The Modi government’s decision to purchase Rafale fighter jets from France continues to be shrouded in controversy. There are now allegations that the deal is marked by overpricing and crony capitalism. But this controversy is more political than economic. It is nothing but a storm in a teacup. But then I am surprised at the utter incompetence of this government in losing a “popular battle” to Congress President Rahul Gandhi, BJP turncoats Arun Shourie and Yashwant Sinha and the lawyer Prashant Bhuashan( who, to the best of my memory, has not won a single case of corruption that he alleges but earns tremendous publicity in the process).
“Repeat a lie often enough and it becomes the truth”, is a law of propaganda often attributed to the Nazi Joseph Goebbels. This is exactly the case now with the so-called Rafael scam. In fact, I now see that many hardcore supporters of the Modi government and many BJP loyalists, including MPs, even believing that the Modi government has done “something wrong” in the Rafale deal. The Modi government’s officials and the spokesmen of the ruling BJP have been utter failures in repelling the growing perception that the procurement of 36 medium multi-role combat aircraft (MMRCA) Dassault Rafale fighter jets, as concluded by the Modi government in 2015, is the biggest scam pertaining to Indian defence and security. Now that the election-season has set in, the saga of Rafale, more than a decade now, has got embroiled in the country’s highly competitive domestic politics.
The utter incompetence of the government and its spokespersons is all the more unfathomable when there have been articles, even though small in number, that have been published to prove the spurious logic of the critics against the deal. The crucial question that the Modi government is not asking its critics is : was there any “concluding deal” between the Hindustan Aeronautics Limited (HAL) and the Rafale manufacturer Dassault Aviation, the L1 or lowest bidder, during the UPA raj? What was agreed between these two in 2012 was based on this L 1 provisions(which were offered sometime in 2007). But subsequently, the HAL and Dassault could not agree on the final deal that would have talked of the price and other terms and conditions. In fact, Dassalut was not convinced of HAL’s competence to deal with the Rafale technologies and hence was not prepared for the responsibility of the quality of the 108 Rafales that were to be manufactured at HAL. Besides, Dassalt could not agree to the astounding labour cost that the HAL quoted, which it thought was more than what it would cost in France. In fact, had Dassault agreed to the price the HAL demanded, it would have lost the L 1 status! So it is really absurd to hear Rahul Gandhi saying that prices decided upon under his government were much lower than what Modi agreed for. There was no agreement on final pricing of the aircraft under the Manmohan Singh government. So what is the basis of the comparison?
Not long ago, in Geopolitics , a strategic publication of which I also happen to be the editor, I had published a series of articles in this regard. In the current issue of this magazine, I have republished some of them.
In essence, the Congress (through Rahul Gandhi and the official spokesperson Randeep Surjewala) has five issues with the deal that was officially signed on September 23, 2016, though it was announced by Prime Minister Narendra Modi in April 2015 at Paris during his visit to France. One, the deal did not undergo established official Defence Procurement Procedure (DPP). Two, the Modi government violated and bypassed the interests of Hindustan Aeronautics Limited (HAL), which was supposed to co-produce the fighter planes as per the original Agreement in 2012, as made by the Congress-led UPA government. Three, while the Modi-government signed the $8.7 billion deal, costing each plane Rs 1570 crores, as per the UPA negotiated price, the cost of one plane was Rs 526.1 crores. Fourthly, the deal seems to have been made not to benefit the Indian Air Force (IAF) but the “crony capitalist” Anil Ambani’s Reliance Defence. Surjewala finds it intriguing that “while India signed the $8.7 billion deal on September 23, just 10 days later, on October 3, 2016, Reliance Defence Limited entered into a joint venture with the French fighter plane maker Dassault” without any clearance from the government.
Though the Congress has not said it as such, another major criticism against the Modi government is that if it was not happy with the deal on Rafale made by the UPA government, it should have cancelled the deal
and brought out new vendors to compete again for better price discovery and cost negotiation. In fact, some military analysts argue that India did not need any Rafale as the IAF could be better by having more Russian Su-30 MKI.
