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Rafale Deal Controversy Unwarranted; Directly Benefits LCA Tejas & Make in India: Experts

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The controversy over Rafale Deal, signed between India and France has turned turbulent with Reliance Group suing an Indian news channel for their negative coverage on the deal. The Rafale deal controversy gained momentum when Congress party blamed the government and PM Modi of directly benefitting from the Rafale deal.  EurAsian Times analyses the real controversy behind the Rafale deal and evaluates how it benefits the Make in India initiative and the HAL Tejas programme.

Historical Background of the Rafale Deal 

Rafale deal is a defence agreement between the Indian Government and the French Government. It started under the then National Democratic Alliance (N.D.A) when late Prime Minister Atal Bihari Vajpayee was heading the government.

In 2012, the Indian Air Force (I.A.F) was in dire need of new fighter jets due to the ageing squadrons. The requirement was of a minimum of 42 fighter squadrons to maintain ideal potentiality. However, between 2000-2012, the squadron strength came down to 36 because of obsolescence.

The original proposal was for the procurement of 126 Mirage-2000 jets to replace the MiG-21s in service. Nevertheless, under the Vajpayee government, it was later converted to 126 Medium Multi-Role Combat Aircraft (M.M.R.C.A). However, the issue of Request for Proposal (R.F.P) for the same took place in 2007 under the United Progressive Alliance (U.P.A).

Choice of the Indian Air Force

The Indian air force had to choose among the following- Boeing Super Hornet, Lockheed Martin F-16IN Super Viper, R.A.C MiG MiG-35, Saab Gripen C, the Eurofighter Typhoon, and the Rafale.

The I.A.F finally narrowed down on Eurofighter Typhoon and the Rafale fighter jets as they met the technical evaluation and the flight evaluation criteria in 2011. In January 2012, Rafale became the lowest bidder or the L-1 bidder. It eventually won the deal over Eurofighter for the supply of aircraft to India. After this, contract negotiations began with the manufacturers Dassault aviation the same year.

According to the Indo-French agreement, the deal would cover the purchase of 126 Rafale jets. The purchase of the 18 of them was to be off-the-shelf. The remaining 108 were to be license manufactured in India by the Hindustan Aeronautical Limited (HAL), Bengaluru.

Unfortunately, Request for Proposal (R.F.P.) and the medium multi-role combat aircraft was withdrawn in June 2015 as contract negotiation had reached an impasse. Transfer of technology was not cost effective.

The Beginning of the Rafale Deal Controversy

The controversy arose when the U.P.A claimed that the deal which they cracked was much better than the N.D.A. On the other hand, the deal was not formalized by the previous government.

Many experts believe that the contract had many shortcomings. Had it been finalized, it would have thwarted the agreement due to increased cost by manifolds.

Also, the recent controversy flared when ex-president of France – Francois Hollande claimed that the decision of choosing Reliance over HAL was purely from the fact that the Indian government suggested the same and the French government had no say regarding the matter.

However, a major backlash erupted was when he rebutted from his statement the next day and Dassault aviation had to make a statement whether they were pressurized to go with Reliance defence.

What was the  U.P.A Deal for the Rafale Jets? 

There was as such no agreement between the Indian and the French government signed up for the same under the previous government. It is because of the various issues which arose as there was no consensus between the two parties.

The most important aspect is the request for proposal, cost and the transfer of technology, which remained incomplete even after two years until 2014.

Transfer of Technology (T.o.T)

The prima facie reason because of which the there was no consensus on the contract under the U.P.A regime was the clause on Transfer of Technology. Dassault aviation was not ready to take responsibility on the quality control of 108 aircraft, which were to be built by the HAL. Both the HAL and Dassault have since been giving a different statement on the hours of labour for the production purpose.

While Dassault allocated three crore staff hours, HAL had given an approximation which was higher than the original figure by three times. This cost stated by HAL was increasing the price by several times.

Additionally, there was no agreement on the transfer of technology previously. What was there was the license manufacturing technology. It was the same reason because of which the defence minister rebutted on the allegation put by Congress by stating – “the bases of the earlier contract were on the procurement of 126 jets. On the other hand, this new contract is on the procurement of 36 off the shelf purchased of jets. So, the T.o.T is not economically feasible.”

Did Modi Government Buy Rafale Fighter Jets at Higher Price?

