The debate on the Rafale deal. Who is right?

  08-Sep-2018 14:26:09

Rafale NDAUPA FranceIndia

The debate on the Rafale deal. Who is right?

The Rafales are twin-engine Medium Multi-Role Combat Aircraft (MMRCA) manufactured by Dassault Aviation, a French firm. Rafale fighter jets are positioned as ‘omni role’ aircraft that are capable to perform a wide range of combat roles such as air supremacy, interdiction, aerial reconnaissance, ground support, in-depth strike, anti-ship strike and nuclear deterrence.

As news broke that India and France had finally agreed upon the terms and conditions for the purchase of 36 Rafale jets, by the former from the latter, it was probably greeted with relief rather than joy. Dassault, the French aviation company that manufactures the Rafale, had won the tender in January 2012 but had been locked in negotiations with the Indian government over the technical details ever since.

Four companies participated in the competition - Saab, Mikoyan, Lockheed and of course, Dassault, the company that eventually got the contract. However, Rafale was not India’s only choice. Several international aviation manufacturers expressed interest upon knowing the Indian government’s mammoth plan to revamp its Indian Airforce fleet by introducing MMRCAs. Six renowned aircraft manufacturers competed to bag the contract of 126 fighter jets, which was touted to be the largest-ever defence procurement deal of India. The Rafale's similarities to the Mirage 2000 that the IAF already operated, its lower life-cycle costs, and its naval and nuclear strike variants clinched the deal for Dassault.

Although the deal was originally envisaged to be for 126 aircraft with an option of 74 more, the final agreement has seen the number drop to 36. Projected to cost $12 billion in 2012, the estimated expenditure has also come down to $7.88 billion. The negotiation of the deal has brought the price of the deal down by $750 million as compared to the deal negotiated by the UPA government

Dassault also agreed to make India-specific modifications to the planes, allowing the integration of Israeli helmet-mounted displays. Additionally, MBDA, the European missile manufacturer, will provide Meteor, an air-to-air missile with a beyond-visual-range over 100 km, and Storm Shadow (known as Système de Croisière Autonome à Longue Portée – Emploi Général or SCALP in the French military), an air-launched cruise missile with a range of over 560 km, with the Rafales. Both these acquisitions will significantly improve the reach of the IAF, allowing them to shoot deep into enemy airspace or territory without crossing any international boundaries. Integration of the Brahmos-NG, a smaller version of the Brahmos supersonic missile, will make the Rafale a lethal platform by land or sea.

A complete transfer of technology, including for the Thales RBE2-AA radar and software source code, spare parts, maintenance, training, and a guarantee of 75 percent operational availability for the first five years takes the price of the package up from a base price of $3.8 billion for just the Rafales to the final number. A 50 per cent offset agreement obligates Dassault to re-invest half the money from the deal in India again, creating hundreds of new jobs.

Why is the deal important?

Dassault bagged the contract to provide 126 fighter jets, as it was the lowest bidder and the aircraft was said to be easy to maintain. Indian Air Force sought additional fighter jets in 2001. The current IAF fleet largely consists of heavy and light-weight combat aircraft. So the Defence Ministry considered bringing in intermediate medium-weight fighter jets. Though the idea has been around on this since 2001, the actual process began in 2007.

Rafale jets are currently being used mostly by France and also by Egypt and Qatar. Dassault is hoping that export of Rafale jets will help the company meet its revenue targets. India was the first country that agreed to buy Rafale after it was used in Libyan airstrikes. If India inducts these jets in its military fold, other nations could express its willingness to buy Rafales.

And India chose Dassault over its traditional partner Russia’s MiG. It also ignored U.S.’ Lockheed, at a time when India and U.S. were aiming for closer ties. Procurement of combat aircraft is long overdue for the Indian Airforce. This deal is being seen as India’s biggest ever procurement. In the effectiveness of the Rafale deal lies the future of other defence procurements.

Corruption allegations

The Indian government’s deal to purchase 36 Rafale fighter jets, first announced during a 2015 state visit to France, is now in the headlines due to allegations of overpricing and crony capitalism.

The controversy began with the selection of the Rafale fighter jets by the Congress government in 2012 to meet the IAF’s requirement for 126 combat aircraft. As the deal hit a deadlock, the Modi government scrapped the process to purchase 36 Rafale fighters. Now, the Congress has raised questions on the cost of each jet and alleged industrialist Anil Ambani was unduly favoured in the deal.

According to a report by The Print, in 1996 India signed a deal with Russia for Russian Su-30 MKI fighter jets to be procured in five batches. The deal cost India approximately 1.46 billion USD. The Sukhois were the last fighter jets to be bought by India till date. Then on 4th January 2001, the indigenous Light Combat Aircraft ‘Tejas’ completed its first flight, but it was clear that the project was nowhere near completion. The jet was finally inducted in the air force only in 2016. Meanwhile, the ageing MiG 21 fleet’s shelf life was drawing closer and the IAF began its search for a new multi-role fighter.

