Rafale Deal: Price Rise as Quick as The Jet Itself.

On August 28, 2007, India’s Ministry of Defence issued a Request for Proposal towards procurement of 126 MMRCA (medium multi-role combat aircraft) fighters. After Qualifying the trials, in May of 2011, two aircraft were shortlisted namely Eurofighter and Rafale jets out of which Rafale aircraft by Dassault Aviation was chosen citing the lowest bid and negotiations began with Dassault Aviation which is an international French aircraft manufacturer of military and business jets. The original deal while the UPA government was in power was supposed to deliver,

  • A total of 126 aircraft were to be manufactured.
  • 18 Aircraft off the shelf, in other words, manufactured in France and are ready to fly.
  • The remaining 108 Fighter Jets were supposed to be manufactured in India by Hindustan Aeronautics Limited (HAL).
  • HAL was supposed to achieve this by Transfer of Technology by Dassault Aviation.
  • The delivery schedule was between 3 to 4 years.
  • Advance and Performance Guarantee along with Sovereign Guarantee.

The transfer of technology would have been of great importance if ever the ties between India and France were to be strained, also manufacturing the majority of the requirement here in India would mean lesser cost in production. HAL is one of the oldest and largest aerospace, which would have been a great venture.

In March of 2014, Dassault Aviation and HAL signed a Work Share Agreement, according to which 70% of the manufacturing was supposed to be completed by HAL in India and the rest 30% would be taken care of, by the Dassault Aviation for 108 aircraft. The then Defence Minister Arun Jaitley while addressing the Parliament tells that 18 direct fly-away aircraft would be delivered within 3-4 years from signing of the contract; the remaining 108 aircraft to be delivered in the next seven years. Even though the work share agreement was signed, the actual deal wasn’t sealed.

 Meanwhile, due to the results of the 2014 Indian general elections, the NDA government comes to power, On March 25th, 2015, Dassault’s CEO Eric Trappier announced the completion of paperwork for the deal, said “After an outstanding amount of work and some discussion, you can imagine my great satisfaction to hear on one hand from the Indian Air Force chief of staff that he wants a combat-proven aircraft which could be the Rafale… and on the other hand from HAL chairman that we are in agreement for the responsibilities sharing, considering as well our conformity with the RFP ( Request of Proposal) in order to be in line with the rules of this competition. I strongly believe that contract finalisation and signature would come very soon.”

On the 8th of April, 2015, the then foreign secretary 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.”

Just 2 days later, on 10 April 2015, Prime Minister Narendra Modi announced a new Rafale deal, after meeting with the then French President Francois Hollande in Paris. In the India-France Joint Statement during the visit of Prime Minister to France (April 9-11, 2015), “Government of India conveyed to the Government of France that in view of the critical operational necessity for Multirole Combat Aircraft for Indian Air Force, Government of India would like to acquire [36] Rafale jets in fly-away condition as quickly as possible. The two leaders agreed to conclude an Inter-Governmental Agreement for the supply of the aircraft on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway; the delivery would be in time-frame that would be compatible with the operational requirement of IAF; and that the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by Indian Air Force, and with a longer maintenance responsibility by France.”.

January 26, 2016, the Narendra Modi government signed the MoU on the purchase of 36 Rafale MMRCA. Mr Modi said, “Only financial aspects of the Rafale deal is left. The inter-governmental agreement has been finalized. It will be done soon,” on 23rd of September, the Narendra Modi government signed an inter-government deal with France for the sale of 36 Rafale medium multi-role combat aircraft (MMRCA) in flyaway condition.  The deal is worth Rs.59,000 crore (7.87 billion euros at 2016’s conversion rate). The new agreement stated that the aircraft, associated systems, and weapons would be delivered under the same configuration as has been tested and approved by the Indian Air Force. MBDA, to date, has not confirmed the transfer of technology. The Rafale agreement also included an Offset clause fixed at 50% according to which 50% value of the contract has to be invested in Indian companies to boost indigenous technology. This was to be discharged by the four French partners- Dassault Aviation, MBDA, Safran, and Thales. Technically, Dassault Aviation is to decide in which company they want to invest the money.

The Pricing of the fighter aircraft has escalated compared to that of the UPA government’s deal with the same company, for the same aircraft, which has sparked controversy, according to congress spokesperson, the old deal, comprising of 126 fighter jets with 18 manufactured in France and 108 in India with the transfer of technology came up to Rs.54,000 Crore with the average price of one jet comes up to Rs.520 to Rs.570 Crore, while in the new deal one jet costs Rs.1638 Crore with the total deal is signed for Rs.59,000 Crore for just 36 fighter jets without technology transfer.

Each Rafale aircraft costs approximately Rs.670 crore, says the government. But after the inclusion of associated equipment, weapons, India-specific enhancements, maintenance support, and services the price shoots up to Rs.1638 Crore, no clear information regarding details of pricing has been disclosed citing National Security as the reason.

15 Days before Modi visited France, on 25th March 2015, Adani Defence Systems And Technologies Limited was Public incorporated. 3 days later, that is on 28th March 2015, Reliance Defence Limited was incorporated and received 3% of the offset clause. The Rafale agreement also included an Offset clause fixed at 50% according to which 50% of the value of the contract has to be invested in Indian companies to boost indigenous technology. This was to be discharged by the four French partners- Dassault Aviation, MBDA, Safran, and Thales. Technically, Dassault Aviation is to decide in which company they want to invest the money. On 10th February 2017, Dassault Reliance Aerospace Limited, a joint venture by Anil Ambani’s Reliance Group and Dassault Aviation was Public Incorporated, but it was under construction since 3rd October 2016. The companies in a joint statement said that French major Dassault Aviation will invest over 100 million euros(Rs.850 Crore) in a joint venture to manufacture aircraft components as a part of the ‘offset obligation’ connected to the purchase of 36 Rafale fighter jets from France. The Dassault-Reliance joint venture represents the largest ever foreign direct investment in the defence sector in India.

