The CAG on Tuesday slammed the Defence Ministry and Air Force for "several instances" of deviation from rules in the procurement of VVIP choppers in the Rs 3,727 crore AgustaWestland deal.
In its report tabled in Parliament, the Comptroller and Auditor General also questioned the decision of the then IAF chief to hold the trials of the two contenders for the deal abroad. The CAG also noted that the benchmark cost of Rs 4,871.5 crore for the 12 VVIP choppers was "unreasonably high" as compared to the Rs 3,966 crore quoted by AgustaWestland.
"Several instances have been observed where the Defence Ministry deviated from the 2006 Defence Procurement Procedure and the tender for the deal issued in Sept. 2006," the report stated. As per the DPP, a reasonable price is benchmarked by the Contract Negotiation Committee (CNC) while proceeding with a deal.
Cost of AgustaWestland chopper deal was unreasonably high: CAG
But the benchmark price of Rs 4,871 crore arrived at by CNC was "unreasonably high as it had provided no realistic basis for comparison with the offered cost of Rs 3,966 crore (by AgustaWestland) for price negotiations," the report said.
The report added that while an approval for deviation was required to be pursued with "extreme caution and in exceptional circumstances", the frequent deviations made in this case are counter to the clauses of the DPP 2006.
The CAG also criticised the procurement of four additional choppers in the deal at a cost of Rs 1,240 crore as "avoidable" and said that the assessed requirement was not commensurate with the low utilisation levels of existing helicopters providing transportation to VVIPs.
On the evaluation of the choppers, the CAG said that trials for the AgustaWestland model were conducted on representative Merlin helicopters and not on the actual craft whereas the other contender, Sikorsky, had offered its S-92 for try-outs.
"Even at the stage of trials, the AgustaWestland chopper was in a developmental phase. Evaluation of helicopter following different methodologies could not give desired assurance that equal opportunity was provided to both shortlisted vendors.
"Thus, the recommendation and assurance given by the Chief of Air Staff in October 2007 to conduct trials abroad lacked justification," the report said. The CAG also questioned the offsets obligations carried out by AgustaWestland, saying there was "ambiguity in the contract regarding the type of services and export orders to be executed by IDS Infotech (its Indian offsets partner)".
"AgustaWestland gave a year-wise break up of work from 2011 to 2014 to be executed by IDS Infotech under this offset programme even though the work had been completed well before the conclusion of the contract in 2010," the report said.
The Anglo-Italian firm had projected seven programmes to be completed as part of the offsets contract but "these allowed offsets were not compliant with the DPP. "Besides many Indian offsets partners selected for discharge of offsets obligations were not eligible," the CAG added.