Explainer: A-Z of Rafale controversy

In yet another controversial development in the Rs 59,000 crore defence deal with France, an internal note has surfaced from a time when negotiations were in full swing. According to this note, the Ministry of Defence (MoD) strongly objected to “parallel negotiations” conducted by the Prime Minister’s Office (PMO) with the French side.

First reported by The Hindu, the note dated November 2015, and addressed to Defence Minister Manohar Parrikar, clearly states that parallel parleys led by the PMO had “weakened the negotiating position of the MoD and Indian Negotiating Team.”

The government’s submissions to the Supreme Court last year, however, had no mention of the PMO’s role in these negotiations, which consequently opened a new can of worms and shook the foundation on which the apex court had given the a clean chit last December.

Congress chief Rahul Gandhi immediately questioned, “If Supreme Court had this paperwork, do you think that the Supreme Court would have given the judgement that they give? This was withheld from the Supreme Court, of course. So that entire judgement is also in question.”

As the undying Rafale row keeps adding more explosive half-information even after the apex court’s clean-chit verdict, it further raises bigger questions and clouds the dialogue around it. This makes it exceedingly easy to forget the iterations of the controversial deal, and equally difficult to follow the latest developments which are likely to play a big role in the upcoming general elections.

So we tried to sort through the clutter and ended up creating this handy A-Z guide on everything you should know, but were hesitant to ask, about the Rafale deal.

A for Aircraft

According to the joint India-France statement declared in 2015, the Indian Armed Forces will soon helm 36 of the world’s most powerful combat aircraft in “fly-away” (fully-built) condition. The Rafale jets are Medium Multi-Role Combat Aircraft (MMRCA) systems which would be “on the same configuration as had been tested and approved by the IAF in the MMRCA evaluation” back in 2007.

B for Bids by different vendors

Six vendors including Dassault Aviation, Lockheed Martin, Boeing, Saab, Eurofighter GmbH, and Russian Aircraft Corporation had submitted bids. Dassault’s Rafale and Eurofighter GmbH’s Typhoon fighters met the IAF’s requirements, of which lowest bidder Dassault was chosen. It began negotiations with the Indian Government in 2012.

C for Cost of the aircraft

This is the first mystery which needs solving. According to the original Rs. 42,000 crore deal, 18 aircraft would be procured in a “fly-away (fully built) condition” and the remaining 108 fighters would be built by HAL. 

In 2015, after Prime Minister Narendra Modi signed the deal, then Defence Minister Manohar Parrikar disclosed that the price for 126 aircraft would been about Rs 90,000 crore, inclusive of everything. 

In 2016, Parrikar announced in the Lok Sabha, “Inter-Governmental Agreement with the Government of French Republic has been signed on 23.09.2016 for of 36 Rafale aircraft along with requisite , services weapons. Cost of each Rafale aircraft is approximately Rs 670 crore and all the aircraft will be delivered by April 2022.”

Subsequent press releases by Dassault and Reliance Defence, two companies closely associated with the deal, however, show that the total final price comes to Rs 59,000 crore for 36 aircraft (approximately Rs 1,660 crore per plane), which is more than double the price of the aircraft under the earlier 126-aircraft deal, and almost Rs 1,000 crore higher per aircraft than the final quote furnished by the government in the Parliament on November 18, 2016.

D for Dassault Aviation

Dassault Aviation rebuffed the original 18+108 aircraft deal quite unceremoniously after entering into a work-share agreement with HAL. The company has not come clean about the exorbitant and overpriced nature of the final deal of 36 Rafale jets either. The reason under duress cites “India-specific add-ons” to the original aircraft, directly contradicting the joint statement in April 2015, which assures that the configuration of the jets would adhere strictly to those “tested and approved by the IAF in the MMRCA evaluation.”

If the government had adhered to the original RFP, the 18 would have come within two and half years, and, as Dassault would have been bound to commence production within three years, the additional aircraft would also have been available to the Air Force by mid-2022.

