Return to frontpage
  • ePaper
Return to frontpage
15
Return to frontpage
  • Today's Paper
  • News
    • India
    • World
    • States
    • Cities
  • Opinion
    • Cartoon
    • Columns
    • Editorial
    • Interview
    • Lead
    • Readers' Editor
    • Comment
    • Open Page
    • Letters
  • Business
    • Agri-Business
    • Industry
    • Economy
    • Markets
    • Budget 2022
    • Stock Quotes
  • Sport
    • Cricket
    • Football
    • Hockey
    • Tennis
    • Athletics
    • Motorsport
    • Races
    • Other Sports
  • Entertainment
    • Art
    • Dance
    • Movies
    • Music
    • Reviews
    • Theatre
  • Crossword+
  • Science
  • Life & Style
    • Fashion
    • Fitness
    • Food
    • Motoring
    • Travel
    • Homes and gardens
    • Luxury
  • Get Trial
  • SUBSCRIBE NOW
  • Log In
Return to frontpage
Government waived anti-corruption clauses in Rafale deal
    Share On
  • News
  • India
  • World
  • States
  • Cities
  • News
  • National
CLOSE THIS MENU
TRENDING TODAY
  • Chennai
  • Hyderabad
  • Bengaluru
  • Videos
  • Entertainment
  • Subscription
  • Latest News
  • Today's Paper
  • ePaper
  • Housing
  • Coupons
  • News
    • National
    • International
  • Coronavirus
    • Video & Podcast
    • Expert Speak
    • All Reports
  • States
    • Andhra Pradesh
    • Karnataka
    • Kerala
    • Tamil Nadu
    • Telangana
    • Other States
  • Business
    • Agri-Business
    • Industry
    • Economy
    • Markets
    • Budget 2022
  • Real Estate
  • Crossword+ "Free Games"
  • Cities
    • Bengaluru
    • Chennai
    • Coimbatore
    • Delhi
    • Hyderabad
    • Kochi
    • Kolkata
    • Mumbai
    • Kozhikode
    • Madurai
    • Mangaluru
    • Puducherry
    • Thiruvananthapuram
    • Tiruchirapalli
    • Vijayawada
    • Visakhapatnam
  • Elections
    • Goa
    • Manipur
    • Punjab
    • Uttar pradesh
    • Uttarakhand
  • Opinion
    • Editorial
    • Lead
    • Comment
    • Columns
    • Interview
    • Cartoon
    • Open Page
    • Readers' Editor
    • Letters
  • Sport
    • Athletics
    • Cricket
    • Football
    • Hockey
    • Motorsport
    • Other Sports
    • Races
    • Tennis
  • Entertainment
    • Art
    • Dance
    • Movies
    • Music
    • Reviews
    • Theatre
  • Society
    • Faith
    • History & Culture
  • Books
    • Reviews
    • Authors
  • Children
  • Life & Style
    • Fashion
    • Fitness
    • Food
    • Motoring
    • Travel
    • Homes and gardens
    • Luxury
  • Technology
    • Gadgets
    • Internet
  • Sci-Tech
    • Science
    • Technology
    • Health
    • Agriculture
    • Environment
  • Education
    • Careers
    • Colleges
    • Schools
  • Multimedia
    • Photos
    • Videos
    • Podcast
  • Data
  • Specials
  • Resources
  • Tags
  • Theatre - Fest
  • November Fest
  • Lit for Life
  • Tamil Nadu Smiling
  • Newsletter
  • Archive
  • Classifieds
  • eBooks
  • Subscribe
  • Social
  • About Us
  • CONNECT WITH US
CLOSE THIS MENU

Investigative reports by N. Ram on the Rafale deal

Government waived anti-corruption clauses in Rafale deal

N. Ram
February 11, 2019 05:31 IST
Updated: November 28, 2021 12:28 IST
N. Ram
February 11, 2019 05:31 IST
Updated: November 28, 2021 12:28 IST

It also overruled Financial Advisers’ recommendation for an escrow account after PMO forced a waiver of sovereign or bank guarantee

    Share Article
  • PRINT
  • AAA

It also overruled Financial Advisers’ recommendation for an escrow account after PMO forced a waiver of sovereign or bank guarantee

The €7.87-billion Rafale deal between India and France involved major and unprecedented concessions from the Indian government, with critical provisions for anti-corruption penalties and making payments through an escrow account dropped days before the signing of the inter-governmental agreement (IGA). This has significant political implications for the Narendra Modi government which has claimed that eliminating corruption is a major plank of its agenda for governance and promised action against alleged corruption in defence deals struck during the United Progressive Alliance Government.

