Monday, 16 December 2019

A History of how India zeroed on Rafale and why the Congress charge of corruption in the Rafale Deal is absolutely bogus

Updated: September 6, 2018 2:49 pm

During the debate on the no-confidence motion in the Lok Sabha Congress President Rahul Gandhi again attacked the Narendra Modi government on Rafale (pronounced as “Raafaal” which means gust of wind in French) fighter jet deal. Rahul Gandhi claimed that during his meeting with French President Emmanuel Macron, Macron had privately told him that no agreement signed by the two countries stopped India from disclosing the aircraft’s pricing. Rahul Gandhi stated that Indian Defence Minister Nirmala Sitharaman citing a secrecy clause while resisting attempts to disclose price of the deal had “lied to the nation”. Nirmala Sitharaman vigorously defended herself & the government saying that Rahul Gandhi’s allegations that she had lied to the country over the Rafale fighter deal were “absolutely wrong” while also saying that “It was an agreement of secrecy. I am not privy to what the French President told Mr. Gandhi. But I am referring to two particular interviews that the French President had given to Indian TV channels. In the interviews, the French President had said that commercial details of the Rafale deal cannot be revealed”.

In response to these allegations on the same day (July 20, 2018) the French government foreign affairs spokesman said “We have noted the statement of Mr. Rahul Gandhi before the Indian Parliament. France and India concluded in 2008 a security agreement, which legally binds the two States to protect the classified information provided by the partner that could impact security and operational capabilities of the defence equipment of India or France. These provisions naturally apply to the IGA (Inter Governmental Agreement) concluded on September 23, 2016 on the acquisition of 36 Rafale aircraft and their weapons. Further he said “As the President of the French Republic indicated publicly in an interview given to India Today on March 9, 2018, in India and in France, when a deal is very sensitive, we can’t reveal all details,”

This so called controversy which has been repeatedly debunked by a wide range of defence experts refuses to die down anytime soon.

 

HISTORY

The history of the Rafale fighter in context of India has been a long & agonizing one. Around 2001 the IAF (Indian Air Force) due to the impending retirement of the several older aircraft (MiG-21/23/27) in the near future foresaw a big reduction in no. of fighter aircraft. IAF wanted to procure 126 new aircraft under the MRCA (multi-role combat aircraft) tender which later got upgraded to the MMRCA (medium multi-role combat aircraft). Around the same time the Dassault Mirage-2000 production line in France was going to be closed down due to lack of orders. Mirage-2000 which had performed very well in 1999 Kargil conflict was in favor with the IAF who was keen move its production line to India. However the defence ministry in the NDA government at that time due to ongoing scams was not comfortable with a single vendor purchase which they believed could lead to allegations of favoritism & kickbacks. They instead wanted to go in for a mutli-vendor tender process. In August 2007 the Request for Proposal (RFP) was sent out to six vendors: SAAB (Gripen), EADS (Eurofighter), Dassault (Rafale), Mikoyan (MiG-35), Lockheed Martin (F-16) and Boeing (F/A-18). The 6 aircrafts then underwent extensive field trials Field Evaluation Trials (FETs) with their performance being judged on a reported 643-660 technical parameters. The aircraft were flown in the high altitude/cold weather in Leh, desert/hot weather in Jaisalmer & humid climate in Bengaluru.

Only two of the aircraft the Eurofighter Typhoon & Dassault Rafale in April 2011 were selected as passing this technical evaluation. Next the cheaper of these two aircraft was going to be declared the winner of this MMCRA contract. The actual purchase price of the aircraft was not going to be sole factor for judging the cheaper option but instead it would include along with price of aircraft the cost of service, maintenance & upgrade over the life span of the aircraft. IAF had had learnt from its past experiences where low cost aircraft later tuned out to have big operational costs. Come January 2012, it was announced that the Dassault (Rafale) won the competition (it was reported that it was $4-5 million cheaper than Eurofighter) as the lowest bidder. The next stage in the process would be completing negotiations for the finalizing all details of the contract including final pricing.

