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The Rafale Deal

The Rafale Deal

By Esha Agarwal

The contentions, political, economic and military considerations

In February,2018, The Rafael deal was brought under intense media and public scrutiny when defence minister Kapil Sibal alleged that the finances in this new deal were skewed as the numbers indicated a significant loss made for the benefit of (probably) private capitalist interests.

The balance sheet and the numbers in this situation are, on a superficial examination, highly unfavourable the NDA as in 2012, 126 aircrafts were in the process of being purchased at roughly INR 526 cr. per aircraft, the contracting parties being the government at the time and Dessault (French manufacturer of Rafale jets),  them being the lowest bidder at the time. The NDA government however, bought 36 jets for about three times the cost of the original deal (per unit), valued at around INR 1670 cr. per aircraft. If we merely evaluate the numbers without considering any other factors that influence prices like additional features, technological evolution due to passage of time etc. It came into light however, that India specific changes were made in the planes that added to their defence capabilities.

 

 Another issue raised by opposition leader, Rahul Gandhi was that of crony capitalism i.e. favouritism of an entirely inexperienced company, who was a new comer in aeronautics manufacture (Reliance) headed by Anil Ambani who is the Prime Ministers comrade instead of Hindu Aeronautics Ltd. that was the original contractor under the UPA agreement in 2012, which was supposed to be the recipient of valuable TOT.

 

Before evaluating these allegations, rebuttals and third-party expert statements, its important to analyse why this deal was made in the first place. The aircrafts used by the Indian Air Force previously, during the Kargil War with Pakistan were MiG-21 fighter jets, two of which had been shot down and captured in enemy territory, one of the pilots, Flight Lieutenant Ajay Ahuja, was captured and brutally tortured. The two planes were not structurally strong enough to withhold the attacks and the Vajpayee government on a defence examination, highlighted the need for replacement of the then aircrafts who were nearing their shelf-life and reaching technological redundancy, the success of French made Dessault Mirage 2000 captured the attention of Indian ministers. Initially, Dessault was one of the bidders among a multitude of companies, which became a contractual party on bidding the lowest. Indian Airforce requires 42 squadrons and the wars had substantially depleted our defence capacity at that point and technology getting obsolete was posing another challenge.[1]

 

 

Firstly, the numbers indicated that NDA had engaged in some sort of foul play to incur such huge costs on the jets while UPA was able to negotiate the much better deal. However on careful debunking, it is made clear that substance/ material that backs these amounts is thoroughly different. The NDA provided us with a more comprehensive account that was inclusive of many other incidents (not just the mere cost of the planes themselves and the export of parts to HAL which was what was the gist of activities that backed the costs in the UPA report). The 7.7 billion euros or massive sum of 526 cr. INR in this case included 36 fully assembled aircrafts along with specialised Indian additions to these systems, five year service agreements and all the supporting infrastructure to set the jets in motion and dispense all their crucial functions. This disparity in the items included in the computation of these numbers, which differed significantly, makes it impossible to determine which alliance was able to secure the best deal. However, NDA government has thoroughly determined all the factors that would go into furnishing the deal into a physical reality and a finalised contract with the French Government has been signed in 2016 itself which is a whole lot more complete than a preliminary agreement or negotiating talks.[2]

 

The next argument, relating to crony capitalism is rebutted by the NDA representatives by repeated assertions that Dessault was the one that chose this company and not the government. It may be part of the deal for the French company to determine which Indian company they want to collaborate and create a joint venture with and these commercial and trade matters are not in the public domain as they are facilitated and influenced by private interests (which are based on mutual profit) and therefore that is the end of this discussion.

 

The obscure military and business jargon in this controversy begs the question- Why was the public so deeply interested in this matter? The main reason is that it was the prime agenda focused  on by the Congress in its electoral campaign against the BJP and Parliamentary debates, during this very contested time, were viewed by the entire nation. Allegations of fraud and hiding of information from the public and even the rest of the party members and opposition considering such a huge sum of money outflow is a big deal , as the tax payers or the general public has a strategic and economic interest in how the government spending is being managed and what they assets or jobs they are bringing to the table. Transparency of the government is an important indicator of the levels of corruption or malpractice that is taking place within the party and this serious accusation made on the current defence and cabinet ministry had a huge impact on their image. The Congress repeatedly asked the ruling party to release price-related specifications to them as its  a common practice to bring in confidence the opposition in such crucial matters of national importance.[3]

The government again contended with the fact that their was a non-disclosure clause in relation to the release of classified information and releasing item-cost parallels can, if leaked or somehow communicated in the hands of China or Pakistan compromise the entire Airforces’ capabilities and India’s structural power. This debate is still unsettled, as their is a combat of vicious insults on both sides, one calling the other immature and the other raising doubts on the legitimacy and fairness of this transaction.

