In the last few weeks, there have been a number of press conferences and social media posts on the Rafale deal. The term refers to the defence deal between the Indian and French governments. But is it really a scam? Let us understand what the Rafale deal controversy is, and if it is really a scam. Read on to find out.

by Harshita Swaminathan

What is Rafale Deal?

The Rafale controversy is with regard to the defence deal struck between the Indian and French governments, for India to acquire fighter jets from the French company Dassault Aviation. The tale begins in 2001 – after the Kargil War, India noticed a need for greater defence preparedness, so it decided to buy 126 fighter jets to strengthen its air force. In 2007, tenders were issued by the Indian government for procurement of Medium Multi-Role Combat Aircraft (MRCA) jets, calling for bids from vendors such as Boeing, Lockheed Martin, Dassault, etc. India tested all the fighter jets of these companies and when Dassault came out as the lowest bidder, decided to buy 7 squadrons (126 total aircraft) of the Dassault’s fighter jet, called the Dassault Rafale (which is where the issue gets its name).

The UPA government was in negotiations with Dassault to buy the 126 Rafale jets for a supposed $15 billion (estimates vary) with 18 jets in ready-to-fly condition and 108 to be manufactured by HAL (India’s government-owned aircraft manufacturer) through transfer of technology from Dassault, but negotiations came to a standstill when Dassault refused to guarantee the quality of HAL’s manufacturing. In 2015, after the NDA government came into power, negotiations were reopened, and the government decided to sign the deal with the French government instead of Dassault, so they would have greater assurance. Instead of buying 126 aircraft, the deal only included 36 aircraft for $8.7 billion, all in ready-to-fly condition to fulfil the immediate requirement, with deliveries beginning in September 2019.

What is the Rafale Deal Controversy All About?

This deal is seeing controversies because the Congress claims they had negotiated a better deal during UPA days. The opposition is alleging the NDA government agreed to an inflated price of the jets in exchange for personal favours or kickbacks for itself or its cronies. The NDA government had ordered 36 Rafale jets in ready-to-fly condition with India-specific enhancements, spare parts, missiles, and a guarantee that 75% of the jets would be in flying condition at all times, all for a price of $8.7 billion, compared to the old UPA deal of $15 billion for 126 aircraft.

Further, the choice of Anil Ambani’s Reliance Defence as “offset” partner for the offset clause of the deal has also sparked controversy– under Indian defence procurement rules, 30% of the total value of the procurement must be invested in India, either by manufacturing in India, buying raw materials from India, etc. The UPA deal included this 30% offset clause, but the Modi government has negotiated this to 50%, under which Dassault Aviation has partnered with Reliance Defence and other Indian companies. There have been allegations that Anil Ambani’s Reliance was chosen by Modi due to their close personal relations and there are some kickbacks involved in the deal.

Was Ambani Chosen Unfairly?

From the time of choosing of Reliance Defence as the offset partner, there have been allegations that Modi pushed Ambani’s company for their personal benefit. The allegations were denied by the Indian government and Dassault, stating that the choice of Reliance as offset partner was entirely of Dassault and the Indian govt had no role in Dassault’s decision. This issue was revived in October 2018, when Former French President Fran├žois Hollande made a statement saying that the choice of Reliance as Dassault’s offset partner was at the behest of the Indian government. French media outlet Mediapart quoted Hollande saying “We had no choice. We took the interlocutor that was given to us”. Mediapart also claims to have obtained a Dassault company document in which a senior official is quoted as saying working with Reliance was an “imperative and obligatory” part of the contract.

In response, a spokesperson for the Ministry of Defence tweeted “The report referring to former French President Mr. Hollande’s statement that [the Government of India] insisted upon a particular firm as an offset partner for the Dassault Aviation in Rafale is being verified. It is reiterated that neither [the Indian government] nor the French government had any say in the commercial decision”. Dassault too reiterated that they chose to partner with Reliance themselves– in their official statement, they said “…In accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group. This is Dassault Aviation’s choice”.

Another reason the opposition is alleging Reliance defence was chosen unfairly is because of their inexperience in the defence industry. Reliance Defence has countered this saying it has acquired Pipavav Defence, a well-established defence equipment manufacturing company, and has also secured contracts with the US Navy, so Reliance defence does have the credentials to fulfil this contract. This allegation is also irrelevant, as Reliance Defence is not to manufacture parts for the 36 Rafale jets– this is just for Dassault to fulfil the offset clause by investing in India. Anil Ambani wrote in a letter to Rahul Gandhi that not a single component worth a single rupee is to be manufactured by Reliance for these 36 jets.

Considering the statements by all the involved parties, it is not possible to conclude on whether Ambani was chosen unfairly or not, since there is evidence on both sides.

Was Rafale Deal Really A Scam?

The two deals are not comparable. What the UPA had negotiated in 2012 was an incomplete deal, as the $15 billion included only the cost of the aircraft and nothing else. The NDA government’s $8.7 billion deal includes the aircraft, spare parts, India-specific enhancements, missiles, and a guarantee from Dassault that 75% of the aircraft would be in flying condition at all times. Hence, simply dividing the total cost by number of aircraft does not make logical sense, since the new deal includes much more than just the aircraft. The earlier deal had only 18 aircraft in ready-to-fly condition, and the new deal has 36. Buying aircraft in ready-to-fly condition means paying for French manufacturing, among other additional costs, so ready-to-fly aircraft are more expensive, and this must be accounted for. Bulk orders are known to be cheaper, this is another variable we must factor in. Furthermore, the deals were negotiated at different time periods: in January 2012, the exchange rate for 1 USD was fluctuating around 50 INR, in 2016, it was hovering close to 67 INR.

The UPA’s negotiations were headed nowhere as Dassault was not ready to guarantee the quality of the 108 aircraft manufactured by HAL. HAL too was incapable of manufacturing the jets– in 2012, HAL said in a letter to the Ministry of Defence that observations by experts that HAL (Dassault’s offset partner-to-be) had the capacity to manufacture Rafale jets was incorrect. During UPA negotiations, there were reportedly serious differences between Dassault and HAL, and nothing was finalised. The UPA government was only at negotiations, no consensus had been reached– from finalising Dassault as the vendor in 2012 to end of the UPA government in 2014, the two parties had not come to a consensus on anything. The UPA government could not even secure a quality guarantee, in a multi-billion dollar defence acquisition. No parts of the deal were finalised, only a bare-bones figure of $15 billion was put out, so it was an incomplete affair that cannot be compared to the NDA’s final deal.

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