The plan for the MMCRA was that the first squadron of 18 aircraft will be manufactured by the vendor after which the remaining 108 planes will be manufactured in India under ToT (Transfer of Technology) which was to be under HAL (Hindustan Aeronautics Limited). Dassault claimed that 31 Million Man Hours would be sufficient to produce 108 Rafale aircraft in India while HAL concluded that the Man Hours required were going to be 2.7 times higher than what Dassault has quoted! The WikiLeaks expose uncovered the fact that former US Ambassador to India Timothy Roemer in a confidential report to the Obama administration said that “HAL was not competent to be a partner” of either of the two American companies – Boeing and Lockheed Martin – who were in the running for the prized MMRCA contract. This report caused concern within Dassault who then requested to look at the HAL facility in India. Dassault after inspecting the facility were not happy with the quality control & production-related problems over the manufacture of the Sukhoi-30 MKI aircraft being manufactured at that facility. This lead to another problem where Dassault refused to guarantee the performance of the HAL-built aircraft in India while limiting its guarantees to only the first 18 aircraft built in France. They believed that any issues arising due to issues with the HAL production line would reflect poorly on Dassault tarnishing its stellar reputation globally. Indian officials protested saying that the original RFP required the vendor to provide a warranty for HAL’s work & they couldn’t escape from this clause.

When Dassault itself presented different cost figures for Rafale’s built at HAL it became clear that Dassault had been incorrectly named the L-1 vendor i.e. cost of the Rafale was now actually higher than the Eurofighter Typhoon. These issues caused the deal to become stuck in limbo for years. In his book Securing India: The Modi Way: Pathankot, Surgical Strikes And More’ strategic analyst/defence expert Nitin A Gokhale stated “The UPA government, under the overly cautious AK Antony instead of imposing a deadline for the French manufacturer to comply with the terms of the RFP, dragged its feet and allowed Dassault Aviation to get away with obfuscation. Moreover, in an unusual move, Antony instructed MoD officials to bring the file back to him after concluding the CNC to re-examine the integrity of the process before proceeding to finalise the contract, creating confusion and doubt in the minds of the officials who were negotiating with the manufacturer.” Even after the Modi government came to power in 2014 the impasse continued for couple of years after which then defence minister Manohar Parrikar realized that they were going nowhere with Dassault in regards to the MMCRA. Since the DPP (Defence Procurement Policy) rules don’t allow India to negotiate with the next lowest L-2 bidder (Eurofighter) India was now in a quandary. PM Narendra to break out this logjam in April 2015 signed a deal to buy 36 Rafale fighter jets directly from France in a G-G (government to government) deal. Modi said “Keeping in mind critical operational necessity of fighter jets in India, I have talked to him (Hollande) and requested for 36 Rafale jets in fly-away condition as quickly as possible under government-to-government deal,” Manohar Parrikar stated in Rajya Sabha in July 2015 that the deal for 126 MMRCA was officially withdrawn by the government. The deal for purchase 36 aircraft was made in April 2015 but negotiations regarding the price stretched out till September 2016 when the agreement was signed by Parrikar & his French counterpart Jean-Yves Le Drian for a reported €7.85B (~$8.8B) [B=Billion]. The 36 aircraft were to be delivered to India within a time frame of 66 months with the first one arriving within 3 years of signing the agreement.

PRICING CLAIM

Congress has claimed that the original MMCRA was projected to cost $12B for 126 aircraft (~$95M/aircraft) while the Modi government ended up paying $8.8B for just 36 aircraft (~244M/aircraft). Now for the simple layman this would appear outrageous that the price has increased ~2.5x for the same aircraft under different administrations. However as they say the devil is in the details!

