Party's senior spokesman Anand Sharma attacked the government for ignoring the objections of Singh, who was the Minister of State for Defence till earlier this week, and the offer of BEL for partial manufacturing.
Sharma said this was all the more serious as the minister in a letter in 2015 had raised the objection contending that a single vendor will push up the price.
Reports had it that days before his exit, Rao Inderjit Singh had a "major row" in a ministry meeting over the gun deal, in which he accused the Army and Ministry of Defence's Acqusition wing of "unfair selection" in the contract.
Raising questions over creation of a single vendor system, the Congress leader alleged that the working style of the Modi government is "not transparent" especially in connection with the defence policy.
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"Contrary to what the government says, they have compromised with the defence preparedness of India in a very serious manner", Sharma alleged and claimed that there is an "arbitrariness".
"All critical decisions on defence acquisitions is being made by a small cabal," he claimed, accusing the Prime Minister of "undermining" the Cabinet Committee on Security.
Citing an example, Sharma recalled that government's first decision was on Rafale jets. "They said 36 jets will be bought but shared no other information."
"Where they have proceeded with decisions, a shadow has been cast on the processes," he said, expressing concern over reduction in the outlay for capital acquisition.
Noting that FDI in defence was permitted earlier also, he said the then governments had insisted on scrutiny of investments of over 26 per cent.