E for Evidence

Besides the gross discrepancy in costs, certain obvious smoking guns include the insistence on secrecy regarding the decision-making process which led to so many iterations; press releases that say otherwise; foreign secretary’s statement promising the original deal, just days before a completely new deal was chalked up and signed by both governments.

The unceremonious booting of HAL and scrapping of the Make in India programme and the induction of newly-minted Reliance Defence (with its huge offset contract) could be the clue to the entire thing.

F for Francois Hollande

Let’s look at what France, then under the presidency of Francois Hollande has to gain from this deal and especially from Anil Ambani’s Reliance connect.

As it turns out, Anil Ambani’s Reliance Entertainment produced a film starring French actress and Hollande’s partner, Julie Gayet. The fact that the film was being financed by an industrialist who stood to gain from the Rafale deal, even if as an offset partner, has added to the controversy.

Last September, when Reliance Defence’s entry into the deal was just beginning to be questioned, Hollande revealed that Modi’s government wanted Ambani as the offsets partner for the Rafale deal. “It is the Indian government which proposed this group and Dassault who negotiated with Ambani. We did not have a choice, we took the interlocutor who was given to us,” he had said.

G for Government’s response

Ever since the controversy first broke, the government has asserted the righteousness of the deal, insisting on secrecy in lieu of national security. It wasn’t until three petitioners moved Supreme Court citing grave criminal misconduct in the government’s framing of the deal, that the issue came under legal scrutiny.

Riding a high ever since the Supreme Court verdict, the MoD’s internal note has dealt a severe blow to the central government’s “clean” record. With the opposition stepping up attack, Defence Minister Nirmala Sitharaman dismissed the Hindu report, saying that flogging a dead horse is futile, further criticising the raising of “selective” points to sow seeds of doubt.

H for HAL

For Hindustan Aeronautics Ltd, its presence in exemption from the deal was a case of “now you see me, now you don’t.”

In 2015, just days before the new deal was signed, two private companies were incorporated; shortly after, the new 36 Rafales deal came about. To their alarm, HAL was manifestly kicked out and the hyped “Make in India” programme was ditched. This has been one of the government’s most controversial moves thus because the companies which ultimately got the offsets contract has no experience in manufacturing defence aerospace defence equipment.

I for IGA

The absence of fresh tenders is mysterious, especially when suppliers Eurofighter GmbH had formally written to the then minister Arun Jaitley in 2014, offering to reduce the cost of the Eurofighter Typhoon by 20%.

But the central government pulled off an unprecedented move when they declared the final deal before devising the modalities, without a tender. They were able to do this by taking the restricted inter-government agreement (IGA) route to acquire the new number of jets, in order to avoid submitting a tender, thus short-circuiting the acquisition process.

J for Jaishankar’s statement

Foreign Secretary, S. Jaishankar, in a press briefing before Modi’s France visit, had announced, “In terms of Rafale, my understanding is that there are discussions underway between the French company, our Ministry of Defence, the HAL which is involved in this. These are ongoing discussions. These are very technical, detailed discussions. We do not mix up leadership level visits with deep details of ongoing defence contracts. That is on a different track. A leadership visit usually looks at big picture issues even in the security field.”

Within two days of this announcement, a completely new deal had been struck, where HAL was struck off the list, and the number of aircraft drastically reduced from 126 to 36.

Utterly perplexing, especially in the light of recent revelations concerning parallel parleys, this confirms the s.

K for Key poll issue

The Rafale deal by the sheer magnitude and unaccountability of its cost hike, has the potential to become a pivotal debate in the run-up to the Lok Sabha polls. Not only has it placed an enormous additional burden on the national exchequer and betrayed the common taxpayer, the delay in the delivery of the Rafale jets jeopardises national security.

Misuse of public office and funds to enriching parties and its cronies at the expense of the national interests is certain to a contentious issue over which the BJP-led NDA government may lose by anti-incumbency.