One must note that the 2007 price of $12B was from the RFP & not the finalized contract. Dassault was chosen as the winner of the selection process & negotiations over pricing were ongoing but were never finalized. Therefore it is disingenuous to use that number to compare against the 2016 deal. One has to note that as per various news reports the price jumped higher (from original $12B) initially to $15-$18B range (January 2012) & later $20B-$30B (January 2014) once man hours from the HAL production (2.7x more were accounted for) & inclusion of costs associated with weapons, avionics, upgrades, training, support, etc. were fully accounted for. There is not a lot of clarity regarding the exact final nos. as the final negotiations were never completed & they vary depending on the sources from which they were obtained. Taking the final $20B- $30B costs the per fighter cost for MMCRA would be ~158 to 238M/aircraft close to the $244M price from 2016 deal.

Further regarding the pricing I want to highlight two minor points. One the order in 2007 vs the one in 2016 was 3.5x times bigger (i.e. 126 vs 36). Everyone knows that the bigger the order you place be it for any product as small as a paper clip or as big as an aircraft, you tend to get a favorable lesser price per unit due to the larger volume of the order. Secondly one has to take into account the inflation in between the 9 years of both of the contracts which means that it would be impractical to expect same price in both situations.

Two other nations have recently bought the Rafale: Egypt & Qatar. Egyptian air force has paid €5.2 billion for 24 fighters (i.e. €217M/aircraft). Qatar paid out €6.3 billion for 24 aircraft (i.e. €262M/aircraft). Now since the weapons package, training, maintenance etc. for all the 3 nations (India/Egypt/Qatar) would be different it wouldn’t be an exact comparison. Still once can see that India paid €217M/aircraft (€7.8 billion for 36 aircraft) which is in the same ballpark as other two which shows that India likely didn’t vastly overpay for the Rafale as the critics claim.

Even comparing the 2 orders that India itself placed is hard to compare as both reportedly didn’t have the same exact weapons, training, sensors, etc. packages (i.e. apples vs oranges comparison). Look at the tweets below from Vishnu Som (Defence Editor with NDTV) where he says that both orders might be called by same overall name (i.e. Maruti Suzuki) but would be like ordering different configurations of the same car (i.e. LXi vs ZXi). The 2007 order was for the F2 version of the Rafale while the 2016 was for the more advanced F3 version plus

The current order of Rafale’s will come with many upgrades/features which were not present in the previous order from a decade ago including some India specific enhancements: Meteor, one the world’s best (BVRAAM) Beyond Visual Range Air to Air Missile which can hit targets upto 150km away & the SCALP cruise missile which can hit ground targets more than 500 km away will be part of the weapons suite. Rafale will have SPECTRA electronic warfare system, AESA (active electronically scanned array combat) radar (a first for IAF), Helmet mounted display (where a target gets locked by just watching the target), ability to take off from high altitude airfields, etc.

Congress has alleged that Eurofighter Typhoon had offered a 20% discount from its original price but why wasn’t that taken into consideration for negotiation. The answer is that as per the Defence Procurement Procedure (DPP) rules once the L-1 winner was declared (Dassault) no negotiations can take place with the L-2 bidder. The 20% discount on its bid from Eurofighter came after Dassault was announced as the L-1 bidder to influence the government to drop Dassault & instead select Eurofighter.

Nitin Gokhale has mentioned in his book that while the deal under the previous government had a fixed 3.9% escalation inflation index which applied from day one of that deal, under the 2016 contract the current government struck had a deal where it was limited to a max of 3.5% but with a caveat. The previous deal had a fixed 3.9% escalation rate which no matter what the actual inflation was always going to be applied while now the escalation in the inflation index only applies when inflation was above 0%. In case inflation indices go down India could end up paying lesser amount. Government sources claim that depending on the actual inflation they could end up saving anywhere between €200M-€1B. As part of the “Performance Based Logistics” support India will be given guarantee that 75 per cent of the Rafale aircraft will be operational (for first 5 years with an option to extend it for another 2 years at same price). This is of importance to the IAF which has struggled to keep more than 60% availability for its fighter aircraft. The original MMCRA agreement had PBL support for just 1 squadron which now extended to both squadrons. Other smaller ancillary benefits as pointed out by Nitin Gokhale were  free training for nine IAF personnel, including three pilots; additional guarantee for 60 hours of usage of training aircraft for Indian pilots and six months of free weapons storage without charge (in case the Indian infrastructure is not ready for storing the weapons).