Further in 2007, tenders for 126 Medium Multi-Role Combat Aircraft (MMRCA) fighters were issued by India. The was a competition between the French Rafale, Russia’s MIG-35, the Swedish Saab JAS-39 Gripen, American Lockheed Martin’s F-16, the Boeing F/A-18 Super Hornet and Eurofighter Typhoon. Only the Rafale and Typhoon made the cut. Five years after the tenders were issued, in 2012, Dassault emerged as the lowest bidder. Of the 126 jets required, 18 fighters were to be imported “in a fly-away condition”. Hindustan Aeronautics Ltd. (HAL) was to manufacture the remaining 108 jets with technological assistance from Dassault.

However, India and France were unable to decide on a price for the jets and the deal was stalled in 2014 when the work share agreement between HAL and Dassault Aviation was signed on 13th of March that year. But with the BJP-led NDA government coming to power, clarity on the progress of the deal remained unclear. Defence Minister Arun Jaitley said that a ‘considered decision’ will be taken. Dassault’s competitor Eurofighter Typhoon made a last-ditch attempt by offering a 20 per cent cut in price.

In 2015, prime minister Narendra Modi visited Paris in April, and India announced its decision to buy 36 Rafale fighters via a government-to-government deal. New Defence Minister Manohar Parrikar said that the previous 126 fighter jet deal is dead, and now the 36 fighters will be bought after negotiations.

In 2016, when French President François Hollande made a visit to India in January, a memorandum of understanding on the purchase of Rafale jets was signed for $7.8 billion.

Then in 2017, Congress claimed to smell a rat, alleging a “huge scam is brewing”, and raised doubts about the deal. The main claims that have since emerged are:

●The PM announcing the purchase of 36 jets without the defence minister’s presence and an inter-governmental agreement, is stated as being against Defence Procurement Procedure.

●The UPA government inked its deal worth $10.2 billion with a transfer of technology agreement but critics argue the new Rafale aircraft is now worth $8.7 billion. It is claimed the 126 Rafale jets would have cost $30.45 billion (without transfer of technology) as per the price arrived at by the Modi government.

●Since Dassault is no longer obliged to share technology with HAL, and Reliance Defence Ltd. has emerged as a key alliance player, the Congress alleges it is a move to “promote the interests of one industrial group”.

Keeping aside the political slugfest between the BJP and the Congress, the deal has thrown up some issues which are of paramount importance in protecting the national interests of the country. The national daily Hindu claims that the deal was changed to incorporate Reliance Defence Ltd in the place of PSU HAL. This change was on a very short notice and allegedly occurred just 50 days before the announcement of the deal by the Prime Minister.

The NDA government took power on May 26, 2014, and by that time, the final understanding with the UPA government was reached for the purchase of 126 Rafales which involved the outright purchase of 18 fighters and the manufacture of 108 more in India on the basis of the transfer of technology. This is the most important part of the deal as this would have helped HAL to technologically upgrade the country’s R&D. This would have been a good thing for India's defence sector as generally, the big foreign defence manufacturing companies are very reluctant on technology transfer. The UPA government got this done in early 2014 and the French company, Dassault Aviation signed a detailed work-share agreement with HAL in March 2014 to have a transfer of technology and production of Rafale in India. Even in February 2015, eight months after Modi became the prime minister, there was no change as far as the French company was concerned. On February 19, 2015, fifty days before Indian PM’s surprise announcement about new Rafale agreement, the CEO of Dassault Aviation, Eric Trappier, told pressmen that he was confident on completing the final negotiations and signing the deal for a full complement. HAL was in the picture as the collaborator. Then again on March 25, 2015, Trappier said in the presence of the HAL officials, “You can imagine my satisfaction to hear from the HAL chairman that we are in agreement for the responsibilities sharing, considering as well our conformity with the REP in order to be in line with the rules of the competition. I strongly believe that contract finalisation and signature will come soon.”

Thus, even fifteen days before the PM’s announcement scrapping the role of HAL and bringing down the number from 126 fighters to 36, HAL was actively involved as far as the French are concerned. But in time, things went in a different direction at the time of the announcement. The dropping of HAL and induction of Reliance Defence was the decision of the Indian government and not of the French company. PM announced his decision on April 10, 2015, but even two days before the announcement was made, the Indian foreign secretary S Jaishankar, had no inkling that such an announcement would be made and HAL would be excluded. So all indications suggest that this monumental decision, having prime importance for the defence forces of India, was taken by the PM without going through the normal procedures with checks and double checks.

Jaitley’s question charging Rahul of giving contradictory figures make no sense as the former defence minister Manohar Parrikar himself gave contradictory figures about pricing after the PM announcement. This indicated that he himself was not in the know of full details of the deal. The best course would be for the government to disclose the prices. The experts are quoting the price of Rs1611 crore per plane which is nearly three times more than the price allegedly agreed to by the UPA government in negotiations in early 2014. If the government is confident that the pricing under the Modi agreement is far more favourable compared to the pricing under the UPA government draft, it will be desirable for the NDA government to officially disclose the prices and nail the Congress “lie”. If Jaitley can prove that the Rafale deal has been in national interests and the prime minister has been able to extract a much better deal compared to the UPA, this is the best time to disclose the prices and nip in the bud all 'propaganda' by Rahul Gandhi and the opposition. '

In this debate, several new points and issues are being raised every other day and thus making it difficult to come to a conclusion deciding who is right and who is not. It is important that the government disclose the up with the actual purchase prices of the aircraft to bring this debate to an end.

Written by:

Rolly Singh