L for ‘Letter of Comfort’

This is connected to the contentious IGA route.

According to news reports, there was no sovereign guarantee from the French government in the deal with regard to obligations and responsibilities, save for a ‘letter of comfort” which is not a legally binding document.

This was one of the government’s more tactful moves to hijack the entire deal but one that has also raised several red flags, because in the absence of a guarantee, the only document useful in is the Inter-Governmental Agreement, which is secret.

Defence Minister Sitharaman addressed this in the Rajya Sabha on February 4, saying, “In the 36 Rafale IGA [Inter Governmental-Agreement], the French Government has provided a ‘Letter of Comfort’ signed by the French Prime Minister. The provision in the IGA along with Letter of Comfort provide adequate safeguards to the Government of India.”

She further stated “Any dispute in the execution of the IGA will be settled through the Bilateral Group established by the Government of India and Government of French Republic. Any dispute not settled by this group shall be settled by arbitration in accordance with UNCITRAL [United Nations Commission on International Trade Law] arbitration rules.”

M for Manohar Parrikar

Defence Minister during the time of inking of the deal, Manohar Parrikar, has been caught in the crossfires of changing interests, as is evinced in the MoD’s internal note and according to certain statements he had made before the final deal. Like the situation Foreign Secretary Jaishankar found himself in, Parrikar too had to rehash the terms he had laid out in some of his speeches before the sudden new deal. [See C for Cost and J for Jaishankar sections.]

N for No-Confidence Motion

Congress chief Rahul Gandhi had kicked the hornet’s in July 2018, when he launched an all-out attack on the central government for hiding the details of the Rafale deal. Gandhi, speaking in the parliament during the debate on the no-trust motion against Prime Minister Narendra Modi contended that French President Emmanuel Macron had told him that no agreement signed by the two countries stopped India from disclosing the aircraft’s pricing.

O for Opposition

Most opposition parties have been up in arms against the BJP over the Rafale scandal, which they claim is even larger than the Bofors scam. Demanding answers from Modi on the increased cost of aircraft, Congress leader Jyotiraditya Scindia tweeted, “The PM’s unilateral decision to buy 36 Rafales resulted in a price escalation of 41.42 percent per jet. When will the prime minister answer?” he asked.

Several opposition leaders backed the Congress’ stance and asked the government to come clean on objections raised by the defence ministry at that time, with AAP leader and Delhi chief minister Arvind Kejriwal going to the extent of demanding an “independent” CBI raid to seize all related files and arrest everyone involved.

West Bengal Chief Minister Mamata Banerjee accused Modi of being “the master of corruption” and said she supported the views of the Congress on the Rafale deal.

CPI(M) general secretary Sitaram Yechury alleged Modi had consistently undermined the Air Force and the Defence Ministry to benefit his “cronies” in the Rafale deal.

P for Petitioners

Last August, two former Union Ministers Arun Shourie and Yashwant Sinha called the Rafale deal a textbook case of criminal misconduct, demanding a forensic audit of the deal and those involved in it. Along with lawyer and Swaraj Abhiyan leader, Prashant Bhushan, the three claimed that the magnitude of the Rafale surpassed any that India has seen. They moved apex court after the controversy acquired political dimensions in October.

Q for Qatar

To further illustrate how the deal signed by the UPA government in 2007 was on better terms than the one agreed upon by the NDA government, here are the details of Qatar‘s Rafale deal. The middle-eastern nation had purchased 12 Rafale fighter jets in November 2017 for around Rs. 694.80 crores per aircraft.

R for Reliance Defence

Two private companies, Adani Defence Systems and Technologies Limited and Anil Ambani’s newly-minted Reliance Defence Ltd, were inducted just days before the new 36 Rafale deal came.

