The government should explain to the people, if not to a joint parliamentary committee, the rationale and numbers behind the Rafale deal

by T K Arun

Does Dassault Aviation CEO Eric Trappier’s clarifications to the Economic Times clear the air over the Rafale imbroglio? Not quite. Not just invisible PM 2.5 particles, some heavy-duty soot and dust still mar visibility. 

Chief among them: Was due process followed in arriving at the decision to change the contract from one for 126 aircraft, with 18 purchased in a fly-away condition and the remaining 118 to be manufactured in India by Hindustan Aeronautics Ltd in collaboration with Dassault, as negotiated by the UPA government, to a truncated order of 36 aircraft? If not why?

It is entirely plausible that the Air Force could not wait any longer to induct fresh aircraft and defence preparedness required the immediate purchase of planes, even as induction of a larger fleet was getting processed. Such a conclusion has to be reached by functionaries authorised to reach such a conclusion in the Air Force, the defence ministry and the Cabinet. We do not know as of today whether such functionaries arrived at this conclusion. Instead, what we do know is that objections were raised by senior defence ministry personnel to the terms of the deal, but were overruled.

Then, there is the mystery over the government’s failure to take cognisance of the Eurofighter offer, which, according to an ET report of August 23, was willing to lower its price by 20% and divert deliveries already committed to other air forces, to speed up deliveries to India. There could be valid reasons to forgo this offer, but we do not know if there, in fact, were such valid reasons and if they were evaluated.

Does the claim that the price per aircraft of the 36 plane deal is 9% cheaper than the price negotiated for the 18 plane deal in the earlier contract put at rest the charge of paying too much? Unfortunately not. The earlier deal was for 18 planes in a fly-away condition and 106 planes to be made in India, entailing extensive technology transfer and local capacity to supply spares and provide service over the lifetime of the planes, bringing down the lifetime cost of each plane significantly.

Compare two offers: one, two shirts for Rs 1,000 plus three pairs of trousers and two Sarees free, and another, three shirts for Rs 450 each. Is the second offer really cheaper than the first one?

Does the clarification put paid to the theory that Dassault chose Ambani as an offset partner because the government recommended the name? It does not. In all such deals, it is only natural for the government to suggest Indian partners. There is nothing inherently wrong with nominating any capable Indian business group for starting a defence joint venture making use of offset credits. The only issue is, what selection criteria were used to recommend the Anil Ambani venture, preferring it over others?

The Congress party’s claim that Anil Ambani’s company was to be the sole recipient of offset business worth 50% of the Rs 59,000 crore Rafale deal was tall to begin with. Why would Rs 29,500 crore, a kitty large enough to patronise at least half a dozen industrial groups and enlarge the private sector base of Indian defence production, be channelled to just one company? If that is a tall claim, the suggestion that the order going to the Ambani’s new defence firm has been just Rs 850 crore all along is vertically challenged, seriously. If some sturdy engineering company from say, an industrial cluster in Coimbatore had got such an order, it would be a proud moment for that company. But for the Anil Ambani group, which has borne debts of Rs 45,000 crore lightly on its books, the notion that its foray into defence production would be for Rs 850 crore, or less than 3% of the offsets on offer, is worth at least another defamation suit.

It is possible that the biggest casualty of the manner in which the Rafale deal has been handled is not the exchequer, nor the Air Force nor even HAL, but the Anil Ambani group’s defence foray, which, instead of getting a substantial chunk of business in India’s valid ambition to create a vibrant defence production industry, is now reduced to a small beginning.

The government should explain to the people, if not to a joint parliamentary committee, the rationale and numbers behind the Rafale deal. And have the courage to accept that the offsets business entails use of discretion in the national interest, not disavow use of discretion.