CAG report raises concern over Rafale deal not having sovereign guarantee

CAG report raises concern over Rafale deal not having sovereign guarantee In the 2015 offer with the present government, the French vendor did not furnish any financial and performance bank guarantees, the report stated

Current Affairs: The Comptroller and Auditor General (CAG), in its report on the Rafale fighter jet deal with France, has highlighted the drawbacks of settling for a 'Letter of Comfort' rather than a sovereign guarantee by the French government.

The report, tabled in Parliament on Wednesday, noted that the 2007 UPA deal included a 15 per cent bank guarantee against advance payments.

Highlighting its concerns, the CAG observed that in case of a breach of agreement, India would now have to first settle the matter through arbitration directly with the French vendors.

If the arbitration award goes in favour of India and Dassault Aviation, the makers of the Rafale jet, fails to honour it, India will have to exhaust all available legal remedies, it said. Only after that will the French government make the payments on behalf of Dassault Aviation, it added.

India for the first time signed an Intergovernmental Agreement (IGA) with France to procure 36 Rafale fighter jets. It has earlier signed similar IGAs with the US, the UK and Russia.

"In case of IGA for 36 Rafale, the offer of M/s DA (Dassault Aviation) in 2007 had included 15 per cent Bank Guarantee against advance payments, 5 per cent each for Performance Guarantee and Warranty. A Bank Guarantee gets directly and automatically invoked in case of breach of contract by the seller," the CAG said.

In the 2015 offer with the present government, the French vendor did not furnish any financial and performance bank...read more

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