CAG pulls up Centre for favouring Boeing in P-8I aircraft deal

• The Controller and Auditor General (CAG) pulled up the Defence Ministry for changing the parameters of the deal in the procurement of P-8I Long Range Maritime Reconnaissance Anti-Submarine Warfare (LRMRASW) aircraft. In a report presented in the Parliament, the CAG noted that Boeing is yet to fulfil the offset obligations as part of the contract for the deal signed in 2011.

• Two companies, Boeing, USA and EADS CASA, Spain were found technically compliant among the five bids that were received.

• “The Ministry while concluding the contract for the acquisition of LRMRASW aircraft enhanced the financial bid of EADS CASA, Spain to cater for 20 years product support cost while ignoring this element in respect of Boeing. At a later date, Boeing, USA offered the product support under a separate contract and consequently the deduced ranking of Boeing as L-1 turned out to be incorrect,” the CAG said in the report.

• The commercial bid of Boeing was Rs 8,700 crore, whereas, the other firm EADS CASA had quoted Rs 7,776 crore which also included product support for two years.

• Boeing was awarded the contract in January 2009 at a cost of Rs 10,773 crore and the aircraft were delivered between May 2013 and October 2015 with the warranty of two years post-delivery. In July 2016, India exercised the option clause for four more aircraft at a cost of $1 billion.

• Further, the critical role equipment offered by Boeing were not fully meeting the needs of the Indian Navy, the report said and noted, “Owing to capacity limitations of radars installed onboard, the aircraft is not able to achieve the envisaged coverage area requirements.

• For Anti-Submarine Warfare, the Naval Staff Quality Requirements had envisaged the procurement of torpedoes and certain bombs as the ammunition. However, the contract for procurement of the Bombs had not yet been concluded, the CAG observed and said that reasons for non-procurement of the bombs were yet to be intimated by the Navy as on September 2017.

• In addition, offset obligation to the tune of $640.26 million to be fulfilled by Boeing within seven years (August 2016), had not been fulfilled till date, the report added.