CAG raises question over USD 2.1 billion aircraft deal with Boeing under UPA regime
National auditor CAG today raised questions over a USD 2.1 billion Indian Navy contract awarded to Boeing during the previous UPA regime, suggesting the American defense major was favored over rival bidder EADS CASA of Spain for procuring a fleet of P-8I maritime reconnaissance aircraft.
In its report tabled in Parliament, the Comptroller and Auditor General (CAG) said the defense ministry enhanced the financial bid of Spanish aerospace firm to provide for a 20-year "product support" cost on assumption that Boeing's offer had a similar provision.
Boeing, at a later stage, offered the aircraft maintenance support under a separate negotiable contract, the auditor said, while terming as incorrect the conclusion that the American company was the lowest bidder (L1).
It said enhancing the financial bid of the Spanish company by including its product support cost resulted in pushing it to L-2 status (second lowest bidder).
"At a later date, Boeing, USA, offered the product support under a separate negotiable contract and consequently the deduced ranking of Boeing, USA as L-1 turned out to be incorrect," it said.
The national auditor said the defense ministry had set the offset obligation by Boeing at USD 641 million (Rs 3,127.43 crore).
The CAG said Boeing is yet to fulfill the offset obligations, which was to be met by August 2016. "Boeing, USA had claimed offset credits on the mere placement of purchase orders defeating the very purpose of offset obligations," it observed.
Under India's offset policy, foreign defense entities are mandated to spend at least 30 percent of the total contract value in India through procurement of components or setting up of research and development facilities.
The CAG also criticised delays in procuring bombs as part of the weapons for the aircraft.
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