The government has released this vital information to CAG which has revealed that the 2016 deal made by the BJP is 2.86% lower than the UPA deal[4] but other factors like the five-squadron gap in the present deal and loss of the precious technology-transfer that was part of the original deal is another setback, which would have placed immensely valuable military plane production processes and techniques in the hands of HAL and its personell, indispensable asset as gain of the knowledge of creation is far more superior than mere material benefits.

 However, the quick signing of this deal and addition of Indian specific moderations suggest that this deal was made for emergency use and for bolstering are military capacity in the short term.

 

In this heated power play between the parties, judicial role is often contested. How often and in what manner should the court intervene? The Supreme Court judgement given by the CJI has brought a myriad of different opinions to the forefront, some even alleging that this decision is influenced by the government itself and alleging the violation of the independence and sanctity of the court, that is a vital component of a democracy. The judgement listed, in brief, how the material evidence in no way substantiated any of the claims madly the third party and as far as quality of aircrafts was contested, there was no doubt that it would be a valuable and needed addition to the IAF. The Supreme Court refused to engage in the price and commercial considerations for what they believed the two countries were privy to and revelation of the component and structure by structure (and corresponding prices) of which can substantially hamper national security[5] since it is easy to deduce the type of military equipment and the range of its capabilities and extent of its power through price.

 

 

The offset liabilities on the vendor, in this case, Dessault, that forms the crux of the economic benefits as it creates flow of foreign direct investment in the R&D department as well as manufacture and services and hence is an important asset. The Congress leader, Rahul Gandhi has asserted that the government has illegally awarded the DRAL 300 billion INR worth of offset liabilities which was later denied through a notice, the contents thereof are reproduced as under: That mere 22% or 66 billion worth of offset liabilities were to be discharged by the DRAL while other companies like Thales, Safron and MBDA.[6]

 

My personal opinion on this matter is that the technology transfer that accompanied the previous deal as well as the sheer number of jets that were being bought makes it look like a more lucrative deal. But this same tentative opinion is brought crashing down when the additional features and finalised aspects as well as numerous other variable costs being added to the computations of the NDA report is brought to attention. I believe that action and implementation of policies and proposals is the most important of the executive branch of the government and a deal in its mere negotiation stage, that was left hanging in mid-air till 2014 when the next general elections took place means that the UPA either didn't have the resources or time to finalise the agreement or they didn't assign the strengthening of defence enough importance, which is a disastrous move on their part as our sovereignty is being constantly threatened by forces like China and Pakistan and our military personnel are at a huge disadvantage and in a precarious situation if immediate steps are not taken. I believe the NDA government is in the right here. However, like most political matters, this is a case of one parties statements against the other and who knows who is manipulating what facts to gain electoral advantage? Like many matters, this too might never be clearly known to the public. Right to information still exists, merely on paper and we can only dream of a future where the citizens would b more fully informed about the activities of our representatives.

 


[1]“Rafale Deal to Give India Aerial Edge, Additional Benefits.” The Statesman, 23 Sept. 2016, www.thestatesman.com/india/rafale-deal-to-give-india-aerial-edge-additional-benefits-166849.html.

[2]IndianExpressOnline. “Explained | The Rafale Deal Controversy.” YouTube, YouTube, 18 Feb. 2018, www.youtube.com/watch?v=VPrI6gu9AP0.

[3]NDTV. “The Rafale Deal: Is There A Scam?” YouTube, YouTube, 23 July 2018, www.youtube.com/watch?v=Lu3UBnUgQC0.

[4]“View: What the CAG Report on Rafale Reveals.” The Economic Times, 14 Feb. 2019, economictimes.indiatimes.com/news/politics-and-nation/view-what-the-cag-report-on-rafale-reveals/articleshow/67989377.cms.

[5]Timesofindia.com. “Supreme Court Verdict on Rafale Defence Deal: What the Court Said - Times of India ►.” The Times of India, India, 14 Dec. 2018, timesofindia.indiatimes.com/india/supreme-court-verdict-on-rafale-defence-deal-what-the-court-said/articleshow/67088303.cms.

[6]Shukla, Ajai. “Reliance Group's 2016-17 Report Spoke of Rs 300 Bn in Rafale JV Offsets.” Business Standard, Business-Standard, 14 Oct. 2018, www.business-standard.com/article/current-affairs/reliance-group-s-2016-17-report-spoke-of-rs-300-bn-in-rafale-jv-offsets-118101300731_1.html.

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