Concerns on 'Letter of Comfort': CAG

New Delhi: The Comptroller and Auditor General (CAG), in its report on the Rafale fighter jet deal with France, has highlighted the drawbacks of settling for a 'Letter of Comfort' rather than a sovereign guarantee by the French government.

The report, tabled in Parliament on Wednesday, noted that the 2007 UPA deal included a 15 per cent bank guarantee against advance payments.

Highlighting its concerns, the CAG observed that in case of a breach of the agreement, India would now have to first settle the matter through arbitration directly with the French vendors.

If the arbitration award goes in favour of India and Dassault Aviation, the makers of the Rafale jet fails to honour it, India will have to exhaust all available legal remedies, it said. Only after that will the French government make the payments on behalf of Dassault Aviation, it added.

India for the first time signed an Intergovernmental Agreement (IGA) with France to procure 36 Rafale fighter jets. It has earlier signed similar IGAs with the US, the UK and Russia.

In the 2015 offer with the present government, the French vendor did not furnish any financial and performance bank guarantees, the report stated.

The report on the controversial Rs 59,000 crore Rafale deal has also found that the agreement signed by the NDA government in 2016 for 36 jets was 2.86 per cent lower than the price negotiated by the UPA government for 126 aircraft.