Rafale controversy reveals pitfalls of both excessively centralised decision-making and of emphasis on public positioning rather than strategic outcomes.

The no-confidence motion debate in Parliament highlighted the knots into which the Narendra Modi government has tied itself over the purchase of the Rafale aircraft. Defence minister Nirmala Sitharaman brandished the agreement with France on Exchange and Reciprocal Protection of Classified or Protected Information—an agreement originally inked in 2008 and renewed in March 2018 during President Macron’s visit. However, Sitharaman’s finger-wagging rectitude does not explain why the government is unwilling to disclose full details of the price of the aircraft even to a privileged committee.

The agreement, as the minister of state for defence Subhash Bhamre told Parliament earlier this year, “defines the common security regulations applicable to any exchange of classified and protected information between the two countries”. The French government has helpfully clarified that the agreement “commits to protect the classified information provided by the partner, which could, in particular, impact the security and operational capabilities of the defence equipment”.

The information alluded to here clearly pertains to the operational and technical capabilities of the aircraft—not its cost. After all, Sitharaman had committed herself to sharing the commercial details before she pedalled back and sought refuge under this agreement. Why, then, is the government so averse to placing these details on the record?

In fact, ministry of defence officials have provided important details in background briefings to journalists—details that help us understand why the government is so cagey about the Rafale deal. In September 2016, Ajai Shukla reported that the average cost of each of the 36 jets was €91.7 million. With India-specific enhancements—helmet mounted display sights, radar warning receiver, low band jammer, radio altimeter, Doppler radar, cold weather startup—the price of each Rafale went up to €138.9 million. In addition, the government had paid €2.8 billion for weaponry (€710 million), spare parts (€1.8 billion) and performance-based logistics support (€353 million).

The government insisted that this was a better deal than the one previously on offer. In a written statement on 7 February 2018, the ministry of defence claimed: “The deal secured by the [NDA] government is better in terms of capability, price, equipment, delivery, maintenance, training, etc., than that notionally negotiated by the then [UPA] government”. A few weeks later, Sushant Singh reported the ministry’s stance as explained by its officials. The nub of their argument was that while Rafale had originally submitted a bid to the previous government with a per unit price of €79 million, this would have amounted in 2015 to €100.85 million —owing to an inbuilt cost escalation formula. By comparison, the price of each of the ‘bare’ 36 Rafale bought in 2016 was €91.7 million. The additional requirements, which pushed the price per unit up to €138.9 million, were “not even thought of in 2011”.

These arguments are problematic on several counts. For starters, the headings under which the additional costs are being explained are questionable.  For instance, ‘weather and terrain compatibility’ or ‘India specific enhancements’ were also part of the original bid. It is incorrect and misleading to say the government had not contemplated them in 2011.

Further, the additional weapon systems and other requirements being paid for in 2016 deal are a direct result of the decision to scrap the original process and go for just 36 fighters. Since the government decided to buy only 36 aircraft instead of 126, the Air Force insisted that these ought to be kitted out better. How tenable, then, is the claim that we should treat these additional costs as entirely separate from the cost of the aircraft?

Most importantly, the government’s claim that the original Rafale bid amounted to €100.85 million in 2015 uses the cost escalation formula advanced by Dassault Aviation. This was, in fact, one of the most contested issues in the negotiations with Dassault until 2014. It was not a negotiated cost between Dassault and the UPA government. It is utterly inappropriate to compare a price under negotiation with the price secured for the 2016 deal. The ministry’s resort to the euphemism ‘notionally negotiated’ price gave the game away. Eventually, Bhamre conceded in response to another parliamentary question in March 2018 that the two deals “cannot be compared”.

By the same token, however, the government cannot insist that it has secured a better deal. The nub of the matter is the Prime Minister’s claim—when announcing in April 2015 the scrapping of the older process and the purchase of 36 Rafale aircrafts—that this would be on better terms. It is primarily to defend this claim that the government has performed such contortions on this issue. This decision, it has transpired, was taken without consulting the cabinet committee on security or the ministry of defence. It is not clear if the Air Force was on board at the time of this announcement. The entire process reveals the pitfalls both of the excessively centralised decision-making in the government and of the emphasis on public positioning rather than strategic outcomes.

Some analysts have pointed out that the government’s reluctance to place on record the costs of the aircraft also stems from the fact that these have been modified for the delivery of nuclear weapons. This may well be true, but officials have already shared with journalists details of the modifications without anyone raising an eyebrow. Nothing precludes the Modi government from disclosing the costs to the parliamentary standing committee on defence and untangling itself from this web of controversy.

