Another UPA scam: Defence Finance Wing red flags Pilatus deal

Lions Of Punjab

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Defence finance wing redflags UPA's trainer aircraft deal | The Indian Express




9 components overlooked before declaring lowest bidder, says ministry department
In 2013, Finance under Chidambaram had alerted ministry headed by Antony
What was to be spent on Pilatus trainer over 30 years will get over in just 7
Antony says let them investigate if they feel there is a problem with deal
India's 2012 order for 75 Swiss Pilatus basic trainer aircraft (BTA) for the Indian Air Force (IAF) has run into rough weather with the finance wing of the Ministry of Defence pointing out that 88 per cent of the acquisition cost over 30 years will be incurred in just seven years because of "inbuilt flaws" in the Rs 4,000-crore deal signed during the UPA rule.

The Ministry of Defence (Finance) raised the red flag in January this year after the IAF moved a proposal for Follow On Support Contract (FOSC) for five years at an estimated cost of Rs 507 crore for maintenance and related issues of Pilatus aircraft — almost three times the cost for repairs and maintenance presumed at the time of evaluation of the lowest bidder (L1).

The Indian Express has learnt that in August 2013, the Ministry of Finance, then under P Chidambaram, while giving a no-objection certificate, had asked the Ministry of Defence, then under A K Antony, to fix future cost escalation through "clarification of fixity of contractual prices given in the pre-bid conference".

"RFP for life cycle cost (LCC) used by MoD may be made clearer on a number of aspects such as the cost elements which would be incorporated in the contract, the specific items on which vendor would be bound by any escalation quoted by him, the manner in which evaluation would be done where escalation has been provided and the way various cost elements quoted by them would be binding on the vendor. MoD needs to revisit the RFP format"¦" the Ministry of Finance stated in its letter dated August 22, 2013.

The letter mentioned that "the instant case has been forwarded without specific views of MoD (Fin)".

The Ministry of Defence, it is learnt, raised the issue twice through Financial Adviser (Defence Services) in two notes — in January 2013 and April 2014 — given to Antony asking him to "revisit all these cases urgently to address the issues highlighted by MoF and a view taken on how to progress them further".

On October 24, 2014 — after the change of guard at the Centre — a Ministry of Defence note stated: "It is clear that the basis for MoF in giving 'No Objection' for procurement of 75 x BTA was clarification on fixity of contractual prices given in the pre-bid conference"¦ The argument that L1 vendor is L1 on the basis of both TCA (total cost of acquisition) as well as DAC (direct cost of acquisition) is not advisable as it will amount to denial of opportunities to vendor other than the selected one in view of the fact that issue of contractual fixity of price was not stated upfront in the RFP (Request for Proposal)."

So last Saturday, when the Defence Acquisition Council (DAC) cleared a proposal for the purchase of an additional 38 Pilatus, it put in a rider — purchase subject to examination of life cycle cost issues.

Reached for comment, former Defence Minister A K Antony said: "Let them investigate if they feel there is a problem."

The two orders for the Pilatus PC-7 MkII aircraft are to meet the IAF's desperate need for 181 BTA to train its pilots. The Hindustan Aeronautics Limited (HAL) will meet the remaining requirement by supplying the indigenous HTT-40.

The Indian Express has learnt that nine components, now part of an IAF proposal to pay Pilatus under the maintenance head, were not calculated during the request for proposal (RFP) stage before declaring it the lowest bidder.

This was an issue the South Koreans had also raised in 2011 after Korea Aerospace Industries (KAI) lost to Pilatus in the race for the contract.

"KAI is also confident that one of the bidders could not fulfill the requirements in RFP and DPP 2008 so that company should be disqualified in this tender process for fare and transparent competition," South Korea Defence Minister Kim Kwan-jin stated in a letter to counterpart Antony in July 2011.

The BTA contract was the first awarded on the basis of life cycle cost (LCC). Two components determine L1 (lowest bidder) under the new format: Direct Acquisition Cost (DAC) and LCC, the cost of operation spread over 30 years.

On January 9, 2015, the Ministry of Defence (Finance) red-flagged the deal: "The cost of acquisition with FOSC calculated with exchange rate at the time of L1 evaluation works out to Rs 3274.59 cr"¦ Thus 88.89% of TCA (Total Cost of Acquisition) will be incurred at the end of 07 years period (02 years warranty + 05 years of FOSC) as against Rs 3684.52 cr for 30 years arrived at the time of L1 evaluation."

"There is no independent validation of information provided by the vendor to validate the claims made by them for TCA elements"¦The actual life cycle cost could be much higher than the one used for L1 evaluation and may invite audit objections subsequently," the MoD (Finance) stated.

In an email response to queries from The Indian Express, a spokesperson for Pilatus said: "We are not in a position to respond to your questions due to our contractual obligations. May we suggest that you direct your questions to the appropriate GOI/IAF departments and it would then be at their discretion to release any information pertinent to your enquiries."