PRICE SECRECY CLAIM

Rahul Gandhi & the Congress party have claimed that the government should disclose all the details about the cost of the 36 fighters for which deal was signed in 2016. Last year when this issue was raised in parliament Defence Minister Nirmala Sitharaman initially on November 17,2017 agreed to provide the figures, but few days later declined to do so, citing a “confidentiality agreement” signed with France. Ministry of Defence said “The approximate acquisition cost of the Rafale aircraft has already been provided to the Parliament. Provision of exact item-wise cost and other information will reveal, inter alia, details regarding the various customizations and weapons systems specially designed to augment the effectiveness and lethality of the assets, impact our military preparedness and compromise our national security,” .India’s junior minister for Defence Subhash Bhamre, in a written reply to a question in Lok Sabha on November 18, 2016, had stated, “IGA with the Government of France has been signed on September 23, 2016, for purchase of 36 Rafale aircraft along with requisite equipment, services and weapons. The cost of each Rafale aircraft is approximately Rs 670 crore and all the aircraft will be delivered by April 2022” So the barebones price of the aircraft is indeed in the public domain but the overall price of the deal which has been quoted as being (unofficially) €7.85B is nowhere to be found officially. A few chosen defence reporters were given in an “off the record” conversation a more detailed breakdown of the costs for the 36 Rafale aircraft purchase.

 

Aircraft €3.3B

Weapons: €0.7B

India-specific enhancements: €1.7B

Spare Parts: €1.8B

Performance Based Logistics: €0.35B

 

Now since these “unofficial figures” are already in the public domain (i.e. mentioned on in various articles) there is some idea about the breakdown of the deal. Breaking it down any further as the Congress party wants will be counterproductive to the Indian Air Force. If sensitive details of the weapons, capabilities & nos. of Rafale will be out in the open for our adversaries to study & analyze they can now work on ways to defeat or evade them during times of conflict.

Rahul Gandhi also raised the issue of secrecy in the pricing of the Rafale deal. Nirmala Sitharaman in her rebuttal during the no confidence motion said “On the secrecy clause, I would like to show it before you, and I have submitted it for your consideration. It is an agreement which was signed during the previous government on January 25, 2008. The agreement of secrecy is an umbrella agreement, which was signed by then defence minister, A K Antony.”  “This agreement clearly mentions (that) ‘as per Article 10 of the Inter-Governmental Agreement between Government of India and Government of France on the purchase of Rafale aircraft, the protection of the classified information and materials exchanged under the IGA shall be governed by the provisions of the security agreement signed on 25 January 2008’.” According to Article 11(3) of the agreement, “For any contract or sub-contracting contract that includes classified information and material, a security annex shall be drawn up. In this annex, the competent security authority from the party forwarding the information or the material shall specify what has to be protected by the receiving party, as well as the corresponding classification level, applicable to it.” Dassault wouldn’t want all the pricing information splashed across print & electronic media for all to see as it would hamper negotiations with other buyers. Now as per the clause above Dassault could as the “providing party” classifies it as secret which India as the “receiving party” would then be legally bound to then keep confidential. Further this section states “Only the originating authority of the Providing Party may amend the classification level of an information or material listed in a security annex.” i.e. India can’t suddenly decide on its own to  change the classification level to make the information more readily available. However, as per law, the government is bound to provide full information to the Public Accounts Committee (PAC), the Parliamentary Standing Committee on Defence, and the Comptroller and Auditor General (CAG). Interestingly Subhash Bhamre just a few days ago, replying to a question in the Lok Sabha, said the Comptroller and Auditor General (CAG) is conducting an audit of the capital acquisition system of Indian Air Force including the Rafale aircraft deal.