All these are interesting questions. The government has found it easier to handle some of them; but it has not given a clear answer on the issue of pricing. Procedurally, the government has a point when it clarifies that the approval from Cabinet Committee on Security (CCS) was taken before signing of the final agreement in September 2016. As the Prime Minister, Modi did have the prerogative of taking a broad decision on it earlier by taking the then defence minister Manohar Parrikar into confidence. In any case, the union cabinet has endorsed the Prime Minister’s decision in Paris, after five rounds of subsequent discussions between the two governments. Here, it is important to note that the decision was by two governments of India and France, which are to be accountable to this “inter-governmental” deal, whereas the earlier one in 2012 between the HAL and Dassault was a “commercial deal”. And when it is a government-to-government decision, there is no scope for any corruption or scam as such (it will be preposterous to say that the then French President Hollande bribed Modi to clinch the deal).
As regards the role of the Reliance Defence, the fact of the matter is that the latest deal has unusually(and it is to the great advantage of India) made the French vendor to invest in Indian defence industry as high as 50 percent of the deal-price as offset provisions as against the standard 30 percent requirement. And in this, as the accompanying article discusses, Dassault itself is a partner of the Reliance to maintain the technological edge. The joint venture between Reliance Defence and Dassault is between two private entities and as Reliance Defence has said, the Modi government didn’t have a role. “Government policy issued on 24 June 2016 allows for 49% FDI in the Defence Sector under the automatic route, without any prior approval. No approvals from the Union Cabinet or CCS were required for the formation of the aforesaid Joint Venture Company under the automatic route.” Of course, one can ask as to why Dassault chose Reliance as a partner in India, but it is in the realm of speculation that the French company was “coerced” by the Modi government on its choice of partner in India.
Now comes the crucial issue of pricing-difference between what was the case in 2012 and that in 2016. The latest one will cost India about Rs. 58000 crore or so (Euro 7.8 billion) for 36 off-the-shelf Dassault Rafale twin-engine, fourth generation multirole fighter aircraft, 15 percent of which will be paid in advance. MBDA Missile Systems of France will supply the weapons package, and that country’s Thales Group will be responsible for the fighter jet’s avionics. It is also understood that the first Rafale warplanes are slated to be delivered roughly within 18 months of the signing of the final contract, during which suggestions of the IAF for any customised version of the aircraft, including modifications and reconfigurations to allow the installation of Indian-made and commercial-off-the-shelf systems and weapons, will be taken into account.
The deal also envisages the conclusion of an accompanying offset clause, according to which France will invest 30 percent of the Euro 7.8 billion dollars in India’s military aeronautics-related research programmes and 20 percent into local production of Rafale components(along with its Indian partner). Besides, French defence contractors will supply radar and thrust vectoring for missiles technologies. In addition, the French are believed to be willing to invest 1 (one) billion Euros to revive the Kaveri engine project, according to media reports. They are also ready to share engine technology, by keeping Prime Minister Narendra Modi’s “Make in India” mission in mind. This will help enormously our indigenous LCA (Light Combat Aircraft) Tejas project. Dassault, the manufacturer of Rafale, has also shown its willingness to partner with a private Indian company to manufacture structural parts for its Falcon executive jets.
In other words, the deal has to be seen as a package, not exactly on the basis of cost to a single aircraft per se. Though strangely the government has not yet given breakups of the cost, open military sources say that the latest cost includes not only the 5 percent inflation over the 2012 pricing but also additional programme costs of simulators, training, infrastructure and India-specific modifications in the aircraft(like Active Electronically Scanned Array or Aesa radar and helmet-mounted sight).
The 2102-price was based on the pricing of all the 126 aircraft, bulk of which was supposed to be produced in HAL (108); thus, the pricing per unit was bound to be lower at a first glance. On a close scrutiny, however, things were different. If the 2102-deal under the UPA government was not formally clinched by the time Modi assumed office in 2104, it was essentially because the deal was completely deadlocked with Dassault refusing to certify key components of the jet which were to be built HAL unless a series of conditions were met. As mentioned above, the two fought also over the manpower costs. Reportedly, HAL said that manpower costs would be nearly three times higher in India and so it would cost more to build the Rafale jets here, which was disputed by the French company, which said it wouldn’t. They could not reach an agreement.
Against this background, did the Modi government have any option other than going for an intergovernmental deal with a smaller number of 36? We know the critical state of the IAF these days – “In Air (without) Force”. Given India’s geopolitical challenges, IAF would love to have 45 squadrons (each squadron usually has 12 to 18 aircraft); at least 42 squadrons. Presently, IAF has 35 squadrons, though, according to a Parliamentary Standing Committee news on Defence, a tangible strength (implying fighting- conditions) might be down to 25 squadrons. As a result, the IAF has been heavily banking on the MMRCA deal, along with the indigenous production of Tejas – both Mark 1 and Mark 2 – in the Light Combat Category (LAC) and the Fifth Generation Fighter Aircraft (FGFA), to be co-developed with Russia. The IAF, at the moment, is heavily dependent on Su-30 MKI (from Russia). Unfortunately, the Su-30MKI has been plagued by multiple systems failures. Its capacity to air-deliver a nuclear payload deep inside China — has been in doubt.