Ministry of Defence spokesperson Sitanshu Kar said: "While approving the proposal for acquisition of 38 new BTA from Pilatus, Defence Acquisition Council (DAC) has directed that approval will be subjected to examination of the life cycle cost related issues by Defence ministry's finance wing and subsequently by Ministry of Finance at appropriate stages."
 

Khagesh

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So that is how the costs of HTT-40 and Pilatus were coming out similar.

Chor chori say jaye h/khori say na jaye.


Broadsword: “Make in India” for HAL trainer, import of Swiss trainer capped

HAL rebutted that claim, convincing the MoD that the HTT-40 would cost Rs 38.5 crore, compared to the Swiss Francs 6.09 million price of Pilatus trainer, which comes to Rs 39.5 crore. When life-cycle costs were factored in, the indigenous HTT-40 would be far cheaper over four decades of service.
 

grampiguy

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What was that Mundu Antony doing all these years in the MoD? How can someone be so blind and inefficient and still land up there? What is the use of honesty when you are not fit for job? PATHETIC !!!
 

smestarz

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What was that Mundu Antony doing all these years in the MoD? How can someone be so blind and inefficient and still land up there? What is the use of honesty when you are not fit for job? PATHETIC !!!
He was trying to be clean, he ensured that someone else signed the recommendation,. in this case its former IAF chief NAK Browne who gave the fake figures for Pilatus, so Anthony can still claim that he did not do anything wrong.

But this actually makes me wonder how corrupt is IAF and to what level., if their air chief was involved, maybe there are more involved too. Maybe the present chief or air staff? Surely if the other air staff knew that something was wrong, why did they not inform the MoD?
 

Khagesh

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where is htt 40 on paper ? while pilatus serving saving lives of fresh pilots htt 40 is still on drawing board
Between a plane that was not even allowed to be developed and a plane for which financial engineering was done to induct it, you have already give the winner's podium to Pilatus.

Does it make any sense to compare a plane sabotaged to a plane which gets favoured like Duryodhan.

If Pilatus saved several lives does that exclude HTT40 from being able to better that record? Unless, off course, you want to argue that HAL cannot do it. In which case you have to explain why the Imported Air Force gave a more complex machine like HJT 36 to HAL.
 

sgarg

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Well Pilatus purchase through manipulation is similar to Rafale case where that plane was declared L1 through manipulation of life-cycle costs.

But Pilatus clearly had urgency in view of grounding of HAL trainers. So adequate number of Pilatus will be purchased so that training can go on unhindered.

The issue of Rafale is completely different as MMRCA is an add-on; not a basic capability. IAF has planes (and weapons) which can carry out Rafale missions.

But the import of trainer has to stop at some point. So HAL projects HTT-40 and HJT-36 are also given weight.
 

Lone Ranger

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Well Pilatus purchase through manipulation is similar to Rafale case where that plane was declared L1 through manipulation of life-cycle costs.

But Pilatus clearly had urgency in view of grounding of HAL trainers. So adequate number of Pilatus will be purchased so that training can go on unhindered.

The issue of Rafale is completely different as MMRCA is an add-on; not a basic capability. IAF has planes (and weapons) which can carry out Rafale missions.

But the import of trainer has to stop at some point. So HAL projects HTT-40 and HJT-36 are also given weight.
htt 40 is waste of time , no airforce in world operates 2 types of trainer
 

smestarz

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htt 40 is waste of time , no airforce in world operates 2 types of trainer
True, but then how many of those countries aim to be a super power? Either they produce their own planes, are importing them, none of the country aspires to produce a plane and imports it.

Further, how many of these countries have their air chief fixing the deal and writing to the minister of defence claiming that the imported plane is cheap but its not so and he does that in other and much bigger deal?

Though HTT 40 was on paper, it was still part of the competition and MoD did not objection to it and so considering if the bid was presented as it was, then Pilatus would not have won !!! The winner would have been HTT-40 and not pilatus

thus the pilatus was fixed by the air chief marshal that shows that brazen disrespect for Government of India so Pilatus is not even relevant.
 

Lions Of Punjab

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HAL TURNS UP HEAT ON HTT 40 PROGRAM

Dealt a new lease of life after months of friction with the Indian Air Force, HAL's HTT-40 program has got the necessary boost it needs to move quicker. A first flight of the basic trainer aircraft (BTA) is scheduled for June this year.

The MoD has indicated that the HTT-40 will be produced to meet a requirement of at least 68 aircraft (another 38 to be supplied by Pilatus). The MoD has additionally indicated that further orders will be extended to ensure the project, funded fully by HAL through internal accruals, to ensure the costs are fully amortized. The Department of Defence Production, the parent department to HAL, has also asked HAL to pre-plan export of the aircraft and open discussions with interested countries and clubs that may want to import the aircraft.

HAL will be studying how to market the aircraft, now just as a basic propeller trainer and leisure flying/aerobatics aircraft, but also for light strike and tactical reconnaissance on the lines of the Embraer Tucano. The HTT-40 was conspicuous by its absence at this year's Aero India after making its debut at the last show in 2013. Sources said that the first prototype at the HAL Airport was getting set for its first flight.

HAL turns up heat on HTT 40 Programme - SP’s Exculsive
 

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