The Rafael Deal

Indian Air Force (IAF) currently has 30-32 squadrons of fighter planes, with each squadron consisting of around 18-21 aircraft. India needs about 40-42 squadrons to adequately protect its borders. Also, there are aging issues of the old fighters. IAF asked for additional fighter jets in 2001 to replace its MiG-21s and augment its fleet of Sukhoi 30MKIs. As the current IAF fleet largely consists of heavy and light-weight combat aircraft, the Ministry of Defence (MoD) considered buying intermediate medium-weight fighter jets. Hence, the Defence Acquisition Council decided to buy 126 aircraft in August 2007. The Initial bidders were Lockheed Martin’s F-16s, Boeing’s F/A-18s, Eurofighter Typhoon, Russia’s MiG-35, Sweden’s Saab’s Gripen and Rafale. However, finally two of them — Typhoon and Rafale — were shortlisted.

On 31 January 2012, MoD announced that Rafale had won the Medium Multi-Role Combat Aircraft (MMRCA) competition as it became the lowest bidder based on life-cycle cost. Rafales are twin-engine MMRCA manufactured by Dassault Aviation, a French firm. Rafale fighter jets are capable to perform a wide-range of combat roles such as air supremacy, interdiction, aerial reconnaissance, ground support, in-depth strike, anti-ship strike and nuclear deterrence. Out of 126 aircrafts, the first 18 were to be supplied fully built and the remaining 108 were to be manufactured by the state owned Hindustan Aeronautics Limited (HAL) with transfer of technology from Dassault.

India and Dassault started negotiations for the contract in 2012. Both India and France witnessed national elections and a change in government thereafter. However, in April 2015, on a visit to France, Indian Prime Minister Narendra Modi surprisingly announced a new deal of 36 Rafale jets, all in fly-away (ready to fly) condition. This is in contradiction to the ‘Make in India’ concept and Modi’s announcement that not only did he want India to stop being the world’s top defence importer but that over the next five years, nearly 70% of the country’s military needs would come from domestic production.

In January 2016, India and France signed a Memorandum of Understanding (MoU) for acquisition of 36 aircraft and in September 2016, India and France signed an Inter-Governmental Agreement (IGA) – the “Rafale deal” – at a cost of 7.87 billion euro or about 59,000 crore rupees.

The controversy started as the critics pointed that the price was grossly overvalued. The UPA deal was going to cost around Rs 54,000 crore for 126 aircraft (approx. 430 crore per jet, though it varies as 18 were to come directly from France and rest to be built in India), whereas, Modi’s deal is Rs 59,000 crore for 36 jets (over Rs 1,600 crore per jet). But the government told Parliament in March 2018 that it was spending Rs 670 crore per jet, though this figure does not include “India-specific enhancements”. Defence expert Ajai Shukla said that the contracted price averaged out to Rs 686 crore per aircraft without the enhancements and Rs 1,063 crore per aircraft with the enhancements. So, it seems clear that the Modi deal is much more expensive than the UPA deal. Or rather it’s a multi-crore corruption with the taxpayers’ money. Exact comparison between the two deals, though, is possible only if the government discloses more details, which it has refused to do, citing an agreement of secrecy. However, critics pointed that the agreement covers technical specifications and operational capabilities, and not pricing.

Secondly, the deal favored a particular business house. The deal had an offset clause in which Dassault has to ensure that 50% of the Rs 59,000 crore (i.e. about Rs 30,000 crore) gets invested in the Indian defence system. However, it became clear that the bulk of that amount will be channeled through Dassault Reliance Aerospace, a Joint Venture (JV) established between Anil Ambani’s Reliance Aerostructure and Dassault. “Neither Reliance Defence nor any of its allied companies have any experience of manufacturing aerospace and defence equipment. In contrast, HAL has over 60 years of experience in aircraft manufacturing”, noted some critics. In March 2015, just one month before Modi’s Paris visit, Anil Ambani’s Reliance acquired Pipavav Defence. Anil Ambani also attended Modi’s meeting with defence chief executives in Paris. And just two weeks after Modi’s announcement, the Anil Ambani-led ADAG incorporated a new company – Reliance Aerostructure Ltd. At the time of the Dassault deal with Ambani, Reliance Defence had only been around one year and had a debt of Rs 8,000 crore and losses of Rs 1,300 crore. Also, former French President François Hollande stated in an interview that India suggested the Reliance Defence as the offset partner for the deal. Critics pointed this to be a symbol of crony capitalism.

Although Congress is trying to use the deal for getting benefit in the 2019 election, one may also remember similar scam during the Congress era – the Bofors scandal. Moreover, the Indian defence system is gradually moving into the hands of the private players, which is a serious concern with respect to national security. The event also sheds light on the large war economy which has always been pushed to save the world capitalism or rather imperialism from its crisis, like it did in the first and second world wars.

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