The Rafale Deal Altercation

Which government got us the cheaper deal to fulfill the desperate needs of the Indian Air Force (IAF) to upgrade the aging fleet, of Medium Multi-role Combat Aircraft (MMCRA), the UPA II or the NDA? The French maker of the Rafale aircraft, Dassault Aviation, was initially approached for a total of 126 jets, with 18 off the shelf aircraft and the remaining 108 to be assembled in India by the state-run HAL or Hindustan Aeronautics Limited by the way of technology transfer. But 15 years since the demand was first raised by the IAF and four general elections later, Narendra Modi, the PM of India, made a big announcement in September 2016, for immediate purchase of 36 ready to fly Rafale Jets from Dassault Aviation; in a way completely scrapping off the initial offer of 126 jets.

The whole problem has arisen basically on two fronts, firstly, the sudden fall in the number of jets to be acquired and the way thereof without following the requisite procedure under Defence Procurement Policy & Procedure, and secondly, the cost of the jet initially agreed upon and the cost of the jet finally agreed upon and the secrecy maintained stating the secrecy clause thereof. While the whole altercation between the Government and the opposition was underway, a new issue saw the light of the day, that Reliance Defence received the off-set agreement under the Inter-Governmental Agreement (IGA) instead of the State-run HAL, thus contradicting the present off-set guidelines.

The twin-engine Rafale combat jet is designed from the beginning as a multi-role fighter for air-to-air and air-to-ground attack is nuclear-capable and its onboard Electronic Warfare (EW) systems can also perform reconnaissance and radar jamming roles.

Let us go through all the issues individually.

1. Reduction from 126 to 26 jets

The fall in the number of jets needed by the IAF from 126 to 36, and that too without the transfer of technology, needed for self-sufficiency of Indian industries. The main bone of contention here is that there is a Defence Procurement Procedure which needs to be followed whenever there is an acquisition of defence equipment and weaponry by the Government of India. But as per the allegations, this procedure has been completely ignored and a number of committees have been bypassed thus change in the number of aircraft to be acquired has been reduced arbitrarily.

How was the number of 126 jets reached by the Government of India? From 2002 – 2007, there were elaborate drills done and detailed deliberation done by the IAF, under the due procedure, and there after the number of 126 jets was agreed upon by the IAF and Ministry of Defence vis-a-vis the Government of India. Thus, Dassault Aviation was approached with this number of jets. But in 2016, when the PM visited France, he announced in a joint statement that the deal for the acquisition of 36 Rafale jets has been agreed upon.

The issue here is that even if the Government wanted to reduce the number to 36, which it has the power to do so, it has to be done by following the laid down procedure. The Defence Procurement Procedure states that in case of an emergency (which the IAF claims to be present), the FTP procedure will be used under which a ‘special defence acquisition committee meeting headed by the Defence Minister based on the proposal moved by the respective services.’ It has been alleged that such a meeting did not take place and therefore the reduction in the acquisition of the jets is purely arbitrary and illegal.

2. The Secrecy Clause

On 23rd September 2016, Inter Governmental Agreement between India and France, dubbed as the Rafale Deal, was signed. At that time the media speculated that India will be paying a total of 7.87 Billion Euro or 58,000 Crore Rupees for the jets, which would be delivered between September 2019 to April 2022.

Five months later, on 5th February 2017, IAF rejected a RTI query seeking the copy of the agreement and the price of the jets. “The information sought is confidential in nature and public revelation of the same may lead to its subsequent availability to our adversaries, Further the information sought is also held in fiduciary capacity ad no larger public interest is served by disclosure of such information. Hence, the same is denied.” the IAF replied.

Two days later, on 7th February 2017, Union Defence Minister Nirmala Sitharaman submitted a written response to the Rajya Sabha to the question on the cost of each aircraft. “As per ‘Article-10’ of the IGA between the Government of India and Government of France on the purchase of Rafale aircraft, the protection of the classified information and material exchanged under IGA is governed by the provisions of the Security Agreement signed between the two nations in 2008 (During the UPA’s time)”

But on 17 November 2017, she seemed a little more forthcoming. While addressing a press conference, she promised to share the price details with the media. But no such offering was made by her ministry after the press conference.

The secrecy clause under Article 10, taken as defence by the Government does not include the revelation of the price of the jets. Even Emanuel Macron, the current president of France, on this visit to India in March 2018 announced that the Government of France had no issue if the Government of India reveals the cost of the aircrafts, citing that it is the public money and moreover it does not hamper with the deal or the national security of the nation.

A day later, the government, albeit unwittingly, revealed the price it paid for the jets. Junior Minister for Defence, Subhash Bhamre on 18 November 2017, revealed the cost of each aircraft in the Lok Sabha. He stated “ IGA with the Government of France had been signed on 23 September 2016 for the purchase of 36 Rafale aircraft along with requisite equipment, services and weapons. The cost of each aircraft is approx. Rs 1670 crore and all aircrafts will be delivered by April 2022.”

3. The Off-Set Agreement

What is an Off-set Agreement? An offset agreement is a type of side deal, it is an agreement between two or more parties that provide additional benefits and is ancillary to another negotiated contract. The deal is between a government and company, often a defence company. The company is the one that provides the additional benefit, usually one that is meant to create jobs or wealth for the country’s economy. Usually, companies do this because it boosts their chance to win lucrative government contracts, particularly in developing countries. A company’s offset obligation is usually worth 50-100 percent of the value of the contract and can be direct or indirect.

The off-set agreement in the Rafale Deal is 50 percent, in which France will invest 30 percent of the 7.87 billion Euros in India’s military aeronautics-related research programmes and 20 percent into local production of Rafale components. Having an off-set agreement along with a defence deal has become a common norm now, and the presence of this off-set agreement is not the issue here. But the issue here is the partner Dassault Aviation, the maker of Rafale aircraft, has chosen as its off-set partner. 

Reliance Defence Ltd. has been made the majority partner in the off-set agreement. The issue raised by the opposition and the experts is that, why did the Government of India allowed a private company with no experience of any kind in the manufacture of defence equipment or weaponry, in place of HAL. Hindustan Aeronautical Ltd. or HAL, was to be the majority partner in the previous deal of 126 jets, and the details of the same were being discussed just days before the actual signing of the deal. But on the day of the signing of the Rafale Deal, Reliance Defence Ltd. all of a sudden was made the majority partner in the off-set agreement.

The main issues raised are that how can an inexperienced company be given such a huge agreement instead of HAL, having more than 70 years of experience in developing and manufacturing aircrafts. Secondly, if the change was at all necessary, then why did the Off-Set Guidelines (getting the approval from the Union Defence Minister) not complied with; and lastly, the opposition is alleging an under the table agreement with Reliance Defence Ltd., thus making an inclination towards a scam.

The Government’s and Dassault Aviation’s stand on this point is that the contracting company i.e. Dassault Aviation had the freedom to choose any company as their off-set partner and the Government of India had no say in it. Thus denying all the allegations put on by the opposition.

The recent revelation by the former president of France, Francois Hollande, that they did not have a choice to choose the off-set partner, they were pressured into signing the deal with Reliance Defence Ltd. This statement has been constantly been refuted by the Government of India, and Dassault Aviation. This recent statement by the former President has caused a storm in the Indian political arena.

Whatever the truth may behold and whatever may be the fate of the Rafale Deal, the rational view must prevail that politicising this issue should not hamper the power of Indian Air Force and the national security of our nation.

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