The next allegation by Rahul Gandhi was that when he met the French president Emmanuel Macron as per Rahul’s version of events there is no such pact of secrecy between the two countries. As I mentioned earlier this was quickly shot down by both Indian Defence Minister & French foreign affairs spokesman.

During this ongoing controversy India Today which had conducted an interview with Emmanuel Macron earlier this year put a video in Macron talks about the pricing & sensitivity of the information

If the existing controversies of July 20, 2018 were already not enough Nidhi Razdan of NDTV created another one when she tweeted that Macron actually contradicted what the French foreign affairs spokesman by what he said in his interview. She claimed that Macron said that details can be shared publicly. She did eventually later correct herself when she said that information can be revealed to the opposition (not publicly as indicated by her original tweet) but still insisted Macron contradicted his government spokesman. This did absolutely nothing about clearing up the matter but instead created new round of outrage over the secrecy of the pact.

It was left to air power analyst Angad Singh to clarify that what Macron had actually said was that if Modi government wanted to share some details with the opposition the French government would have no objections to it.

Finally Abhijit Iyer-Mitra (Senior Fellow, Institute of Peace and Conflict Studies) said that the issue could be easily settled without violating the 2008 IGA treaty between Indian & France. He suggested that Rahul Gandhi & few other opposition figures could apply & get the appropriate security clearances after which the government could share details of the contract with them to assuage their concerns of pricing & any other doubts that they may have.

But the question remains (as seen by multiple baseless allegations by Rahul Gandhi & Congress) that are they really serious about getting to the bottom of this matter or not? If so, they could request a private viewing of the details of the contract once the security clearances have been granted.

OFFSET PARTNER CLAIM

Rahul Gandhi claimed “Everybody knows about the amount of money that goes into the prime minister’s marketing. One of those people was given the Rafale (maintenance) airplane contract by taking away the deal from HAL (Hindustan Aeronautics Ltd, a public sector unit). The businessman has a debt of Rs 35,000 crore and has not made a single plane in his life. Yet, he was given the Rafale deal.” He was referring to Anil Ambani’s Reliance Defence Limited being an offset partner for the deal. The offset contract is negotiated directly between France & the vendor Reliance Defence. There is no involvement from the Indian government in the negotiation process which would allow government to influence the selection in any way. Now let’s assume for a moment that there is something shady in the selection of Reliance Defence as the offset vendor as claimed by Rahul Gandhi. Now remember that Dassault is responsible for the execution & quality of work of the offset partner. Would Dassault stake its hard earned reputation of excellence on an offset partner who was being supposedly favored to be the offset partner?

The answer is most likely a no considering that in case something went wrong Dassault would be left “holding the bag” as the original vendor for the contract. Considering HAL as an offset partner should have been a non-starter for Dassault due to the aforementioned quality & production issues plus the fact that HAL’s forte of plane manufacturing (which is mostly what HAL actually does) was already being done by Dassault in France. In this talk of undue favoritism towards Reliance Defence one easily forgets that under the original MMCRA project one of the offset partners was the

company of elder Ambani brother: Mukesh Ambani! Congress leaders have to explain how selection of Mukesh Ambani as offset partner in 2012 for the older MMCRA was perfectly fine while the selection of his younger brother Anil Ambani for the new deal in 2016 suddenly became crony capitalism! To its credit government negotiated the offset to be increased to 50% (vs 30% in the older MMCRA project) which meant on a % basis more investment/work to be done in India.

A “STRATEGIC PURCHASE”

A few days after 36 aircraft purchase announcement was made then defence minister Manohar Parrikar said this about the Rafale: ‘It is a strategic purchase and should never have gone through an RFP (Request for Proposals, or a competitive tender).’ Most aviation & nuclear strategists have taken this comment to implicitly mean that Rafale is a nuclear delivery option (one leg of India’s nuclear triad). Sushant Singh (journalist with the Indian express) wrote that according to officials who spoke to The Sunday Express on condition of anonymity, the deciding factor in buying the Rafale’s, even in such small numbers, was its ability “to be used as an airborne strategic delivery system”. Most nuclear strategists have taken ‘strategic purchase’ to mean that India would use Rafale fighters to deliver nuclear weapons. This task is currently assigned to older Mirage 2000s and Jaguars (which will be retired probably around 2030). These older aircraft which are from the 1980’s have been getting upgrades to extend their life but it would be prudent to shift the nuclear delivery role to a modern fighter before the retirement of the older aircraft.

