(Bloomberg) -- The Indian government’s $8.7 billion purchase of French warplanes was cheaper than a bid negotiated under the previous government, the country’s auditor said, potentially weakening an opposition campaign alleging corruption ahead of federal polls.
Prime Minister Narendra Modi bought 36 Rafale fighters in 2015 from Dassault Aviation SA at a price 2.86 percent lower than a bid by the former coalition government headed by the Congress Party, India’s Comptroller and Auditor General said in the report tabled in parliament today. The delivery of all 36 jets will be faster by one month, it found.
The auditor’s report allows the government to defend itself against the corruption charges, but is unlikely to end debate about the deal amid news reports featuring leaked documents, and an opposition determined to attack Modi ahead of a general election due by May.
“The CAG report could well make some people lose interest in this issue unless the Congress comes out with something more concrete," said Sudha Pai, a political science professor at Jawaharlal Nehru University in New Delhi. "For the Congress, this is still its tool for making more noise."
Modi has been under pressure in the run up to polls to disprove the Congress-led campaign that alleges the jets were bought at a higher price and the new deal unduly benefited Indian billionaire Anil Ambani. Both the government and Ambani, whose Reliance Group is a partner of Rafale-builder Dassault, have denied the allegations, as has Dassault.
Congress party president Rahul Gandhi also alleged that Reliance had no experience making fighter jets and was not in a financial position to receive such a prominent, so-called “offset” contract, which requires companies invest additional money in India.
Modi’s government has consistently denied it played any role in Dassault’s selection of Reliance and insists there was no impropriety.
“The CAG report would probably take the winds off the opposition parties’ attack on the Modi government regarding Rafale procurement,” said Rahul Bedi, a New Delhi-based analyst at Jane’s Information Services. “However, the political slug fest would continue, as it is a battle between reality and perception."
The 2015 deal had better terms for a weapons package, but was costlier by more than 6 percent on an engineering support package and logistics, the report found. The auditor did not include the pricing details, citing confidentiality required for defense purchases.
“We have a claim, and we don’t have price points. I fail to see how something can claim to be an audit without offering price details,” said Manoj Joshi, a distinguished fellow at the New Delhi-based think tank, Observer Research Foundation. “That’s the biggest problem.”
India’s Supreme Court examined the issue in December and rejected a plea to investigate the purchase.
"The truth shall prevail," senior government minister and former defense minister Arun Jaitley tweeted after the report was tabled.
(Updates with analyst comments from fourth paragraph.)
--With assistance from Archana Chaudhary.
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