What is the Rafale Aircraft Deal?

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The ‘Rafale aircraft deal’ is one of the vital political insinuations levelled on the NDA government by opposition parties which deals with the purchase of 36 multi-role fighter aircraft. The aircraft were priced around 7.8 billion euros. The controversy also claimed to have uncovered the crony capitalism of the present NDA government.

Specifications of Rafale Fighter Plane

Rafale is an Omni-role fighter jet capable of the entire spectrum of roles — air supremacy, air defence, close air support, in-depth strikes, interdiction, reconnaissance, anti-ship strikes, and nuclear deterrence. With its advanced AESA (Active Electronically Scanned Array) radar, electronic warfare suite, and network-centric capabilities in addition to its armaments, Rafale is now the most advanced fighter in the IAF arsenal, overtaking the SU-30MKI. It is a unique aircraft that is equipped with a wide range of modern weapons.

Rafale for India

In 2012, Rafale was hand-picked after the Medium Multi-Role Combat Aircraft (MMRCA) competition, also known as the MRCA tender floated by Indian Defence Ministry. The Defence Ministry had allocated Rs 55,000 crore (USD 7.7 billion) for the procurement of these aircraft, making it India’s single largest defence deal. The MRCA tender was floated to fill the gap between its future Light Combat Aircraft and its in-service Sukhoi Su-30MKI air superiority fighter. Rafale of Dassault Aviation triumphed the competition due to its lower life-cycle cost, which is an amalgamation of cost of acquisition, operating cost over 40 years, and the cost of transfer of technology.

Delays in the Deals

The negotiations showed a sign of setback when Dassault began to hear about the warranty for aircraft produced by Hindustan Aeronautics Ltd. India wanted Dassault to ensure the quality of aircraft produced by HAL, which was not accepted by Dassault. Two years later, it was reported that the cost of the deal had escalated to USD 30 billion (Rs 1,86,000 crore), with each aircraft costing over USD 120 million (Rs 746 crore). In February 2014, the then defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be endorsed in the fiscal year 2013-14 due to budgetary constraints.

In March 2014, HAL and Dassault signed a work-share agreement to manage the logistics of license manufacture. After the 2014 Indian general election in April-May, National Democratic Alliance (NDA) led by the Bharatiya Janata Party (BJP) took control of the government from United Progressive Alliance (UPA), led by the Indian National Congress. As disagreements over cost and warranty for aircraft produced by HAL were persistent, the new defence minister Manohar Parrikar said that Sukhoi Su-30MKI could be acquired as an alternative to Rafale. But Air Chief Marshal Arup Raha disagreed, saying that Su-30MKI and Rafale had different capabilities and one could not be replaced by the other. In February 2015, it was openly reported that the Rafale deal would be cancelled.

But the Indian government once again decided to buy Rafale due to the less number of fighter jets in the IAF. Prime Minister Narendra Modi intervened and decided to buy 36 ready-to-fly fighters instead of going for technology acquisition from Dassault and make it in India. Consequently, in September 2016, after authorization from the Indian Cabinet Committee on Security, India and France signed an inter-governmental agreement (IGA) for the acquisition of 36 aircraft at the cost of euro 7.87 billion (Rs 58,891 crore) in what was the first fighter aircraft deal for India in 20 years.

Offsets are, to some extent quid pro quo between countries and defence companies. Since the government spends a large part of its budget buying equipment from these companies, it asks these companies to invest a portion of the deal amount in their countries.

The clause allows for the economic growth of the country in the process of completing the deal. While some offset clauses may ask for investments, others may impose terms like onboarding of local suppliers in the process of manufacturing.

Reliance Group and Dassault Aviation Deal

In October 2017, Anil Ambani and Dassault Chief Operating Officer Eric Trappier laid the bedrock for a facility to produce parts of the Falcon business jets under Dassault Reliance Aerospace Limited (DRAL), a 51:49 joint venture between Dassault and Reliance Defence. The opposition parties accused the government of causing colossal loss to taxpayers’ money after dealing with Rs 58,000 crores in November 2016. They claimed that the Anil Ambani-led Reliance Defence Limited had been unfairly selected to be the French firm’s Indian partner. Dassault says it chose Anil Ambani-owned Reliance Defence Limited as an offset partner as per the defence ministry’s offset strategy.

The DRAL Joint Venture could account for between 15 and 17 per cent of Dassault’s share of the offset pie or roughly between Rs 1,260 and Rs 1,428 crore.

The Congress alleged that the cost of each fighter jet is three times more than what the previous UPA Government had negotiated with France in 2012.

Main Controversial Points

  1. The primary allegations are that the NDA government paid a higher price for the 36 Rafale fighter jets than what the UPA had agreed to pay for 126 Rafale jets in 2012. The government has refused to reveal the pricing details citing confidentiality clauses in the intergovernmental agreement with France.
  2. There were no middlemen in what was a deal between the government of India and France, but, in the presence of businessman Anil Ambani as a defence offsets partner in the agreement, the opposition saw evidence of cronyism.
  3. Why was the number of Rafale jets to be bought reduced from 126 to 36?
  4. Why was the UPA-era deal discarded? 

Conclusion

It has been alleged that Anil Ambani’s defence firm was favoured over the government-owned Hindustan Aeronautics Limited. Even more questionable is the fact that a government-owned firm was maimed to pick Reliance – a company that doesn’t have any experience in making defence equipment. What is even more ironic is that Ambani’s defence company was registered only 12 days before the Prime Minister announced the 36 aircraft deal in Paris in April 2015.

The timing adds to former French president Francois Hollande’s Mediapart revelation — “It is the Indian government which proposed this group and Dassault who negotiated with Ambani. We did not have a choice, and we took the interlocutor who was given to us.” Also, adding to the allegations of favouritism and crony capitalism is the fact that the deal with Dassault Aviation came as a lifeline for Reliance Defence – a firm struggling to pay its land dues.

That is not the end of the controversy – Anil Ambani’s Reliance Entertainment funded a film starring French actress Julie Gayet, partner of Francois Hollande. The fact that the film was being financed by an industrialist who stood to gain from the Rafale deal, even if as an offset partner, has added more to the controversy. One still cannot arrive at an inference, whether corruption has taken place or not, but there are indications of favouritism. Besides, many defence experts feel that the government is concealing some information behind the secrecy clause to give out the financial report.


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