It is significant that neither this nor other important information published by The Hinduon the “parallel negotiations” conducted by the Prime Minister’s Office and the National Security Adviser seems to have found a place in the material submitted by the government to the Supreme Court of India .

Financial Adviser Sudhansu Mohanty’s observations in an official note, in facsimile

Financial Adviser Sudhansu Mohanty’s observations in an official note, in facsimile

The high-level political intervention 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. Under the terms of the IGA signed between India and France in Delhi on September 23, 2016, Dassault is the supplier of the Rafale aircraft package while MBDA France is the supplier of the weapons package to the Indian Air Force.

Official documents available to The Hindu reveal that the Defence Acquisition Council (DAC) chaired by the then Defence Minister, Manohar Parrikar, met in September 2016, and “ratified and approved” eight changes in the IGA, supply protocols, offset contracts and offset schedules (see Box 1). This was done after the IGA and associated documents had been approved by the Cabinet Committee on Security (CCS), chaired by Prime Minister Modi on August 24, 2016.

Box 1: The DAC ratified and approved the following:

    The most significant among these eight changes, recorded in a note signed by Vice Admiral Ajit Kumar, DCIDS (PP&FD) who was the member-secretary of the DAC, is at sub-para (c). This 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.”

    It is highly significant that these clauses were dropped by the Indian government from the supply protocols. While the IGA was the overarching agreement between the governments of India and France, the supply protocols were to be executed by Dassault and MBDA, the two private companies.

     

    This direct dealing with the commercial suppliers, under cover of an IGA, was highlighted in a detailed note of dissent signed by three members of the Indian Negotiating Team — M.P. Singh, Adviser (Cost), A.R. Sule, Financial Manager (Air), and Rajeev Verma, Joint Secretary and Acquisitions Manager (Air). The document, which is available to The Hindu , reveals that these three members took a strong stand against what was being rammed through. On the direct dealing with the two companies, they noted: “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.”

    Sections on penalties

    The Rafale deal was signed between India and France under the terms of DPP-2013. The Standard Clauses in Contract are mentioned in Enclosure 8 of DPP-2013. This has sections on penalties for the use of undue influence, an integrity pact, agents/agency commission and Access to book of accounts. Paragraph 37 of Request for Proposal (RFP) in DPP-2013 states that “the Standard Contract Document at Chapter V of DPP2013 [bit.ly/DPP-2013] indicates the general conditions of contract that would be the guideline for all acquisitions.”

    Despite the DPP stating explicitly that the Standard Contract Document “would be the guideline for all acquisitions”, the Indian government chose to remove these clauses from the supply protocols with the two private defence suppliers. 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.

    Also Read
    Modi’s decision to buy 36 Rafales shot the price of each jet up by 41%

    The letter of comfort issued by the French Prime Minister on September 8, 2016 (put out by ANI) states that “assuming that Dassault Aviation or MBDA France meet difficulties in execution of their respective supply protocols and would have to reimburse all or part of the intermediary payment to Government of the Republic of India, the Government of the French Republic will take appropriate measures so as to make sure that said payments or reimbursements will be made at the earliest.”

    Govt. intervention

    This letter of comfort came after another last-minute intervention by the Indian government in September, when the Cabinet Committee on Security chaired by the Prime Minister 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. This proposal to amend the IGA, which had been approved by the CCS on August 24, 2016, was moved by Smita Nagaraj, Director General Acquisition, in the Defence Ministry.

