The Rafale Deal Controversy

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With the perspective to enhance and upgrade India’s mellow fleet, in the April of 2015, Prime Minister Modi, announced that 36 Rafale fighter jets, will be bought (ready to fly) from the French aircraft builder and integrator, Dassault. It was originally planned, that 108 fighter jets will be foregathered in India, by the state-run Hindustan Aeronautics Limited, Bengaluru, while 18 will be bought from Dassault Aviation.

Finally, in January 2016, the order of 36 Rafale fighter jets was confirmed in the deal with France. Under this deal, Dassault Aviation, along with its main partners Safran and Thales, engine and electronic-system maker respectively, would share some technologies with the Defence Research and Development Organisation, HAL and some private companies.

The Agreement

Nearly after one and a half year since Prime Minister Modi made the announcement, the inter-governmental deal was finally signed between India and France, in September 2016. India promised the payment of Rs 58,000 Crore in exchange for 36 Rafale Fighter Jets and about 15 percent of this cost was to be paid in advance. Additionally, an accompanying offset clause was sealed through which France will invest 30 percent of the amount in India’s military aeronautics-related research programmes and 20 percent into local production of Rafale components [NDTV, February 9].

Alterations that led to the Controversy

In the year 2007, when the UPA government was in power, it floated a tender to purchase 126 ‘Medium Multi-Role Combat Aircraft’. Later in the year 2012, the Dassault Aviation agreed to sell Rafale at a base price of Rs 54,000 crore. The agreement was signed on March 13, 2014.

In April 2015, Prime Minister Narendra Modi made a visit to France and made the announcement that India would buy 36 “off the shelf” Rafale Fighter Jets. The interesting part was that during his visit, he was accompanied by the Reliance Defence Limited owner, Anil Ambani.

The agreement of 2014 was canceled and a new agreement was signed in September 2016, whereby 36 Rafale Jets would be bought for the price of Rs 58,000 Crore. Also, under the new agreement Dassault Aviation no longer had to transfer any technology, RDL undertook offset obligations of Rs 30,000 crore with Dassault Aviation and HAL was no longer required in the manufacture of these fighter jets.

The Controversy

The Opposition alleged that the NDA government bought the 36 Rafale jets at a price which was much higher price than what was being negotiated by the UPA government for 126 aircraft. The UPA negotiation comes to Rs 526.1 crore per aircraft while NDA’s negotiation comes to Rs 1570.8 Crore [The Indian Express, February 9, 2018]. The price for 126 Rafale jets, negotiated by UPA government was Rs 4000 Crore less than that negotiated by the NDA for 36 Rafale Jets.

Allegations were made by the opposition that PM Modi was promoting the interests of Reliance Defence Limited. The opposition alleges that the discharge of offsets has been done to favor a particular private Indian defense company. Congress accused BJP of non-transparency in the billion-dollar deal and it is one of the biggest failures of the “Make In India” programme. The Opposition also alleged that there has been a total neglect of Transfer of Technology (ToT).

The controversy sharpened on Monday after Defence Minister Nirmala Sitharaman declined to share the cost of Rafale Fighters with Rajya Sabha.

The Congress has claimed that the new deal is in violation of the Defense Procurement Procedure since an announcement had been made by the Prime Minister regarding the purchase of the jets without any inter-governmental agreement and in the absence of the defense minister [].

Response to Allegations

The Defence Minister Nirmala Sitharaman told the Parliament earlier this week that the details of the deal with France for the Rafale fighter jets cannot be disclosed as per the inter-governmental agreement as it is “classified information”. She added that “there was no violation of procurement procedures, the Centre is yet to decide on procuring additional Rafales [Economic Times, November 17, 2017].”

“In September 2016, in the presence of France’s Defence Minister and then Indian Defence Minister Manohar Parrikar the agreement for 36 Rafales was signed.  It is an intergovernmental agreement with five rounds of discussion, past which the CCS approval was obtained and then was the agreement between India and France, so no procedure was violated. ”Sitharaman said in response to allegations that the decision was unilaterally taken by Modi.

When she was asked about the lack of Transfer of Technology, she responded that there is no “economic sense” in talking about the Transfer of Technology. The Defence Minister, with regard to the arguments over offset, said, that no offset contract had been signed so far.

In addition, the RDL also asserted to the heating controversy saying that Anil Ambani is a member of the Indo-French CEO Forum and during the meeting more than 20 Indian CEOs present. It further said that no approvals from the Union cabinet or cabinet committee on security were needed as the government policy as of June 24, 2016, allowed for 49% foreign direct investment in the defense sector under the automatic route without any prior approval. The joint venture was formed in October 2016 according to the new policy [The Wire, December 17, 2017].

The Conclusion

Although the Government has promptly responded to the said allegation there remains a lot of unanswered questions. Isn’t the removal of the technology clause from the deal a failure of the “Make in India” campaign? Why was HAL’s role not considered by the Modi Government? What was the need of including RDL in the deal? And finally, why did the Modi Government cancel the old agreement with the less favorable clause and more prices?

For the above reasons and due to the reluctant attitude of BJP to come clean, the Opposition has been raising accusations regularly and challenging the opacity of the deal, obviously for a political cause.


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