Saturday, 25 November 2017

Rafale deal: Modi must explain his actions


  • Days before the PM replaced the deal with one that would eventually exclude HAL, the Dassault CEO had said ‘contract finalisation and signature could come very soon.’ So what changed?
  • The manner in which Prime Minister Narendra Modi bypassed a number of relevant institutional mechanisms to announce the purchase of 36 Rafale fighter jets during his official visit to France in April 2015, gives rise to lots of suspicions about corruption and nepotism.
  • Reliance Defence Ltd.’s Chairman Anil Ambani accompanied Prime Minister Narendra Modi in his trip to France in April 2015, the company said he did because he is one of the members of the Indo-French CEO Forum. 
  • Dassault Aviation selected Anil Ambani's Reliance Aerostructure Ltd (subsidiary of Reliance Defence Ltd) as its joint venture partner. Reliance Defence Ltd stated that the committed offset obligations of Rs. 30,000 crore are to be undertaken by Dassault Reliance Aerospace joint venture company and not by Reliance Defence Ltd.
  • Why is the Modi government buying 36 Rafale aircraft at a highly inflated price compared to the originally negotiated base price by the previous government? Is it correct that the Modi government is buying 36 Rafale aircrafts without the transfer of technology for $8.7 billion while the previous government had negotiated 126 Rafale aircraft at a base price of $10.2 billion along with the transfer of technology?
  • In August 2007 UPA government floated a tender for the purchase of 126 twin-engine “Medium Multi Role Combat Aircrafts” for the Indian Air Force (IAF). After months of hectic bidding by various foreign companies – Lockheed Martin’s F-16, Dasssault’s Rafale, Boeing’s F/A-18s, Russia’s MIG-35, Sweden’s Saab’s Gripen, Eurofighter Typhoon – Rafale won the contract. The agreement between Dassault and the Indian government was finalised in late 2012. The company settled to sell its aircrafts at a base price of $10.2 billion (approximately Rs 54,000 crore as per the 2012 conversion rate). It was decided that out of 126, 18 planes will be imported in a finished state or in a fly-away condition, and the rest of them (108) would be manufactured by HAL, to which the French company was obliged to transfer its technology and was also required to invest half of the total transaction amount in India, according to the agreement. The deal was seen as fair one in which both parties got into a long-term mutually beneficial association. The workshare agreement between HAL and Dassault Aviation was signed on March 13, 2014.
  • During his recent Indian tour, Trappier tried to evade the Indian media's question on why Dassault had inflated the price of 36 Rafale. "You have to ask the [Indian] government this question," Trappier had replied.
  • Former defence minister Manohar Parrikar was informed hurriedly only a few days before Modi’s France visit of the decision to acquire 36 jets, leaving him to publicly defend a decision that “he neither understood nor agreed with”.
  • “In terms of Rafale, my understanding is that there are discussions underway between the French company, our Ministry of Defence, the HAL which is involved in this. These are ongoing discussions. These are very technical, detailed discussions. We do not mix up leadership level visits with deep details of ongoing defence contracts. That is on a different track. A leadership visit usually looks at big picture issues even in the security field.”  A day before the PM’s visit, foreign secretary S. Jaishankar said in a press briefing. 
  • This shows that the foreign ministry’s senior-most bureaucrat was not aware of the impending announcement. In other words, the official stand appeared to be a continuation of the deal that the previous UPA-II government had laid down for a purchase of 126 aircraft from the French company that involved the government-owned Hindustan Aeronautics Limited (HAL) as the Indian manufacturing partner. Jaishankar’s statement also shows that until April 8, 2015, HAL was officially still very much a part of the deal. 
  • The Government has set up a Defence Acquisition Council (DAC) headed by the Raksha Mantri for decision making in regard to approval of Capital Acquisitions in the long term perspective. The decision flowing from the Defence Acquisition Council are to be implemented by (1) Defence Procurement Board headed by the Defence Secretary (2) Defence Production Board headed by the Secretary (Defence Production) and (3) Defence Research & Development Board headed by the Secretary (Defence Research & Development). How can Modi, even as PM directly sign a highly technical defence procurement deal without prior clearance from DAC? Narendra Modi dispensation is having the worst record in recent years on utilisation of Defence Budget and compromising national security. Former Defence Minister AK Antony said that during UPA regime, several opposition leaders and top BJP brass like Yashwant Sinha and Jaswant Singh had opposed the purchase of the French fighter jets during the UPA regime, finding fault on different counts. 
  • Even Dassault CEO and chairman Eric Trappier may not have been aware of Modi’s decision to cut the size of the deal to 36 aircraft, exclude HAL and remove the crucial transfer of technology clauses.
  • An Agence France-Presse report (published on Indian Defense News on March 27, 2015) quotes Trappier as saying that the work on completing an Indian contract for the Rafale fighter jet is taking time, but the deal to purchase 126 Rafales is now “95% completed.”

The first two Indian Mirage 2000 delivered by Dassault Aviation
  • See the above video available in YouTube, published by Dassault on March 25, 2015, two weeks before Modi’s France visit and the reduced order announcement. 
  • In the video, Trappier proudly states that “Considering as well our conformity with the RFP,  in order to be in line with the rules of this competition, I strongly believe that contract finalisation and signature could come very soon.”
  • Now, the first Rafale jets are to enter service with the Indian Air Force between 2019 and 2022 and Dassault has been negotiating with the government of India for a deal of 36 more jets which would form two more squadrons.

Political leaders with majority succumbing to temptations and
overriding institutional procedures in the garb of speed and efficiency
are betraying the sacrifices made by our freedom fighters and founding fathers
in establishing the sovereign republic of India ... Manmohan Singh

Those who had followed the things that happened 2007 onwards on Rafale matters would know that the inordinate delay was due to arriving at amicable agreement of transfer of technology to HAL by Dassault and can't blame MMS government alone for delay and with 95% work for signing agreement was completed which facilitated Modi's instant cancellation of RFS and signing a new costlier deal. No one was aware about the cancellation of UPA deal and hoisting of Modi's own deal in the name of emergency requirement of IAF, till it was announced by Modi. All the institutional mechanisms tor ensuring transparency and fairness were subverted for no justifiable reason. This is nothing but but blatant display of authoritarianism and nepotism by Modi. Anil Ambani's Reliance Defense Ltd has no prior experience in this field. Apart from deleting 'technology transfer clause', per unit cost escalation to $242mn (from $81mn) by 3 times inflicting loss of over Rs. 35,000 crores (Total deal value Rs. 56,500 crores) to exchequer is unjustifiable by any stretch of imagination. Ironically, Defense Minister Nirmala Sitharaman's explanation on Nov 16, 2017 that 'all procedures were followed' doesn't infuse any public confidence in this matter.

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