According to the 2013 defence procurement policy under which the Rafale jets were bought, the CCS approvals are mandated only at the end of the process for final financial approval

by Manu Pubby

As the defence ministry prepares to submit the full details of the decision-making process on the Rafale deal to the Supreme Court, it has emerged that the Cabinet Committee on Security (CCS) gave its stamp of approval to all key process related decisions in the run-up to the signing of the fighter jet contract.

ET has learnt that at least 10 key points of contention surfaced during the 18-month negotiations that commenced in April 2015. The CCS was not only kept informed, but its approval was also sought to move ahead.

These points of contention included objections raised by three of the seven members of the Indian negotiating team (INT) on a variety of issues ranging from a reworking of the benchmark price for the contract to contentions on maintenance and payment terms as well as reservations on Dassault’s ability to deliver the jets on time.
While the CCS is the highest decision-making body for defence matters in the government, the general norm is to raise issues to the committee only when there’s a finality.

Untitled-6According to the 2013 defence procurement policy under which the Rafale jets were bought, the CCS approvals are mandated only at the end of the process for final financial approval, which is just a step before the final signing of the deal. The procurement procedure does, however, have a clause that for procurement made on ‘strategic considerations’, decisions would be taken by the CCS on the recommendations of the Defence Procurement Board.

ET has learnt of at least 10 contentious issues were resolved in the run-up to the signing of the €7.87-b deal in September 2016 by raising the matter to the CCS. One such issue was to set aside the benchmark price — an estimation of the ‘fair value’ for the deal that is kept ready before price negotiations — projected by the financial members of the team. They had determined the price for the 36 jets as €5.2 billion.

The majority view in the INT was that this was way too low. It was suggested that a new formula, using inputs from the bids for the earlier 126 aircraft deal, be used to calculate price. The result was that the price went up to €8.2 billion. Both the formula and the new price were approved by the CCS after vetting by the Defence Acquisition Council.

Similarly, sources told ET, the CCS nod was taken to exempt Dassault Aviation from giving advance and performance bank guarantees based on a sovereign guarantee by the French government. The Indian team tried hard but the French government said even the US and Russia don’t have bank guarantee clauses in government-to-government deals. However, bank guarantees were obtained for the offsets part of the deal, empowering the ministry to penalise French firms that do not follow the norms.

Other issues that the CCS weighed in on were decisions on the delivery period of the 36 jets and modifications in the contract terms suggested by the law ministry. Also, the CCS approved the overruling of objections by team members on a counter-offer by Eurofighter.

As reported by ET, the final decision to sign the contract with the French government was taken after the concerns of some members of the negotiating team were overruled by a majority decision, in what the government says was a consultative process.