CAG slams French cos for not fulfilling Rafale offset terms

Rafale Defense Deal Report

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In News: Rafale Defense Deal Report

  • The Comptroller and Auditor General of India (CAG) Report titled “management of defense offsets” was tabled in the Parliament recently which dwells upon several defense deals including Rafale.

News Summary: Rafale Defense Deal Report

Observations on French Firms:
  • The CAG has slammed the French firms Dassault Aviation and MBDA which are the main companies in the contract for 36 Rafale fighters for their failure so far to fulfil offsets obligations in offering advanced technology to India.
  • The report, however, also criticizes the fact that the maximum discharge of the offsets- 57% by MBDA and 58% by Dassault, is slated only during the last or seventh year (2023).
  • CAG report observed that in many cases, it was found that foreign vendors made various offset commitments to qualify for the main supply contract, but later were not earnest about fulfilling these commitments.
Rafale Defense Deal Report
Article: Rafale Defense Deal Report
Overhaul of Offset Policy:
  • The report said that the offset policy has scarcely met the objectives of inducting advanced technology and bolstering the domestic defense industrial base despite India being among the largest arms importer in the world.
  • There has been negligible foreign direct investment and DRDO has also not acquired any high technology so far.
  • The audit noted the tendency to offer discharge of the substantial portion of obligations in later years, nearer the end of the contract period.
  • All this calls for a major overhaul of the entire offsets policy.

About: Offsets

  • Offsets are contracted obligations that are typically regulated by ministries of defense or government partners.
  • They can take one of two forms:
    • Direct offsets are agreements that are directly related to the defense products being sold. For instance, as part of its bid, Dassault Aviation agreed to subcontract work locally and transfer certain forms of technology to the Indian defense manufacturers like DRDO to support the sale of jets.
    • Indirect offsets are agreements that are not related to the defense products being sold. For instance, Sukhoi, one of Russia’s major aircraft manufacturers, offers to sometimes transfer space technologies to various countries to fulfill obligations related to the sale of their fighter aircraft.

About: Comptroller and Auditor General of India (CAG)

  • Comptroller and Auditor General of India is the apex authority responsible for external and internal audits of the expenses of the National and state governments in the country.
  • The Constitution of India provides for an independent office of the Comptroller and Auditor General of India (CAG) in Chapter V.
  • The CAG is mentioned in the Constitution of India under Article 148 – 151.
Constitutional Provisions:
  • Article 148 broadly deals with the CAG appointment, oath and conditions of service.
  • Article 149 deals with duties and powers of the Comptroller and Auditor-General of India.
  • Article 150 says that the accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the CAG, prescribe.
  • Article 151 says that the reports of the Comptroller and Auditor-General of India relating to the accounts of the Union shall be submitted to the President, who shall cause them to be laid before each House of Parliament.
  • As per Article 279 Calculation of “net proceeds” is ascertained and certified by the Comptroller and Auditor-General of India, whose certificate is final.
  • Third Schedule of the Constitution of India prescribes the form of oath or affirmation to be made by the Judges of the Supreme Court and the Comptroller and Auditor-General of India at the time of assumption of office.
Appointment and Terms of Service:
  • As per Article 148 of the Constitution, there shall be a Comptroller and Auditor-General of India who shall be appointed by the President and can be removed from office only in the manner and on the grounds that a Judge of the Supreme Court is removed.
  • He holds office for a period of six years or upto the age of 65 years, whichever is earlier.
Independence of CAG’s Office:
  1. Security of Tenure
    • CAG can be removed by the President only in accordance with the procedure mentioned in the Constitution.
    • Thus, he does not hold his office till the pleasure of the president, though he is appointed by him.
  2. Salary and Conditions of Service Determined by Parliament
    • The salary and other conditions of service of the Comptroller and Auditor-General shall be such as may be determined by Parliament by law and neither the salary of a Comptroller and Auditor-General nor his rights in respect of leave of absence, pension or age of retirement shall be varied to his disadvantage after his appointment.
Ineligible for Further Office:
  • The Comptroller and Auditor-General shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office.
Administrative Expenses upon Consolidated Fund of India:
  • The administrative expenses of the office of the Comptroller and Auditor-General including all salaries, allowances and pensions payable to or in respect of persons serving in that office, shall be charged upon the Consolidated Fund of India.
Functions of CAG:
  • CAG audits the accounts related to all expenditure from the Consolidated Fund of India, Consolidated Fund of each state and UT’s having a legislative assembly.
  • He audits all expenditure from the Contingency Fund of India and the Public Account of India as well as the Contingency Fund and Public Account of each state.
  • He audits all trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept by any department of the Central Government and the state governments.
  • CAG audits the receipts and expenditure of all bodies and authorities substantially financed from the Central or State revenues; government companies; other corporations and bodies, when so required by related laws.
  • He audits the accounts of any other authority when requested by the President or Governor e.g. Local bodies.
  • He advises the President with regard to prescription of the form in which the accounts of the Centre and States shall be kept.
Reports by CAG:
  • The CAG submits his audit reports relating to the accounts of the Centre to the President, who shall, in turn, place them before both the houses of Parliament.
  • He submits 3 audit reports to the President-
    1. Audit report on appropriation accounts
    2. Audit report on finance accounts
    3. Audit report on public undertakings
  • He also submits his audit reports relating to the accounts of a State to the Governor, who shall, in turn, place them before the state legislature.
CAG and Public Accounts Committee (PAC):
  • CAG audit reports are handed over to the PACs both at the centre and at the state.
  • Three CAG reports i.e. audit report on appropriation accounts, audit report on finance accounts and audit report on public sector undertakings are examined by PAC.
  • CAG acts as a guide, friend and philosopher of the Public Accounts Committee of the Parliament.

Also Read: Economic Updates: Amendments to Insolvency & Bankruptcy Code gets Parliament nod

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