The finalized deal is controversial because of the cost involved in it. The U.P.A claims that N.D.A government has signed a deal for approximately 1570.8 crore which is much more than the price at which U.P.A negotiated.

There have been various improvements in the design and the specification of the planes. However, these highlights are not coming onto the foray. Ability to take off from a high-altitude station such as Leh, advancement to the search track sensor and potential electronic jammers pods are a few of them. These changes are as per the Indian requirement.

Not to mention that the cost of the improvement established in this deal is equal to the 126 aircraft. This improvement is costly because this is a one-time research and development cost.

The basis with which the Congress is pointing a finger towards the government is that the new deal is a massive blow to the Prime Minister’s dream of ‘Make in India.’ Furthermore, the fact that the Congress is missing is that the new deal is with front-line technology, more efficiency, and a performance guarantee clause.

Additions in the new Rafale Deal

The I.A.F is getting the meteor missiles, which is considered the most advanced missiles in the world. The present government has settled in a contract which indeed gives it an upper edge over the opposition.

European inflation has been capped at 3.5 % to reduce the cost. Thus, in case the inflation goes down, and the cost will decrease as the payment is being made in instalments. Under the current agreement, the Make in India initiative is being supported by the 36 Rafale procurement offset proposal through Article 12 of the Inter-Governmental Agreement (I.G.A).

It states that 50% value of the protocol will facilitate the implementation of the ‘Make in India’ by the French industrial.

The offsets proposal also includes provisions for the transfer of sophisticated design technology, which is meaningfully superior to the licensed manufacturing offered in the earlier pact of M.M.R.C.A. The two governments are presently discussing the critical design technologies.

Secrecy in the Rafale Deal

For a long period, Rahul Gandhi has been alleging that the government is not revealing exact details of the price between the two governments. However, the fact remains that an approximate figure of the deal has been present in the parliament.

Providing information about the various details of the customization and the weapon systems specially designed as per Indian requirement if revealed would hinder the national security of the country, as per the Indian defence minister. The disclosure of this confidential information is not allowed due to a bilateral agreement signed by both the government in 2008 which has a confidentiality provision.

Rafale Deal Procurement Process

Defence by the Government

One of the most important questions which remain unanswered is whether all the procedure for the procurement of the aircraft followed with the clearance from the Cabinet Committee on Security (C.C.S) before the announcement or not.

To back it up the actions of the government, defence minister Nirmala Sitharaman addressed the media and in a hush-hush manner stated that all the process regarding the acquisition were as per the D.P.P.

Although it might be factually correct for the aspects, including mandating, conducting and monitoring of negotiations and seeking all necessary approvals, including that of the Cabinet Committee on Security, before entering into the I.G.A, it may be partly right.

Defence Procurement Procedure (D.P.P.)

According to paragraph 71 of Defense Procurement Procedure, 2006 it clearly states that-

“There may be …. Competent Financial Authority (C.F.A.) ….”

However, paragraph 72 and 73 of the same Act respectively clearly mentioned that-

“In cases of large value acquisition …. unforeseen problem.”

“In certain acquisition cases…. Defense Procurement Board (D.P.B).”

According to paragraph 71, the government might be factually correct. However, according to paragraph 72 and 73, C.C.S. was not consulted as per the due procedure. Moreover, the Defense Procurement Board did not receive prior information regarding the announcement. Additionally, the Inter-Governmental Agreement was not drafted before the announcement.

Eventually, the now finalized deal is along with the lines of the procedure; although the announcement bypassed the rules in all manners which may or may not be breaking the laws.

Rafale Deal with Reliance Defence

The involvement of the Prime Minister’s so-called friend has raised many eyebrows regarding this deal. Allegations of cronyism, double-dealing and favouring of the private sector over HAL has been flying high in the air.

According to experts supporting the Government, Dassault has chosen Reliance Defense Ltd. to meet its ‘offsets’ or export obligation in the contract. The Ministry of Defense (M.o.D) has no role in the selection of Indian partners by the foreign vendors. All purchased planes are in the fly-away condition. So, neither HAL nor any other company can make it.

As per D.P.P., the M.o.D has no role in the selection of Indian partners by the foreign vendors. The mentioned above rule was introduced in the country in 2005, and it has the same position since then.

