Six Things You Wanted To Know About The Rafale Controversy But Did Not Know Who To Ask

In April 2015, Prime Minister Narendra Modi had announced the purchase of 36 Rafale jets after talks with the then French president Francois Hollande during his visit to the country. A deal was finalised when Hollande visited New Delhi to participate in the Republic Day celebrations in January 2016.

The Congress-led United Progressive Alliance (UPA) government, when in power, was negotiating with Dassault Aviation for 126 Rafale aircraft. Of these, 18 jets were to be supplied in a fly-away condition and 108 were to be manufactured in India along with Hindustan Aeronautics Limited (HAL). However, the UPA could not seal the deal due to differences with Rafale-maker Dassault.

Since the past one year, the Congress has been accusing the Modi government of compromising with national security by reducing the number of aircraft being procured and favouring Anil Ambani’s Reliance Defence over state-owned HAL. A statement by former French President Francois Hollande, Dassault’s rebuttal to it and the French government's denial have complicated the issue further.

Here are six questions, the answers to which can solve the mystery:

1) Why did the Modi government buy 36 Rafale jets instead of 126 that the Congress-led UPA decided to procure?

By the time Modi came to power, the negotiations with Dassault for the procurement of Rafale had stalled due to disagreements between the company and HAL over the production of the aircraft in India. The Indian Air Force (IAF), on the other hand, had only around 33 squadrons against the sanctioned strength of 42, which it needs to deal with a two-front threat. The number is now down to 31. Therefore, the IAF needed fighters urgently to plug the gaps developing in its capability due to depleting numbers. Negotiating a deal which involved transfer of technology and production of the aircraft in India would have taken considerably long time.

Moreover, if such a deal was negotiated, the HAL would have been required to develop the infrastructure needed for producing the aircraft in India. This too would have taken some time, delaying the procurement further.

Hence, the government decided to go ahead with 36.

The fact that the Indian Air Force has already kick-started the process to procure additional aircraft, most of which will be built in India, gives credence to the government’s claim that buying 36 Rafales was an emergency measure.

Questions have also been raised over the government’s ability to buy 126 Rafales because of the high cost of the aircraft. A K Antony, who was the defence minister in the Congress-led UPA government, had once said that the government did not have sufficient funds to buy 126 Rafales.

2) Why was HAL not made part of the deal?

One, as the deal had no ‘Make In India’ clause, the HAL was not made part of the deal. The government decided to buy the fighters off the shelf because manufacturing small number of fighters would not have been economical. While HAL is not part of the deal, it remains Dassault’s partner for execution of the offset clause along with Reliance and other private and state owned firms.

Two, as Livefist has reported, the Indian Air Force officer who was leading negotiations with Dassault during the UPA rule has said that the deal got stuck due to ‘irresolvable’ differences between HAL and Dassault.

3) Is the Rafale’s high cost unjustified?

As security expert and commentator Abhijit Iyer-Mitra has pointed, Qatar bought its Rafales at $292 million per unit, Egypt bought the same fighter for $246 million per unit and India paid $243 million. Therefore, the cost was in line with what other countries have paid for the same fighter.

Moreover, the deal India has signed includes not only maintenance support, weapons and training, but also India-specific enhancements to the fighters. These modifications, which the IAF demanded, add to the cost of the fighter. And even though the Rafales sold to Qatar and Egypt do not have most of these modifications, they cost as much as the modified for India.

The deal also has a clause for 50 per cent offset. This means, 50 per cent of what Dassault earns (50 per cent of the Rs 59,000 crore) from the deal will be invested back in India, giving a boost to local defence manufacturing.

Congress’ claim of government buying Rafales at an unjustified price also falls flat because the party continues to quote the price of the bare aircraft offered in late 2000s and refuses to take into account the inflation and the in-built cost escalation, which Finance Minister Arun Jaitley has explained.

4) Did Modi bypass the Cabinet Committee on Security and other defence procurement related bodies while signing the deal?

The deal was signed in accordance with the Defence Procurement Procedure (DPP) of 2013, put in place by the UPA government. According to the document, this report says, inter-governmental agreements do not require approval from the Defence Procurement Board, the Defence Acquisition Council and the Cabinet Committee on Security. The parts of the document which deal with inter-government agreements can be found in Articles 71 and 72.

5) How did Reliance become part of the deal? Did Modi government indulge in ‘crony capitalism’ and ‘favour’ Anil Ambani’s Reliance?

Reliance, unlike what the Congress claims, has not replaced HAL in the deal. It was selected by Dassault, which was free to choose its partners in India, for the execution of the offset clause. Additionally, it is not the only company that the Rafale maker has chosen for offsets. According to reports, state-run firms like Defence Research and Development Organisation and HAL, along with multiple other private firms, will also be part of Dassault’s offset execution.

There are also serious questions on Congress’ claim of ‘crony capitalism’ and ‘favour’ to Anil Ambani’s Reliance by the Modi government in the deal.

As this report says, the defence arm of Reliance owned by Mukesh Ambani had tied up with Dassault before the Modi government came to power. However, Mukesh Ambani’s Reliance did not pursue its defence business after 2014 and his brother Anil Ambani’s company Reliance Aerospace Technologies tied up with Dassault for the execution of the offset clause after the deal was signed. However, if the deal had gone through in 2012 and Mukesh Ambani’s Reliance had gone ahead with its association with Dassault could the Congress-led UPA be accused of cronyism?

The claim remains unproven in absence of concrete evidence.

6) Why has former French President blamed the Modi government?

A report in the Indian Express (titled ‘Rafale talks were on when Reliance helped produce a film for Francois Hollande’s partner) alleged in August this year that Anil Ambani’s Reliance Entertainment entered into a deal to produce a film with former French President Francois Hollande’s partner and actor Julie Gayet two days after he came to New Delhi as the Republic Day chief guest and signed a Memorandum of Understanding with India for 36 Rafale aircraft.

This report, which made headlines in India, also raised questions in France. Therefore, the French president’s assertion that the Indian government suggested the offset partner (Reliance) could have come as a result of allegations of corruption against him. It should be noted that Hollande made the statement accusing Modi government while denying any conflict of interest with Reliance. The French government and Dassault have refuted his claim. Hollande too has clarified since, saying only Dassault can comment on the issue.