    Safeguards

    The proposal, which states that “this issues under the direction of Raksha Mantri,” asked the CCS to issue a corrigendum to the minutes, amending Para 50(b) of the note giving approval to the IGA. It reads: “Raksha Mantri has directed that attention of Secretariat is drawn to the fact that in the context of the proposal contained in Para 50(b) of the CCS Note, stated that in the event of payment into escrow account is not found feasible, MOD shall work out alternative safeguards in consultation with the French Government, in which an assurance will be obtained from the French Government to provide effective oversight of utilization of payments released to the French industrial suppliers.”

    The amended Para 50(b) of the CCS Note approving the IGA [see Box 2] did away with the need for ensuring that the payments made by the Indian government were done through an escrow account operated by the French government. The escrow account was a measure of financial prudence: the payments would be released by the French government to Dassault and MBDA with the concurrence of the Indian government.

     

    The proposal to have an escrow account operated by the French Government was recommended by Sudhansu Mohanty, Financial Adviser (DS) on January 14, 2016. It was in Note-263, which begins with this qualification, “I wish I had sufficient time to go through the entire file and mull over the various issues raised. However, in view of the fact that the file has to be submitted to RM immediately, I would like to make the following quick observations from the Finance point of view.”

    Important observation

    One of Mr. Mohanty’s important observations was: “In the absence of a sovereign/bank guarantee, in a case like this where an IGA is to be signed, it would be prudent to involve the French Govt. as far as releases are concerned. This possibly could be done through an Escrow account or a variant of the same where the money released by the buyer (Govt. of India) is paid to the Escrow account held under the charge of French Govt. to make further payments to the firm as per terms & conditions agreed to by the Indian and French Govt. through IGA. This would make French Govt. morally and materially responsible for the procurement so proposed. Since they are one of the parties to the IGA and also jointly and severally responsible for the execution of the supply protocol, they should not be having any reservation about it.” Evidently, the French government did.

    Mr. Mohanty’s note, it is now known, came after the Prime Minister’s Office (PMO) and National Security Adviser Ajit Doval chose to waive the sovereign or bank guarantee from France. As reported by The Hindu on February 8, 2019, Defence Ministry officials had objected to the “parallel negotiations” being conducted by the PMO, which was “undermining the process of formal negotiation with the French side… may be detrimental to our interests as the French side may take advantage of same by interpreting such discussions to their benefit and weakening the position taken by the Indian Negotiating Team. This has precisely happened in this case.” The Defence Ministry note, which was dated November 24, 2015, cited as “a glaring example” how the parallel negotiations had undercut “the position taken by MoD and conveyed to Indian Negotiating Team that the commercial offer should be preferably backed by Sovereign/Government Guarantee or otherwise by Bank Guarantees.”

    Contrary positions

    Another example cited in the note was the contrary positions taken on the arbitration arrangement.

    Also Read
    Defence Ministry protested against PMO undermining Rafale negotiations

    The then Defence Secretary, G. Mohan Kumar, who now says “there were no parallel negotiations” and that the Rafale deal was negotiated in the “most transparent way”, had endorsed the protest note in his own hand on November 24, 2015: “RM may pl. see. It is desirable that such discussions by avoided by the PMO as it undermines our negotiating position seriously.”

    The need for a sovereign or a bank guarantee was also highlighted by the Ministry of Law and Justice in its communications to the Defence Ministry, documents available to The Hindu show.

    Active push

    As for the part played by Mr. Parrikar in the Rafale deal, what has been established is this. From a stance of being non-committal, as evidenced by his hand-written notation of January 11, 2016, he shifted later that year to actively pushing for the changes, giving the financial experts little time to study the proposals.

    He chaired the September 2016 meeting of the Defence Acquisition Council that “ratified and approved” the eight changes, including the decision to drop the provision of penalties for corruption in the supply protocols with the private companies.

    In his official capacity, he also directed the issue of a proposal that led to doing away with the provision for an escrow account as a financial safeguard.

