The Narendra Modi-led central government waived critical provisions for anti-corruption penalties and overruled the recommendations from financial advisers for an escrow account for the Prime Minister’s Office days before signing the Rafale jet deal with France, The Hindu reported on Monday.
The news comes days after the newspaper published a report claiming that Prime Minister Modi had carried out “parallel negotiations” with France on the deal and that the Ministry of Defence had expressed its objections. Neither of the details were reportedly part of the material submitted by the Bharatiya Janata Party-led central government to the Supreme Court.
The government waived standard Defence Procurement Procedure clauses on “Penalty for use of Undue Influence, Agents/Agency Commission, and Access to Company accounts” of Dassault Aviation and MBDA France in the supply protocols, showed official documents accessed by The Hindu. While Dassault is the supplier of the Rafale aircraft package, MBDA France is the supplier of the weapons package to the Indian Air Force.
The Defence Acquisition Council, headed by then Defence Minister Manohar Parrikar, had “ratified and approved” eight changes in the inter-governmental agreement, supply protocols, offset contracts and offset schedules in September 2016. The changes were made after the agreement and the documents had been approved by the Modi-led Cabinet Committee on Security a month earlier. The changes were recorded in a note signed by Vice Admiral Ajit Kumar, who was the member-secretary of the Defence Acquisition Council.
The report said that three members of the negotiating team – MP Singh, Adviser (Cost), AR Sule, Financial Manager (Air), and Rajeev Verma, Joint Secretary and Acquisitions Manager (Air) – had voiced their dissent to dropping the clauses, but were overruled.
The government also decided to do away with a sovereign or bank guarantee from France, instead agreeing to a letter of comfort from the French Prime Minister, which is not a legally-binding document.
The letter of comfort issued on September 8, 2016, says “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”.
The letter of comfort came after the Cabinet Committee on Security issued a corrigendum to a note forwarded by the Ministry of Defence dropping the requirement for an escrow account operated by the French government to make payments to the two companies. This proposal to amend the inter-government agreement was moved by Defence Ministry Director General Acquisition Smita Nagaraj.