According to The Wire, Reliance is to hold 51% of the equity and Dassault, 49%. This brand new company is the one that has been assigned 70% of the offset benefits—that is, orders worth Rs 21,000 crore out of a total offset liability of Rs 30,000 crore.

On the subject of awarding offset contracts to Anil Ambani’s Reliance Defence, the SC bench said that it was the job of the Centre and the vendor to decide. Ambani, in a statement after the hearing, said the ruling “conclusively established the complete falsity of wild, baseless and politically motivated allegations”.

S for Secrecy

The government has cited an Agreement of Secrecy with France for refusing to disclose the price of the .

Prashant Bhushan said the government was hiding behind the secrecy clause because “they know as soon as they put the papers on the table, the game will be up”. He further questioned the government’s insistence on keeping the pricing details under wraps, and how divulging it compromises national security, especially since it was public money.

More importantly, in several press releases and in response to a question in the Lok Sabha, the government itself had disclosed the inclusive price for each aircraft. [See: C for Cost section]

The sudden appearance of the –, therefore, makes no sense especially when NDAs usually pertain to technical specifications and operational capabilities of the aircraft; it does not oblige the buyer to keep the price secret.

In October, the court issued an ultimatum to the central government to furnish pricing details of the 36 Rafale fighter jets, which it did in sealed cover.

T for Transfer of Technology agreement

In the original 126 aircraft-deal, apart from the first 18 aircraft that were to be purchased in “fly-away” condition, the remaining 108 fighters were supposed to be manufactured in India by HAL under a Transfer of Technology agreement.

U for UPA’s original deal

According to a detailed requisition by the Indian Air Force, the UPA government in 2007 issued a request for proposal (RFP) for 126 Medium Multi-Role Combat (MMRCA). From the very beginning, the RFP states that the bids would include everything, from of initial purchase to transfer of technology and licensed production. [See: C for Cost section]

V for Verdict

The apex court in December dismissed the pleas challenging the deal between India and France for procurement of 36 Rafale jets, saying there was no occasion to “really doubt the decision making ” warranting setting aside of the contract.

“So far as the decision-making is concerned, we have studied the material and interacted with senior air force officers,” CJI Gogoi said, adding, “there was no occasion to doubt the process”. Minor deviations, if they did occur, were no reason to scrap the contract or demand a detailed scrutiny by the court, he added. The bench also ruled that examining specific financial details, like the cost of each aircraft, isn’t within the court’s purview.

Backing the deal, the court further said that the country cannot afford to be unprepared for national security situations, where “our adversaries are stated to have acquired not only 4th Generation, but even 5th Generation aircraft, of which, we have none”.

W for Work-share agreement

Dassault Aviation, the manufacturer of the fighter jets, had apparently entered into a Work Share Agreement with Hindustan Aeronautics Ltd (HAL), a public sector with 60 years of experience in aircraft manufacturing.  According to the Work-Share Agreement, HAL was to put in 70% of the work on the 108 planes to be manufactured in India, while Dassault would undertake the rest of the work.

X for Unknown causes behind inflated deal

It doesn’t take a manufacturing expert to conclude that “India-specific enhancements” to the world’s best combat aircraft cannot be the reason for a meteoric rise in production cost. All evidence, therefore, points towards private parties enjoying enormous financial benefit under the garb of the IGA. As long as BJP skirts transparency, it will be increasingly difficult to convince what caused the deal to change forms so many times.

Y for Year of delivery

Official sources had said that the number of planes reduced because the Air Force needed the planes and that these 36 planes would reach India by 2017.

Z for Zero, the number of aircraft received

If the government had adhered to the original RFP, the planes would have been available at the pace which the government now claims it has ensured as a matter of urgency, and, in addition, the country would have gained from the technology that would have been transferred.

They are still nowhere in sight and according to latest reports, will not be available to India till mid-2022.

Prarthana Mitra is a staff writer at Qrius

Anil AmbaniCorruptionDassaultFrancois HollandeHALNDA governmentRafale dealrelianceScandal