As my friend noted defence analyst Abhijit Bhattacharyya says, “ The inevitable fall out of the protracted negotiation and the consequential adverse effect on the forces appear to have had inflicted an invisible cost overrun in another front. Delays of Rafale procurement compelled the IAF to extend the operational life of its ageing and vintage air assets, well beyond their retirement date/life. Understandably, successive Air Chiefs were upset and expressed their concern. And rightly so, because old machines mean more time on ground (aircraft on ground) and less time in the air. Its logistics, spares, maintenance and technical personnel, all become more expensive and at times scarce. It simply compromises with the quality of operational preparedness as well as training of the flying and technical crew. It is a nightmare and a potential failure on and off the air.
“What then was the course of action available to India when the Indian delegation, led by the Prime Minister Narendra Modi, faced a stark reality in Paris in 2015? Rafale had been chosen but the final contract was in deep freeze. Almost 30% of Air Force operational squadrons were virtually non-operational owing to under-strength fleet. Cost escalation had reached alarming proportions. Defeated (vendor) rivals were up in arms to make another desperate attempt to push out the Rafale. Foreign ambassadors were giving audacious press statements castigating the Indian choice of an ‘inferior’ flying machine.
“Cancellation of the Rafale contract would have put the clock back! Again another “request-for-proposal” to “selection” of the aircraft would mean an additional 4-5 years! And by that time Indian Air Force would emerge as a “force on paper” and with a prominent foot note of history book chapter describing it as “the glorious air force that was”? Not a very pleasant situation to be faced by any Indian Prime Minister when his foreign visit is meant to be for capital infusion, trade collaboration, favourable investment environment and industrial co-development. Undiplomatically speaking, it was an unthinkably adverse climate. ‘Now or never flight envelope’ of the Indian Air Force compelled India to go for a deal which is bound to be raised by critics and cynics alike in future. All the more, by those who had a high stake (legal or illegal) for the continuation of the original “deal” which had begun 2007. Hence, though the present outright purchase of 36 aircraft (which means 2 squadrons) tactically (in short term) and technically possibly cannot be faulted, the strategic (long term) acquisition needs urgent overhaul.”
It is true that 36 Rafale are not enough to feel the void. That was why the original requirement was 126. This is a powerful argument cited by the critics against Modi. But then the fact remains that 36 were the bare minimum that the IAF needed to keep its fighting edge for the moment. It needs more and that is why the Modi government has recently floated a new tender inviting vendor interest for supplying 110 MMRCA fighter aircraft. In other words, stage has already been set for MMRCA 2.0.
It may be noted that the Rafale saga started in August 2007 when India floated its Request for Proposals (RFP) for the MMRCA. Over the next two years, six companies entered the race—the American Boeing F/A-18E/F Super Hornet and Lockheed Martin F-16IN Super Viper, the French Dassault Aviation Rafale, the Russian RSK MiGs MiG-35, the European Eurofighter Consortium’s Typhoon, and the Swedish Saab Gripen NG (Next Generation). In between 2009 and 2010, the Indian Air Force (IAF) supervised trials and demonstrations in the home countries of these manufacturers as well as in Indian locations such as Bengaluru, Jaisalmer, and Leh.
It is said that the IAF tested these aircraft by 660 technical benchmarks. It also took into account the RFP’s requirement that 60 per cent of the aircraft’s technology be transferred to India in four phases. Of the 126 aircraft, the first 18 were to be delivered in a flyaway form by the original equipment manufacturer, with the remaining 108 to be assembled in India through a combination of kits supplied by the foreign seller and indigenous Indian production. The idea was to ensure that 50 per cent of the foreign exchange component of the purchase costs was defrayed through direct of sets within the Indian aerospace sector. Finally, on the IAF’s feedback, the Ministry of Defence (MoD) opted for the Rafale in 2012 in about 10 billion dollars, but the price subsequently was hiked by the Dassault Aviation Company to 22 billion dollars. Meanwhile, dirty campaigns were made by many who had argued for other bidders that quality-wise Rafale was inferior to Erofighter Typhoon, or for that matter to Boeing’s F-18 and Lockheed’s F-16. A Russian Ambassador to India claimed that Chinese Sukhoi Flankers (sold by Russia) “will swat the Rafale like mosquitoes”. A senior member of the ruling Bharatiya Janata Party had said that but for the kickbacks received by senior functionaries of the then Congress-led government under Manmohan Singh, Typhoon, not Rafale, would have been the choice.