    Return to frontpage
    Our code of editorial values

    Related Topics
    Rafale deal
    defence contract
    defence equipment
    national security
    Related Articles
    Rahul Gandhi renews Rafale attack, says PM 'opened door' for Ambani
    The Hindu’s Rafale exposé: Revelations put Supreme Court ruling in question, says Rahul Gandhi
    Rafale deal: Manohar Parrikar downplayed concerns of officials, file noting shows
    Bofors brought Congress down but Rafale will bring Modi back to power, says Nirmala Sitharaman
    Rafale row a non-issue for the voter, says Goyal
    News analysis: Four reasons why the attacks on The Hindu’s Rafale story are shallow and self-implicating
    Congress accuses CAG of conflict of interest
    This article is closed for comments.
    Please Email the Editor

    Printable version | Jun 9, 2022 11:22:57 am | https://www.thehindu.com/news/national/government-waived-anti-corruption-clauses-in-rafale-deal/article61543440.ece

    © THG PUBLISHING PVT LTD.

    In This Package
    Rafale: Modi govt. gave unprecedented waivers in offset agreements
    No bank guarantees meant a more expensive new Rafale deal
    Rafale deal not on ‘better terms’ than UPA-era offer
    You are reading
    Government waived anti-corruption clauses in Rafale deal
    Defence Ministry protested against PMO undermining Rafale negotiations
    Modi’s decision to buy 36 Rafales shot the price of each jet up by 41%

