Will PM Modi Resign? Report Reveals Govt Excluded Anti-Corruption Clauses From Rafale Deal
The Modi Govt also overruled the recommendation of the Financial Advisor of safeguarding payments using an escrow account under the French Govt’s charge.
For a government that came to power promising a crackdown on corruption, the suspension of anti-corruption clauses and the overruling of the Financial Advisor’s recommendation in a multi-billion dollar defence deal do not constitute as trivial mix- ups.
Per an exclusive report by The Hindu, in the 7.87 billion Rafale deal between India and France, the Narendra Modi government dropped anti-corruption clauses from the supply protocols. Eight changes were “ratified and approved” by the Defence Acquisition Council (DAC) chaired by the then Defence Minister, Manohar Parrikar in September 2016, after the inter-governmental agreement (IGA) and related documents had been approved by the Cabinet Committee on Security (CCS), chaired by Prime Minister Modi on August 24, 2016.
“The most significant among these eight changes, recorded in a note signed by Vice Admiral Ajit Kumar, DCIDS (PP&FD) who was the member-secretary of the DAC, is at sub-para (c). This states: “Non-inclusion of the Standard DPP Clauses related to ‘Penalty for Undue Influence,’ ‘Agents/Agency Commission’ and ‘Access to Company Accounts’ in the Supply Protocols,” reported The Hindu.
This is significant as the supply protocols were to be executed by two private companies — Dassault and MBDA.
“Not advisable to sacrifice the basic requirement of financial prudence”
Three members of the Indian Negotiating Team — M.P. Singh, Adviser (Cost), A.R. Sule, Financial Manager (Air), and Rajeev Verma, Joint Secretary and Acquisitions Manager (Air) strongly condemned the direct dealing with the private companies under the cover of an IGA.
They wrote, “Notwithstanding the fact that the procurement is on Government-to-Government basis, the IGA involves ‘Transfer of Rights and Obligations’ relating to supplies of equipment and related industrial services by French Government to the French Industrial Suppliers, and the payment is also being made to the French Industrial Suppliers and not to the French Government; therefore, it is not advisable to sacrifice the basic requirement of financial prudence,” reported The Hindu.
Safeguard of payments through an escrow account under the charge of the French government also done away with
The Hindu report added that under Parrikar, the Defence Acquisition Council revised eight provisions in the IGA. One such amendment is to the Para 50(b) of the Cabinet Committee on Security (CCS) note, that now calls for a search for alternative safeguards to be decided between the Ministry and the French Government under the assurance of the French government over effective supervision vis-à-vis utilisation of payments made by India. Before this amendment, Para 50(b) asked for an insurance over the payments to be made through an escrow account held under the charge of the French government.
Escrow accounts make for better checks and balances as they that funds would have been released to Dassault and MDA under strict agreement of the Indian government.
It has been previously reported by The Hindu that the safeguards of bank/sovereign guarantee had been removed after Joint Secretary to the PMO had conducted alleged “parallel negotiations” with the French government.
Sudhansu Mohanty, Financial Adviser (DS) had noted that in absence of a bank guarantee and a sovereign guarantee, an escrow account involving the French government was crucial.
“In the absence of a sovereign/bank guarantee, in a case like this where an IGA is to be signed, it would be prudent to involve the French Govt. as far as releases are concerned. This possibly could be done through an Escrow account or a variant of the same where the money released by the buyer (Govt. of India) is paid to the Escrow account held under the charge of French Govt. to make further payments to the firm as per terms & conditions agreed to by the Indian and French Govt. through IGA. This would make French Govt. morally and materially responsible for the procurement so proposed. Since they are one of the parties to the IGA and also jointly and severally responsible for the execution of the supply protocol, they should not be having any reservation about it,” Mohanty had written, reported The Hindu.
The Hindu also reported that these material facts were kept hidden from the Supreme Court by the Narendra Modi-led government.