CAG: UPA gave favour to Boeing in Naval spy plane deal

The Congress-led UPA government offered an undue favour to US aviation giant Boeing while purchasing eight P8I Naval spy planes, the Comptroller and Auditor General (CAG) disclosed in a report tabled in Parliament on Tuesday.

While negotiating a deal to buy these aircraft, the defence ministry under Congress veteran A K Antony unfairly cut out Boeing's rival EADS CASA, Spain, by ignoring a crucial element in the documents submitted by Boeing.

The $ 2,137.54 million (Rs 10,773.18 crore) contract was concluded with Boeing in January 2009.

The process to purchase the aircraft began in 2005. In November 2007, Boeing offered a commercial bid of $ 2,187.54 million (Rs 8,700.37 crore) whereas EADS quoted 1,323.72 million Euro (Rs 7,760 crore), which also included product support for two years.

Boeing maintained it could provide product support for 20 years, but that was needed to be negotiated separately through a different contract.

However. instead of reducing the product support cost for two years factored by the EADS in its submission, the defence ministry enhanced the EADS quote to 1,482.12 Euro (Rs 8,712.44 crore) by including product support for another 18 years at a rate of 7.1 million euro per year.

As a result, Boeing was declared the L-1 vendor by the Contract Negotiation Committee of the defence ministry that signed the P8I contract with the American company towards the end of the UPA-1 regime.

The contract was signed months after the historic Indo-US nuclear deal signed in October 2008.

At a later date, Boeing offered the product support under a separate negotiable contract and consequently the deduced ranking of Boeing as L-1 turned out to be incorrect, the CAG said.

All the aircraft were delivered between May 2013 and October 2015 with a warranty of two years post delivery. The delivered aircraft didn't have the product support post expiry until June 2017, when the ministry concluded a $ 131 million “interim support agreement” to support the fleet for three years.

The disclosure comes at a time when the Narendra Modi-government is under criticism from the Congress-led Opposition for a “scam” in the Rafale fighter aircraft deal in which 36 combat jets were purchased from French firm Dassault Aviation in a government-to-government deal.

The audit watchdog also found that the defence ministry is yet to procure a particular bomb for the P8I aircraft, without which the aircraft's ability to function as an anti-submarine warfare platform gets restricted.

In 2016, the Modi government signed a $1 billion follow-on deal to buy another four P8I aircraft from Boeing. These aircraft are to be delivered by 2020.