The Supreme Court Case,

March 13, 2018, Four Public Interest Litigations were filed in Supreme Court, seeking an independent probe into the Centre’s decision to procure 36 Rafale fighter jets from France and disclosure of the cost involved in the deal before Parliament. The hearing for the case began on 5th September 2018, where the SC asked the Central Government to share the details of the agreement for buying 36 Rafale fighter jets, details of the decision-making process in the Rafale fighter jet deal as well as the pricing details of 36 Rafale fighter jets in a closed envelope. Fourteen days later Former Union ministers Yashwant Sinha and Arun Shourie and activist-lawyer Prashant Bhushan move SC, seeking registration of FIR into the Rafale fighter jet deal. On the 12th of November, the centre gave details to SC as directed and on the 14th of November, The Supreme Court gave a verdict, a 29 pages judgement. It stated, “ We find no reason for any investigation by this Court on this sensitive issue”.

In point 25 of the 29 pages Judgement, it states “ The pricing details have been shared by the Comptroller & Auditor General (CAG) and the report of the CAG has been examined by the Public Accounts Committee (PAC), only a redacted portion of the report was placed before the parliament and is in the public domain”.

But in reality, there were no such reports submitted to the PAC neither is it available in the public domain nor has it been submitted in the Parliament, which was pointed out in a press conference following the judgement, where Rahul Gandhi and the then Chairman of PAC Mr Mallikarjun Kharge were present. Mr Kharge backed the allegation by stating “ Ek toh CAG ke paas bhi, unka koi comments nai he. Iske bare mein na CAG ko patha he, maine Deputy CAG ko bula kar pucha. Jab CAG ke paas nahin he, PAC me aane ka sawaal nahin he.”

This translates to ‘Even CAG doesn’t have this report, I have asked the Deputy CAG today when the CAG doesn’t have this report, there is no question of it being in the PAC’. This suggests the factual error in the Supreme Court judgement. After the conference, the Government stated, the sealed envelop given to the SC, stating the details of the deal was misinterpreted by the Supreme Court Judges, which caused typing mistakes in their report. They mean to say that the CAG report “will be examined by the PAC”, but it was typed “has been examined by the PAC” in the report.

Opposition leaders claim that the government is lying as three Supreme Court Judges cannot all be grammatically wrong, resulting in misinterpretation causing such a big factual error. Experts like Indira Jaisingh believe that SC judgement is NULL and VOID and should be RECALLED as “It is based on the reasoning that “CAG submitted the report which was examined by PAC”. Since no such report exists, the reasoning goes, it is no judgement in the eyes of Law.

On January 2nd 2019, Yashwant Sinha and Arun Shourie and Prashant Bhushan move Supreme Court seeking review of its December 14 Judgement, but on November 14 of the same year, SC dismisses review pleas against its verdict in the Rafale deal, rejects the contention that there was the need for registration of an FIR in connection with the procurement of 36 fighter jets.

Allegations:

  • The opposition has accused PM Narendra Modi of lying and influence Peddling by alleging that the deal was signed to benefit Reliance group chairman Anil Ambani. (FAVOURITISM)
  • The opposition has accused the government of corruption and money laundering as they point out the India-France Joint statement (released during the PM’s visit to France when he had signed the deal) in which France states to deliver the same model of planes which were tried and approved by Indian Air Force during UPA government. Which were around Rs.570 Crore in the original deal and skyrocketed to Rs.1638 Crore during the NDA government.
  • On the 4th of July, 2014, Arun Jaitley, the then Defence Minister allegedly received an offer by Euro fights tyfoon of 20% reduction in cost, but was never considered.
  • There are questions and speculation on the details on why the first deal made under UPA was called off.

 A judge has been appointed in France to investigate alleged favouritism and corruption in the 2016 purchase by the Indian government. A judicial investigation into alleged corruption was first opened on June 14 in France. The French investigative website Mediapart reported a 7.8 billion euro deal between Dassault Aviation and the Indian government. The judicial probe in France was ordered following the reports by French journalist Yann Philippin in Mediapart, which claimed that despite Dassault Aviation investing 94 per cent of the total value in the Reliance-Dassault joint venture, Reliance was given 51 per cent shares of the joint venture. The report also claims that Sushen Gupta had access to classified documents of the defence ministry due to which, the report adds, Dassault Aviation knew the specifics of what the Indian side required much before it was officially told. In another report, Mediapart claims the existence of “suspicious payments” made to a company linked to Sushen Gupta, the Augusta Westland chopper scam accused.

Following the Mediapart reports, a complaint was made by Sherpa, an NGO that works for the victims of financial fraud. With this, France’s National Prosecutor’s Office (PNF) appointed a judge to investigate “corruption” and “favouritism” in the 2016 multi-billion dollar deal for the purchase of 36 Rafale jets.

Reference:

The Hindu

Ministry of External Affairs

Ministry of External Affairs

Images:

France24

NDTV

Sneha Alkur

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