The length of time that state-owned Hindustan Aeronautics Limited (HAL) would have required to build French-made Rafale fighter jets in India and questions about the quality of the warplanes it would produce caused a “stalemate” in negotiations with Dassault Aviation (DA) that dragged on for nearly a decade, the Comptroller and Auditor General of India (CAG) said in a report presented in Parliament on Wednesday.
“Five years after the bids, and after three years of [price] negotiations, there was no finalization” of a deal because of these twin issues, the CAG?report said.
The Opposition, in particular the Congress, has underlined that not manufacturing the fighter planes in India was a national loss. The Congress party has accused the government of deliberately leaving HAL out of the deal.
Bengaluru-based HAL was to manufacture 108 of the fighter jets in India and 18 were to be delivered in a flyaway condition by Dassault under the deal the United Progressive Alliance (UPA) government led by Manmohan Singh negotiated in 2007. In 2015, the deal was scrapped by the National Democratic Alliance (NDA) government led by Narendra Modi, which decided to buy 36 fighters in a flyaway condition instead.
Giving a detailed account of the stalemate, the CAG report said Dassault claimed it would take 31.2 million man-hours to produce the 108 fighters. But, “at the time of Bench Marking in June 2011, HAL had stated that the French man hours had to be converted to Indian man hours by multiplying quoted man hours by a factor of 2.7,” the CAG observed. The auditor noted that the manpower cost in India would have been several times higher.
Interestingly, the requirement of more man-hours when arriving at the benchmark price – an indicative price that is used as a guide for price negotiations – was overlooked. This created difficulties during negotiations later with Dassault, which was no longer the L-1 (lowest price) bidder, the CAG observed.
The defence ministry’s plea that “man-hour factor required by HAL was not on basis of scientific rationale” and therefore ignored was rejected by CAG. “Audit noted that the reply of the Ministry is silent on the manner the bid of M/s DA was evaluated,” CAG noted.
Dassault also refused to guarantee the quality of the fighters manufactured by HAL.
“During CNC (Contract Negotiations) M/s DA took the position that the firm was only responsible for delivery of 18 direct flyway aircraft,” CAG observed.
The original tender by India had said the “vendor ( in this case Dassault Aviation) should guarantee the performance of the product to design specifications, at the production agency or customer locations.”
The two issues — extra man-hours required by HAL and Dassault’s refusal to guarantee the quality of fighters produced in India –led to the stalemate in negotiations, the CAG report observed.
“It takes time to absorb new technology, there is something called a learning curve. As we manufacture more of certain type of equipment, the learning curve would tend match that of the manufacturer,” Air Chief Marshal S Krishaswamy (retd) said on the larger man-hour requirement of HAL.
He also said the original equipment manufacturer could not perhaps have taken responsibility for products manufactured in India.