All you need to know about the Rafale deal and the fiasco that followed

By Prarthana Mitra

With the Rafale Deal, Rahul Gandhi opened a can of worms at the No-confidence motion debate, but it might really be a smoking gun.

The opposition, several former ministers and the independent media now claim that the Rafale transaction of aircraft with the French government could be a bigger scandal than Bofors.

In an unexpected revelation, two former ministers Arun Shourie and Yashwant Sinha on Thursday called it 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. Here are the facts and figures revealing the gross discrepancy in the government’s actions and words.

On the elusive secrecy clause

The government has cited an Agreement of Secrecy with France for refusing to disclose the price of the aircrafts.  It also begs that question of how certain pro-government media outlets are dismissing this accusation, if they don’t have the proof themselves.

Ever since Gandhi’s scathing attack on Defence Minister Nirmala Sitharaman in parliament last month, several media organisations are calling the non-disclosure a baseless lie. The Congress also claim that their attempts to investigate or report on the claim are being systematically impeded by the centre.

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”. Press releases by Dassault and Reliance Defence, two companies closely associated with the deal, show that the total price comes to Rs 60,000 crore for 36 aircrafts (Rs 1,660 crore per plane), which is more than double the price of the aircraft under the earlier 126 aircrafts 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.

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

The sudden appearance of the non-diclosure, 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.

To top it all, the French President Emmanuel Macron himself stated explicitly in March in an interview to India Today that it is entirely up to the Indian government to reveal or withhold information in this regard.

The original deal and its many iterations

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 Aircrafts (MMRCA). From the very beginning, the RFP states that the bids would include everything, from cost of initial purchase to transfer of technology and licensed production.

Six vendors had submitted bids, of which Dassault Aviation and Eurofighter GmbH met with the IAF’s requirements. In 2012, negotiations between Dassault (the cheaper option) and the Indian Government began. Till then, the Rs. 42,000 crore deal envisaged that the first 18 aircraft would be procured in a “fly-away (fully built) condition” and the remaining 108 fighters would be manufactured in India by HAL under a Transfer of Technology agreement.

In 2015, after Prime Minister Narendra Modi signed the deal, the then Defence Minister Manohar Parrikar disclosed that the price for 126 aircrafts would have been about Rs 90,000 crore, inclusive of everything. Foreign Secretary, S. Jaishankar, in a press briefing before Modi’s France visit, said,

“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.

The new and largely inexplicable contract

Under the new deal, India would purchase 36 aircraft in “fly-away” condition. The joint India-France statment stated that the aircraft and systems would be “on the same configuration as had been tested and approved by the IAF in the MMRCA evaluation.” This clearly meant, as reported by The Wire, that the price per aircraft would remain the same, but now, the government is spreading falsehood under the pretext of some novel “India specific enhancements”. Back then, defence minister Manohar Parikar’s statements to the press also revealed that he was not intimated or solicited about this new deal.

Official sources only justified this saying that the Air Force needed the planes urgently, and that these 36 planes would reach India by 2017. They are still nowhere in sight and according to latest reports, will not be available to India till mid-2022.

Coming out of the private sector woodwork

Dassault Aviation, the manufacturer of the fighter jets, had apparently entered into a Work Share Agreement with Hindustan Aeronautics Ltd (HAL), a public sector organisation with 60 years of experience in aircraft manufacturing.  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.

In 2015, just days before the new deal was signed, two private companies were inducted: Adani Defence Systems and Technologies Limited and Anil Ambani’s Reliance Defence Ltd. The new 36 Rafales deal comes within days of this incorporation. To much alarm, HAL was manifestly kicked out and the hyped “Make in India” programme was ditched. This lies at the centre of the allegation regarding overpriced aircrafts, as it is clear that the newly minted Reliance Defence Ltd. (led by someone in deep debt, with a record of failing in large projects, no experience in aerospace manufacture) were going to benefit from the billions of dollars of offsets that would arise from the Rafale purchase.

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.

Rajesh Dhingra, chief executive officer of Reliance Defence and Aerospace, spoke to NDTV, saying, ”The defence ministry has no role in selection of Indian partners by foreign vendors. This has been position right from 2005 when offsets were first introduced. In more than 50 offset contracts signed till date, the same process has been followed. Therefore, it is a deliberate attempt to mislead.”

The questions we should ask

There is great confusion if the Cabinet Committee on Security approved the deal prime minister announced included in 2015’s India-France joint statement. The absence of fresh tenders is also mysterious, especially when suppliers Eurofighter GmbH had formally written to the then defence minister Arun Jaitley in 2014, offering to reduce the cost of the Eurofighter Typhoon by 20%. The government is answerable for jettisoning the original deal which expressed a dire need for 126 aircrafts, because this, and handing over responsibility to an inexperienced private player, places national security on the sacrificial altar.

With the purchase of 36 Rafale fighter jets in 2016 now being compared to the 1986 Bofors Howitzer gun deal which brought the Congress down in the nineties, the opposition is now determined to pursue this unfolding mystery in the run up to next year’s general elections and intends to turn it into a key election agenda.

Prarthana Mitra is a staff writer at Qrius