtained through the commercial bids of the acceptable L1 bidder i.e. M/s Dasault Aviation. In other words, the former was a tentative value arrived at pre-bid stage based on certain assumptions and actuals while the latter was a firmed up cost arrived after the last competitive tender action.
While negotiating the IGA after scrapping of the earlier non-deal, the minority view (so-called domain experts) relied on the benchmark price worked out in the past while the majority members (alleged lightweights) pressed for adopting the last tendered price as realistic benchmark. Other than the insiders of the MOD, the CAG is the only entity which would have complete information and access to relevant files and records including financial data.
The CAG too used the methodology for the cost comparison that endorses and vindicates the approach and opinion of the majority members in INT, portrayed as lightweights by the detractors. The CAG has, in fact, devolved a separate paragraph on “Unrealistic Price Benchmarking” in his report and criticized the approach of low benchmark stating that when both the previous unrealistic benchmark pricing as well the actual commercial offer were known, INT could have estimated the benchmark price more realistically. Three of the four alleged lightweights are the Deputy Chief of Air Staff as Chairman of INT, Assistant Chief of Air Staff as Member Secretary and Joint Secretary & Additional Financial Advisor. Unbiased people who are aware of the structure and function of the MOD would vouch that the Chairman and Member Secretary in any price negotiation committee are the most well informed, competent and committed members and it would be sacrilege and scandalous to say that the two along with Additional Financial Advisor are lightweights.
Denying the more realistic L1 prices obtained in the last competitive bidding for fixing realistic benchmark prices and instead relying on the old inconsistent data taking refuse to Para 52 of Defence Procurement Procedure is a gross error and reflects unprofessional and rigid bent of mind of the so-called domain experts, if they indeed did so as reported in media. Even the CAG has criticized this flawed approach. I have seen report published by The Hindu and some other blogs citing several paragraphs of the Defence Procurement Procedure 2013 but it is really intriguing why the contents of the applicable paragraphs 71 and 72 specifically provided for the Inter-governmental Agreements have been skillfully ignored by the detractors. The relevant extract from paragraph 71 is reproduced below:
“There may be occasions when procurements would have to be done from friendly foreign countries which may be necessitated due to geo-strategic advantages that are likely to accrue to our country. Such procurements would not classically follow the Standard Procurement Procedure and the Standard Contract Document but would be based on mutually agreed provisions by the Governments of both the countries. Such procurements will be done based on an Inter Governmental Agreement after clearance from CFA…”
End Note
In effect, the paragraphs 71 and 72 of the Defence Procurement Procedure supersede and make null and void the routine (classical) procurement procedures including bank guarantee, sovereign guarantee, and so on, paving way for a procedure mutually agreed between the two transacting governments. MOD should have taken cognizance of this and other facts mentioned in the preceding paragraphs while going to the Supreme Court to defend the national cause. Also rather than arguing to disqualify such leaked documents under the Official Secret Act, it would have been wise to highlight their intermediary and incomplete nature and how the issues thus flagged were resolved. Procurement of Rafale aircrafts is a crucial and strategic requirement of national security and the process should not be allowed to be derailed by an unprofessional handling that suits the political ambitions of a party and a few disgruntled people in the system. People may have their vices, leanings or aversions towards political personalities and parties but it indeed saddens and hurts that such people in their endeavor to settle grudge, satisfy personal ego or needs, or to score over their political rivals, have no reservations in adopting such ways and means that actually work against the national interests.
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