 

INDO-FRENCH AVIATION PARTNERSHIP

The Indian Air Force has been a long user of French fighter aircraft, going back to the Dassault Ouragan in the 1950s. Mirage-2000’s excellent performance during the 1999 Kargil war is very fondly remembered by IAF personnel who served in that war. During that campaign, India obtained French assistance to quickly adapt Israeli and Russian-supplied laser-guided bombs to the Mirages, which were then used to successfully pound the entrenched Pakistanis on the mountain tops in Kargil. Defence portal LiveFist reported during the MMCRA trials that Rafale was the only fighter with “explicitly stated nuclear delivery capability”. India is confident that France would help India to make modifications for the nuclear delivery capability but of course they can’t confirm this ever publicly as it would probably violate the NPT (Non-Proliferation Treaty). After the cancellation of the MMCRA there was no binding commitment to the L-1 bidder (Dassault).

Therefore some have questioned that why Eurofighter Typhoon was not considered again especially since they were offering 20% discount on their original bid? Eurofighter Typhoon is manufactured by a consortium of multiple European nations: UK, Germany, France, Italy and Spain. Now if India quietly asks for some modification to enable the Eurofighter for a nuclear delivery role it would impossible to get approval from all nations each who have different policies regarding export of defence equipment & nuclear proliferation/armament policies. India’s excellent experience with Dassault previously in terms of performance, help with modifications & dealing with a single nation with whom they share excellent defence cooperation was the reason that India always favored the Rafale from day one of even the older MMCRA. There were a lot of whispers about the process being structured to favor Dassault. This can be seen from the fact that at one stage in 2009 Rafale was dropped from the MMCRA process only to be added back later on after some diplomatic intervention by the French government. Rafale was now added back as per the defence ministry after missing answers for its technical bid were submitted.

CONCLUSION

Abhijit Iyer-Mitra in a piece argues that “India is asserting its rights as a Nuclear Weapons Power, and France is helping us do this at great risk to itself, and the Indian public discourse seems intent on proving India is an unreliable partner. It is high time the government stops treating this issue as a joke. It must understand the serious damage to national security its clumsy, incomplete and inarticulate defence is causing and offer a closed-door briefing to select opposition leaders, assuming it can mount a defence in private that it has failed to do in public. At the same time, the Opposition too needs to understand the core of the India-France pacts and the Rafale specifically. At the very least, they need to understand the enormous implications of their words, hire some serious security experts to help them navigate this while mounting a robust political attack.”

France has been one of India’s longest defence partners who has consistently & solidly stood by India. France was one of the few Western nations which didn’t impose sanctions after Pokhran-II. France was the first country to enter into a formal understanding with India after the Nuclear Suppliers Group granted India a waiver. The Indo-French Naval exercise called VARUNA slightly predates the more famous MALABAR naval exercise.  French group DCNS is helping design six Scorpène submarines (INS Kalvari class) which will built by India under a technology transfer agreement at Mazagon Docks in Mumbai. These false accusations by the Congress against French could be harmful in the long run for India’s “special” partnership with the French. Some countries in the future might have hesitation in dealing with India regarding defence deals if they are going to be dragged into the internal political squabbles of India.

Many have said that the Rafale deal is no scam but more a failure of the government to explain it clearly to all.

Vishnu Som said on Twitter said that “Rafale is a ‘scam’ because of inability of government leaders to lucidly argue point by point WHY Rafale was NOT a scam”

Abhijit Iyer-Mitra & Angad Singh have rightly said in a piece that that Rafale procurement has been clumsy but not crooked.

 

(courtesy: www.myind.net)

By Mohal Joshi

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