These charges against Rafale may not hold water. All told, the IAF was deeply impressed with it during the trials for the bid. The Rafale’s greatest strength, especially in the air combat arena, is its ability to acquire, process and fuse information from multiple sensors and present it to the pilot in a single tactical display. During its trials, the IAF pilots were said to be greatly impressed by the aircraft’s remarkable cockpit ergonomics and human factors engineering as manifested in its sensors, controls, interfaces, and displays. In fact, the Rafale performed, and this factor might have tilted the scale in its favour, much better than the Eurofighter during the NATO-operations in Libya and Afghanistan. The second great advantage that it had over its rival was that it could be very well mastered by the pilots of the French Mirage 2000, which India already has. A pilot of a Mirage can very easily be trained to fly a Rafale.
Another factor in favour of the Rafale is that it could be the best platform for India in near future for delivering the nuclear weapons against the enemies. Of course, our nuclear doctrine (if at all there can be said to be one) is based on the concept of a triad – delivering weapons from air (aircraft), ground (missiles such as Prthivi and Agni) and water (submarines such as Arihant). Arihant, however, is not fully functional as yet. Our land-based launchers still need much more rigorous testing regimens to be hundred percent reliable. Therefore, it is an open secret that at the moment the best delivery platforms for nuclear weapons happen to be the French Mirages, which were modified by the Dassault (also manufacturer of Mirage) in the 1990s at India’s request by keeping nuclear weapons in mind.
It is in this context that while choosing Rafale over other five contenders in 2102, the Indian government had taken in to account not only the factors of technology transfer, prices and performance but also the importance of France as a strategic partner of India. It is true of every major country that geopolitical factor plays an important role in big-ticket purchases. As it is, the IAF was a satisfied user of long standing of French fighters, going back to the 1950s. It was also particularly appreciative of the performance of French Mirages during the 1999 Kargil campaign against Pakistan, and of the support it then obtained from France. During that campaign, India , and this is extremely important to note, obtained French clearance – and possibly more – to urgently adapt Israeli and Russian-supplied laser-guided bombs to the Mirages, which were thus able to successfully engage high-altitude targets that Indian MiG-23s and MiG-27s had been unable to reach.
It is noteworthy that France’s steadfastness as a military ally contrasts strongly with that of the United States, which has never been a reliable supplier of military items and technologies not only to India but also to its traditional allies. It vetoed or slowed components for LCA that India is developing. It had imposed otherwise arms embargo on India following its nuclear tests in 1998. Similar geopolitical reasons went against the Eurofighter, jointly made by Germany, Italy, Britain and Spain. Not only these countries had reservations on the technology transfer, the fact also remained that their reliability during a War was a suspect. After all, if there is a war, German laws prohibit deliveries of weapons and spares. Italian and Spanish laws are not clear on the issue. France, on the other hand, is the only major Western nation (other than Russia) not to impose sanctions on India.
Viewed thus, Rafale has further cemented the growing Indo- French strategic relations. All told, France has been the first Western power to have supported India’s claim for a permanent membership of the UN Security Council. France, unlike its other partners in the Western Alliance, did not impose any sanctions on India after the latter went nuclear in 1998; in fact, it did not even “condemn” the nuclear tests. Besides, France was the first country with which India conducted a joint naval exercise called “Varun” after the 1998 nuclear tests; this exercise has become quite frequent over years. Similarly, the IAF’s first bilateral exercise in 2003 with a foreign counterpart—“the Garuda I”— was again the French Air Force.
India’s choice of Rafale has come at the top of three existing defence projects with France—the 50000 crore for six Scorpene submarines, nearly Rs 15000 crore upgrade for 51 Mirage-2000s and about Rs 10000-crore acquisition of 490 MICA missile systems. Additionally, France is all set to provide nuclear reactors for power generation. In short, the going is pretty good as far as the Indo-French friendship is concerned.