CAG says it changed parameters to favour the U.S. company in aircraft deal

The Comptroller and Auditor General (CAG) has pulled up the UPA government for changing the parameters of the deal for the procurement of Long Range Maritime Reconnaissance Anti-Submarine Warfare (LRMRASW) aircraft to unduly favour Boeing of the U.S.

In a report presented in Parliament on Tuesday, the CAG said Boeing was yet to fulfil the offset obligations as part of the contract for the deal signed in 2011.

Product support

Two companies, Boeing and EADS CASA of Spain, were found to be technically compliant among the five bids that were received.

“The Ministry while concluding the contract for the acquisition of LRMRASW aircraft enhanced the financial bid of EADS CASA, Spain, to cater for 20 years’ product support cost, while ignoring this element in respect of Boeing. At a later date, Boeing, USA, offered product support under a separate contract and consequently the deduced ranking of Boeing as L-1 turned out to be incorrect,” the CAG said in the report. The commercial bid of Boeing was Rs. 8,700 crore, while EADS CASA had quoted Rs. 7,776 crore, which also included product support for two years.

Boeing was awarded the contract for eight aircraft in January 2009 at a cost of Rs. 10,773 crore and the aircraft were delivered between May 2013 and October 2015, with warranty of two years post-delivery.

In July 2016, India exercised the optional clause for four more aircraft at a cost of $1 billion.

Further, the critical role equipment offered by Boeing did not fully meet the needs of the Indian Navy, the report said. “Owing to capability limitations of radars installed on board, the aircraft is not able to achieve the envisaged coverage area requirements.”

Contract for bombs

For Anti-Submarine Warfare (ASW), the Naval Staff Quality Requirements (NSQR) had envisaged procurement of torpedoes and certain bombs as the ammunition.

However, the contract for procurement of the bombs had not yet been concluded, the CAG observed. The reasons for non-procurement of the bombs were yet to be intimated by the Navy as on September 2017.

Offset obligations to the tune of $640.26 million to be fulfilled by Boeing within seven years [August 2016] had not been fulfilled till date. “Boeing had claimed offset credits on mere placement of purchase orders, defeating the very purpose of offset obligations,” the CAG said.