Rafale deal Its confidence bolstered by the PMO, the Manohar Parrikar-led MoD drove a hard bargain with the French government on Rafale deal

by Nitin A Gokhale

Apart from a hug and a wink that hijacked the debate on the ‘no-confidence’ motion in Parliament for a while last Friday, one of the other contentious issues raised in the Parliament was the acquisition of Rafale fighter jets by India in 2016. Congress leader Rahul Gandhi essentially made two claims on the Rafale issue: First, the NDA government paid an inflated price as compared to the UPA’s price for the fighter jets and two, the government favoured a private company over the Defence Public Sector Unit, the Hindustan Aeronautics Ltd or HAL. On both counts, the man who aspires to become the Prime Minister of India one day was economical with the truth.

For one, the UPA government had been unable to arrive at a price for Rafale jets despite a tortuous seven-year-long process. The events need a bit of a recap to put the matter in the right perspective. The competition to acquire 126 Medium Multi Role Combat Aircraft (MMRCA) for the Indian Air Force began in 2007.

In 2010, the evaluation committee of the IAF shortlisted two aircraft — the Eurofighter Typhoon and the Rafale aircraft fielded by the Dassault Aviation (DA) — after vigorous field trials and forwarded the recommendation to Defence Minister AK Antony. Antony took almost a year to accept the recommendation. It was already 2011.

For the next two years, certain aspects related to License Manufacture of 108 aircraft in India with HAL as the lead production agency could not be finalised. Major differences occurred on the aspect of ‘Man Hours’ that would be required to produce the aircraft from kits in India and who would take the responsibility for entire lot of 126 aircraft. While the DA maintained that the 31 Million Man Hours it has proposed should be sufficient to produce 108 Rafale aircraft in India, HAL was asking for mark up of this Man Hours by 2.7 times. This became the bone of contention between the government and the French manufacturer.

The UPA government, with an overly cautious AK Antony as the defence minister, instead of imposing a deadline for the French manufacturer to comply with the terms of the RFP, dragged its feet and allowed Dassault Aviation to get away with obfuscation. Moreover, in an unusual move, Antony instructed the Cost Negotiating Committee (CNC) to bring the file back to him after concluding the CNC to re-examine the integrity of the process before proceeding to finalise the contract, creating confusion and doubt in the minds of the officials who were negotiating with the manufacturer. Even as talks got deadlocked, the government changed in Delhi.

As the new political leadership was briefed about the impasse, MoD officials were told to try and break the deadlock as soon as possible since the IAF’s fleet of fighter aircraft was depleting alarmingly. On November 10, 2014, meanwhile Manohar Parrikar took over as Defence Minister.

As the CNC members took the matter to Parrikar, he realised the process had been convoluted to such an extent that it would have been impossible to take it forward. He, however, knew from the briefings given by the IAF, there was no time to lose in acquiring fighter jets. The number of effective squadrons was going down rapidly. Parrikar realised that another round of MMRCA kind of competition would have taken enormous time and effort. So he took the matter to the Prime Minister and briefed him about the necessity of procuring the fighter. At the same time, Parrikar told Modi it would be legally untenable to go through with the MMRCA contract since the process had got vitiated completely, thanks to Antony’s indecisiveness and a crucial oversight in the original terms of the contract.

Under the circumstances, there was no alternative but to withdraw the original tender. Parrikar told Modi since the CVC (Central Vigilance Commission) guidelines provide that negotiations cannot be held with the competitor who has come second in the contract (L2 vendor in officialese), the only way was to scrap the tender and buy a minimum number of Rafale jets off the shelf to fill a critical gap in the IAF’s inventory. The Cabinet Committee on Security (CCS) gave its approval to the new proposal before Modi left for Paris on April 9, 2015.

Once the in-principle decision was taken, it was left to Parrikar and his team in the MoD to negotiate the eventual price for buying the 36 jets. Their confidence bolstered by the PMO, the Parrikar-led MoD drove a hard bargain with the French. But it wasn’t until another 15 months later — in September 2016 — that India finally signed the contract.

The final negotiated price for 36 Rafale package, along with initial consignment of weapons, Performance-based Logistics (PBL), simulators along with annual maintenance and associated equipment and services was fixed at 7890 million Euros. The average unit cost of Rafale aircraft thus turned out to be 91.7 million Euros (going by the Euro-to-rupee conversion rate at the time of signing the contract it meant each aircraft would cost Rs 688.30 crore and not Rs 1500 or Rs 1700 crore as quoted by some analysts). Under the scrapped MMRCA, the French were asking for anything between 100 and 110 million Euros per aircraft and without India-specific enhancements.

The lower price apart, the Rafales for IAF will have 13 India-Specific Enhancement (ISE) capabilities which are not present in the Rafale aircraft being operated by other countries. These enhancements will provide a significant capability edge to the IAF over India’s adversaries.

Clearly, Rahul Gandhi is unaware of these facts or is deliberately choosing to ignore the reality. Also, to say a private company, allegedly close to the Prime Minister will stand to benefit because of nepotism, is also contrary to facts. Dassault Aviation like any other original equipment manufacturer is free to choose its offset partners. Several private companies and not just one besides the Govt of India’s Defence Research and Development Organisation (DRDO) will execute the offset obligations (supply defence industrial goods, or absorb some of the technology) and NOT co-produce Rafale as described by the uninitiated. Clearly, the Congress is hoping that noise will prevail over facts.

The writer is a strategic affairs analyst, author and founder of BharatShakti.in, a specialised defence website