CAG claims UPA violated norms in purchase of Boeing P-8I aircraft

Report says defence ministry evaluated bid of Spanish company, EADS CASA, with product support costs added to cost of aircraft; but evaluated Boeing's bid without product support costs loaded on

The Comptroller & Auditor General (CAG) tabled a report in Parliament on Tuesday that says the United Progressive Alliance (UPA) government violated procedure in buying eight P-8I Poseidon Long Range Maritime Reconnaissance Anti-Submarine Warfare (LRMR-ASW) aircraft from US giant, Boeing, in 2009.

The National Democratic Alliance (NDA) government, which is facing an Opposition onslaught for the procurement of 36 Rafale fighters in 2016, now has ammunition to fire back.

The CAG report says the defence ministry “enhanced the financial bid of M/s EADS CASA, Spain to cater for 20 years product support cost while ignoring this element in respect of M/s Boeing, USA. The contract was concluded with M/s Boeing, USA in January 2009 at MUSD 2,137.54 (US $2.177 billion). At a later date, M/s Boeing, USA offered the product support under a separate negotiable contract and consequently the deduced ranking of M/s Boeing, USA as L-1 turned out to be incorrect.” 

In effect, the CAG says the defence ministry evaluated the bid of Spanish company, EADS CASA, with product support costs added to the cost of the aircraft; but evaluated Boeing’s bid without product support costs loaded on.

Further, the CAG report said that Boeing had failed to discharge its offset liabilities of $641.26 million – amounting to 30 per cent of the contract value. “The Offset obligations of MUSD 641.26 ($641.26 million), to be fulfilled within seven years (August 2016), had not been fulfilled till date. M/s Boeing, USA had claimed Offset credits on mere placement of purchase orders defeating the very purpose of Offset obligations,” said the report.

Boeing sources say, and ministry sources confirm, that offset liabilities have been discharged in full. Boeing has submitted the supporting documents to the ministry, which was still examining them before granting offset credits.

Towards discharging offsets, Boeing has established production capabilities with Indian firms, including Hindustan Aeronautics Ltd, Tata Advanced Systems Ltd and Dynamatic Technologies, which produce assemblies for the F/A-18E/F Super Hornet fighter, Chinook and Apache helicopters and the P-8I aircraft.

The P-8I, the world’s most feard LRMR-ASW aircraft, is a derivative of the Boeing 737-800 airliner. It has a Raytheon multi-mode radar to detect aircraft ships and submarines, while another belly-mounted radar looks backwards like an electronic rear-view mirror. A “magnetic anomaly detector” on the tail also detects submarines. Enemy targets are destroyed with on-board Harpoon missiles or Mark 54 torpedoes. Alternatively, the targets are “handed on” to friendly warships to engage.

The CAG report also stated that “critical role equipment” that came with the aircraft were not fully meeting the navy’s requirements: “Owing to capability limitations of radars installed onboard, the aircraft is not able to achieve the envisaged coverage area requirements.”

Senior navy officers tell Business Standard that the CAG’s information is outdated and the P-8I radar now meets every navy requirement. “Initially, we had teething problems. But as we matured in our exploitation of the P-8I and added our own tweaks, the radar is now a game-changer for the navy,” says a serving admiral.

Also criticised by the CAG is the navy’s late contracting of Mark 82 depth charges, which the report refers to as ‘X’ Bombs. “Reasons for non-procurement of ‘X’ Bombs (September 2017) were yet to be intimated by Indian Navy. Thus, in the absence of ‘X’ Bombs, the ASW capability of the aircraft could only be partially fulfilled,” says the report.

The navy tells Business Standard this observation too is outdated. The P-8I’s Harpoon missiles and torpedoes are so effective the navy decided against buying depth charges.

Boeing officials have declined to comment on the report, pointing out that this was an internal audit and the CAG took no inputs from the US company. “The P-8I Poseidon is the backbone of the Indian Navy’s maritime reconnaissance capability and has participated in major national and international exercises with credit,” says a Boeing official, speaking anonymously.

The navy is watching developments warily, hoping that political jousting does not derail the procurement of additional Poseidons. “In July 2016, we contracted for four more P-8Is. They are critical for our operational posture and I hope they come on schedule,” says a senior naval planner.