    Trending in National

    National NIA conducts raids in T.N., Puducherry over terror funding
    National Long wait for visas for U.S. and many European destinations
    National Masks mandatory for air travellers
    National IIT-Madras launches new online course for anyone aged above 10
    National 80-year-old engineer appears for IIT-Madras entrance
    National Govt. rejects statement, but reaches out to OIC members
    National Stopped by Arunachal students, trucks carrying elephants to Gujarat released
    National India monitors security of its mission in Pakistan
    National BHEl, LIC played key role in country’s development: Amit Shah
    National India’s biotech sector grew eight fold in eight years: PM Modi
    National BJP names candidates for Maharashtra Legislative Council polls; Pankaja Munde not in list
    National India and Vietnam sign mutual logistics agreement
    National Andhra Pradesh: K. Vijayanand posted as Special CS (Energy)
    National Al-Qaeda in Indian subcontinent threatens to attack India after Prophet controversy
    National State’s COVID graph continues to rise
    National 16-year-old boy shoots dead mother for stopping him from playing PUBG
    National Food material sent to Lanka
    National Narsinghanand, Owaisi booked by Delhi Police
    National Nupur Sharma’s remarks on Prophet: Violence erupts in Kanpur
    National Modi ‘gag order’ sends BJP leaders into a tizzy
    Top Picks in The Hindu today
    A worker spreads wheat crop for drying at a wholesale grain market in Chandigarh. Is the ban on wheat exports good policy? | The Hindu Parley podcast
    Nine months after release, ‘Rivaldo’ thrives in the wild
    The social milieu [in ‘Tomb of Sand’] is not alien to me: Daisy Rockwell, translator of Geetanjali Shree’s Booker-winning novel
    Explained | The battlefield for the upcoming Rajya Sabha elections
    Microsoft’s mixed reality gets a black eye
    Nayanthara, Vignesh Shivan get married
    Parents opt for residential schools to wean children off mobile phones, gadgets
    HR&CE Department vs Podhu Dikshithars: the saga continues
    ‘080 Lounges’ to bring luxury back to flying at Bengaluru airport
    An interesting ‘battle’ between foreign and Indian coaches
    TRENDING TODAY
    • Russia-Ukraine Crisis
    • Coronavirus
    • IPL
    • Housing
    11K | One dead, 15 injured in Mumbai building collapse
    6K | COVID-19 | India registers over 7,000 cases after 99 days
    5K | Constitute 9th National Commission for BCs, Ramadoss urges PM Modi
    4K | Madras HC gets its first woman mace-bearer
    4K | Satisfied with action against BJP spokespersons: Iran Foreign Minister
    3K | Presidential polls scheduled for July 18
    3K | Safe foods: On the need to develop lab infrastructure in States
    3K | Hijab row: Uppinangady college revokes suspension of six girls
    3K | Chinese activity in eastern Ladakh ‘eye-opening’, behaviour ‘concerning’, says U.S. Army General
    168 | Health Ministry asks States to increase COVID-19 vigilance
    2K | RBI raises rates to tame inflation
    2K | Italy arrests Pakistanis linked to 2020 Charlie Hebdo attack
    2K | Citizenship Amendment Act will not help us: Bangladesh Hindu leader
    2K | NHAI enters Guinness World Record for laying 75 km highway in 105 hours: Nitin Gadkari
    2K | Current account deficit likely to hit three-year high at $43.8 billion in FY22
    2K | Owaisi lashes out at Al Qaeda
    2K | Bengaluru’s University Visvesvaraya College of Engineering building dons a new look
    680 | Narsinghanand, Owaisi booked by Delhi Police
    2K | On the draw — June 9, 2022
    2K | GST, Insolvency and Bankruptcy Code reforms to push growth after ‘clouds recede’, says Chief Economic Advisor
    • ePaper
    Return to frontpage
    TRENDING TODAY
    • One dead, 15 injured in Mumbai building collapse
    • COVID-19 | India registers over 7,000 cases after 99 days
    • Constitute 9th National Commission for BCs, Ramadoss urges PM Modi
    • Madras HC gets its first woman mace-bearer
    • Satisfied with action against BJP spokespersons: Iran Foreign Minister
    TRENDING TOPIC
    • Mumbai
    • Coronavirus
    • Iran
    Trending on our group sites
    Businessline
    • stocks and shares
    • gilts and treasuries
    • Films
    • monetary policy
    • Home
    • News
      • India
      • World
      • States
      • Cities
    • Coronavirus
      • Video & Podcast
      • Expert Speak
      • All Reports
      • All Reports
      • E-BOOK
    • Opinion
      • Cartoon
      • Columns
      • Editorial
      • Interview
      • Lead
      • Readers' Editor
      • Comment
      • Open Page
      • Letters
    • Business
      • Agri-Business
      • Industry
      • Economy
      • Markets
      • Budget 2022
      • Stock Quotes
    • Sport
      • Cricket
      • Football
      • Hockey
      • Tennis
      • Athletics
      • Motorsport
      • Races
      • Other Sports
    • Crossword+
    • Coupons
    • Entertainment
    • Life & Style
    THE SITE
    • About Us
    • Terms of Use
    • Privacy Policy
    • Contacts
    • Archive
    • Print Subscription
    • ePaper
    • Digital Subscription
    • Rss Feeds
    • Sitemap
    GROUP SITES
    • The Hindu
    • இந்து தமிழ் திசை
    • Business Line
    • BL on Campus
    • Sportstar
    • Frontline
    • The Hindu Centre
    • RoofandFloor
    • STEP
    • Young World Club
    • Publications
    • eBooks
    • Images
    • Classifieds
    Contact us Copyright© 2022, THG PUBLISHING PVT LTD.
    JUST IN
    • 9 mins Pocso case against teacher for molesting student, sharing images on social media
    • 19 mins Top news developments in Karnataka on June 9, 2022
    • 32 mins Candidates will get 1 week to pay fees after engineering seat allocation
    • 52 mins Rajnath Singh hands over 12 high-speed guard boats to Vietnam
    • 1 hr COVID-19 | India registers over 7,000 cases after 99 days
    • 1 hr Top news developments in Kerala today
    • 1 hr Hijab row: Uppinangady college revokes suspension of six girls
    • 1 hr NIA conducts raids in T.N., Puducherry over terror funding
    • 2 hrs Top Tamil Nadu news developments today
    • 2 hrs One dead, 15 injured in Mumbai building collapse
    • 2 hrs Citizenship Amendment Act will not help us: Bangladesh Hindu leader
    • 2 hrs BSF fires at suspected Pakistani drone along IB in Jammu
    • 3 hrs Morning Digest | Indian economy well placed to deal with challenges, says RBI Governor; Iran says it’s ‘Satisfied’ with action against BJP spokespersons, and more
    • 3 hrs West Bengal Speaker rejects plea to disqualify Mukul Roy as MLA
    • 3 hrs CM to disburse crop insurance amount at C.K. Palli on June 14
    CLOSE