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5 COMMENTS

  1. The point to be considered is why the original deal, which was never inked and finalised, required to be scrapped. This was due to disinclination on the part of Dassault Aviation to guarantee the quality of production of 108 planes to be manufactured at HAL, India. Secondly, there was no unanimity regarding number of man-days required for this purpose. Dassault estimated 31 million man-days , whereas HAL required 2.7 times this estimate! The UPA did nothing to expedite implementation not the original deal and was indecisive. This is the root cause of the mess. The two deals are not comparable and the present government should not walk in the trap to explain the deal by comparing it with its previous UPA Avatar.

  2. Prof PK Sharma, Freelance Journalist,Barnala(Punjab)

    The jubilation of winning of trust vote on July 20 by the NaMo led BJP has ironically been marred by the suspicions and grave question marks raised by Mr. Rahul Gandhi Congress Chief surrounding the Rafale Aircraft deal while participating in the debate on
    No-Confidence Motion in the Lok Sabha !political

    PM Modi and Union Defence Minister Ms.Nirmala Sitharaman instead of coming out clean in their replies and explanations in the debate have further deepened and complicated the controversy giving too much air to more doubts.

    Both might be heaving a sigh of relief after putting forth their justifications ! In their heart of hearts,they might have thought that
    issue stands covered up sans any trouble!

    But the way Congress Party is following this alleged fishy deal, it appears that the PM Modi and Defence Minister’s worries, problems and woes pertaining to this issue are far from over yet !

    The fact cannot be denied that they may not have fancied that Congress will take things too far so offensively ! They may wish to escape this issue but issue will now not allow them to rest in peace ! In this case, odds and facts seem to be against them !

    Their careless and immature handling of this issue will offer a big handle to Congress and opposition parties during ensuing assembly polls in four states this year and then the General Elections Lok Sabha in 2019 !

    The opposition will utilise this as a God sent Election Campaign Stuff and opportunity !

    Prof PK Sharma, Freelance Journalist
    Pom Anm Nest, Barnala(Punjab)

  3. Poor madam, sandwiched. Made mistake of life by joining BJP. You are acamedician. You atleast now resign, otherwise BJP will put you in such a place from where you may not be able to come back to your normal life. Please resign for god sake.

  4. Normally, a government to government transaction leaves no scope for controversy. Many countries buy hardware that is surplus to the requirements of the US military, directly from the Pentagon. No middlemen, no commissions. Similarly, if Dassault Aviation, analagous to HAL in India, was a government owned company, this would have been a pure G2G deal. Or if 36 aircraft in use by the French Air Force – in view of urgency – had been purchased at a directly negotiated price, no issue. In this case, a private firm, like Boeing or Lockheed Martin, is manufacturing 36 custom built aircraft for the IAF, to be delivered about four years after the deal was signed. In a way, the rationale for routing the transaction through the French government, which was not how the tender had initially been structured, remains unclear. It will simply receive payment from the Indian government and pass it on to Dassault.

  5. Why Rafale contract was awarded to AMBANI?
    Now the main reasons:
    1. HAL was not chosen bcoz its production line is already full with Tejas, Sukhoi’s etc and in fact its not even able to produce the required number of Aircrafts per year (14 was asked it could only produce 8 Tejas last year)
    2. Government wanted Private industries to support Defence manufacturing
    3. Reliance Aerospace and Defence was previously called Pipavav Defence and Engineering owned by Mr. Gandhi (not to be confused with fake Gandhis of Congress!) and Pipavav had demonstrated experience by producing OPV’s for Indian Cost guard and they had also delivered few Panamax Bulk carriers
    4. Pipavav (Which is now Reliance Defence) has the best infrastructure in Asia and the second largest in the world as well for Production …L&T and Pipavav were the only two bidders that met defence guidelines.
    5. Anil Ambani acquired Pipavav for 1800 crores and renamed it Reliance Defence and Aerospace bcoz he knew only Pipavav was capable of getting contracts due to its previous industry experience and Infrastructure .Also Pipavav had all the required clearance for manufacturing defence equipments (this itself takes 4-6 years in India just to get those clearances )
    6. L&T was not given the contract bcoz it has his hands already full with so many orders from Navy, Army and Defence Manufacturing requires heavy capital investment and profits come very late after the completion of project
    7. Reliance had appointed EX Air Force Officials , Naval High Ranking Officials who knew how to pitch your project. This was also a very crucial factor.
    8. Indian NAVY had given NOC to Reliance Shipyard (pipavav Gujarat) and were very impressed with the infrastructure …
    This is the prime reason RAFALE JV was awarded to Ambani’s Company…i don’t know why CONGress is again hell bent on playing with our Defence Forces like Bofors Time….

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