Above all, reliance is registered with the Ministry of Corporate Affairs and has land in Nagpur which provides access to the runaway. Thus, it was chosen by Dassault aviation over HAL even though reliance is cash-strapped.

Additionally, sources have clearly stated that they began engaging with the Reliance the day it swapped hands from Mukesh Ambani to Anil Ambani. The plans had been firming up at Aero India, where a massive air show was held 2 months before PM announced the deal from Paris.

Also, one cannot deny the fact that an official announcement was made by the Chairman of Dassault for a future venture with the HAL on the 126 aircraft deal. Unfortunately, he did not know the new developments within the defence ministry. However, these reasons are surely not going to diminish the allegations inflicted by the opposition on the government.

Add-On on the Rafale Deal

Reports state that there is a new offset clause in which the Dassault aviation would spend 50% of their earnings in the defence sector of the country. This clause is was not mentioned in the previous contract and is something new.

The new development would help the local manufacturers to learn global technology. It would prepare them to compete in the international level and hence get a business of about 3 billion euros.

The French side has made a 30% offset commitment for military aerospace research and development programs and the rest 20% for making components of Rafale here. The French government has agreed, in principle, to collaborate on the Kaveri engine which lacks the real power thrust needed to fly the Tejas.

An upgraded Kaveri engine with 90 kN thrust compared to the existing 72 kN can be developed with French cooperation. LCA Tejas aircraft currently runs of American engines. These aircraft can then use these newly developed engines which will make LCA Tejas really a “Make in India” fighter jet and give a big boost to the Indian defence industry.

UNANSWERED QUESTIONS

Delivery of Jets

As per the negotiations, the flights have to be delivered 67 months of the signing which took place in October 2016. It means that the delivery would take place before October 2019. It was the same time duration set in the UPA deal which envisaged to get 18 flights off the shelf.

However, the claims of the NDA government have saved 5 months in delivery schedule still doesn’t compensate the fallout of the make in India project. Why only Dassault and not the Eurofighter? Back in 2012, the IAF had chosen both Eurofighters and the Rafale after a much extensive process. Although the government is saying that they have saved 5 months, it is not significant given that no flights are being made in India.

WHY ONLY 36 JETS?

The previous agreement under the UPA government was for 126 jets. It was the minimum requirement as per the IAF due to the ageing Russian fighter planes that are being retired. They had mentioned that they need at least these number of flights to maintain the ideal potentiality. Also, the top leadership had once stated that they need 72 jets to maintain a viable fleet. Anything less than his would be considered insignificant.

However, not only just 36 jets are being purchased, but the current agreement does not even have a clause to consider a similar purchase in future with the same price. With the near cancellation of the fifth-generation Russian jets, the IAF must now acquire the 116 jets from the Make in India project. It pushes the IAF to the tip of the iceberg because if this does not happen, then their aerial capabilities would be at an all-time low by 2022.

Sovereign Guarantee or Bank Guarantee

It is a very crucial aspect as it questions the watertight assurances of the French government. As per the new Rafale deal, the French government acts as a guarantee. It is a significant deviation from other international dealings. This is because generally, an international bank acts as a guarantee so that the purchaser can encash the payment in case of a delay or default of a particular clause by the seller after the due payment has been made.

Hence, this is also one of the reasons that why the UPA government withdrew the deal as Dassault aviation failed to give the necessary safeguard.

Could the deal have been Cheaper?

As per the reports, the UPA scrapped of the Rafale deal as it turned out to be more expensive than the Eurofighters after a full dialogue. The IAF had not only chosen the Rafale but also Eurofighters as it complied with their criteria. The NDA did not consider the Eurofighters while formulating a new deal.

In July 2014, Germany tried offering the jets at a price lower than the earlier quoted by 20%. They also agreed to divert all the manufacture of the typhoon jets from Britain, Italy, and Germany to meet the urgent requirement of India. However, India not even coming in talks with another vendor was a wrong decision. This has also violated the defence procurement procedure. Even a discussion with the Eurofighters would have forced the Dassault to quote a lower price which would have benefitted the country monetarily.

These unanswered questions inevitably create a commotion for a controversy. Until and unless the government doe not addresses these questions, believing either of the 2 sides is not possible. Ultimately, it is the taxpayer’s money which is being used for the same.

 

By Apoorva Iyer

Other News at EurAsian Times

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