Rafale: Mixing Fact with Fiction

Speaking at The Huddle organized by The Hindu in Bengaluru, on February 18, the Union Minister of Defense Nirmala Sitharaman, “assured” that there was no controversy about Rafale. “They (the Opposition) just want to equate this scam-free government with theirs”. And then, offered the audience juicy inside bits to drive her contention. She claimed that the price quoted for Rafale jets was "revised upwards of 300% of the original price”. She argued that Inter-government agreement was like a MoU which states “intention” and does not name either public sector HAL or a private party. And, she claimed that HAL manpower was “not accepted by Dassault.” She went on to say that “(i)f Dassault does a deal with a private company, it is absolutely nonsense to say that it was done because the Prime Minister handpicked the company”.

The scandal concerns how a deal negotiated for manufacturing in India under ToT by the public sector Hindustan Aeronautics Ltd, with work share agreement reached in March 2014 between Dassault and HAL for 30-70 per cent share respectively, was cancelled, then a new deal negotiated for outright purchase of 36 jets in fly away condition in the name of “emergency”, and finally through the offset route Rs 29,000 cr worth orders gifted to a corporate group notorious for being the number one defaulter with Rs 1.25 lakhs crore of Non Performing Assets and with absolutely no experience in military sector. Indeed none other than Eric Trapper, the CEO of Dassault, which manufactures Rafale fighter jets, was reported as saying that his company signed up with Anil Ambani group because “we were told that HAL was fully booked. We talked to Reliance and they were very keen to create such capabilities in India. They have a track record and the financial capabilities as well”. [“Will need larger Rafale order for true Make in India: Dassault CEO”; Manu Pubby, Economic Times July 6, 2017].

Significantly, Union Minister Nirmala Sitharaman had also last November claimed that price negotiated by Modi Government was “definitely” lower, failing to explain how unit price of Rs 670 cr is less than Rs 520 Cr. What is also of interest, in this regard, is that last November she told a press conference of Modi Government’s commitment for transparency and her famous words were to share “all the facts” about the deal because “public money is involved”. Now, she hides behind the “national security” smokescreen and claimed that just as BJP never expressed “outrage” when UPA denied such information in the past because of “national security” reasons, nor should Congress.

That BJP-RSS government has to imitate the Congress Party, which it damns at drop of a hat, speaks volumes for its hypocrisy. More pertinently, since the bits of “facts” she passed out are difficult to vouch for because public has no access to them, nor do we know if the 300% price jump in cost of Rafale under UPA is true or false because she also refers to it as a “non-deal” meaning price was not fixed. However, the Modi Government has in course of last two years justified the price struck by it. Their claim was that as against the price negotiated by UPA for Rs 520 cr per fighter, which included Transfer of Technology to HAL, the Modi Government agreed to Rs 670 cr off the shelf, which is in keeping with the normal price rise and passed on the blame for this on delay caused by the UPA government. However, the fact is that Rs 670 cr is not just Rs 140 cr more it means that Modi government negotiated a bare frame deal even with a discount for non-transfer of technology, at a much higher price. Just the price difference between two bare frame prices comes to an outgo of Rs 5040 Cr. If the discount for non-ToT is added then the bare frame price rises significantly more.

What is also ignored is that dependence on costly imported spare parts and components will not diminish. In the Euro 7.9 billion deal spare parts and components cost Euro 1.7 billion. Converted into rupees (Rs 80 for each Euro) it means no less than Rs 1,36,000 Cr. Import dependence has been a bane for the armed forces. The cost to India for this dependence has not been worked out. Considering, the capability of HAL to absorb technology being far greater than any private sector unit and because of a long association with Dassault. So let’s take a step back and recollect the following:

On April 10, 2015, the PM announces in Paris cancelling the MMRCA deal negotiated by the previous government. The PM negotiated directly with the Company. Question is did Narendra Modi make it clear to the Dassault company that under the new deal, in order to service the offset clause, they should tie up with Anil Ambai group and not HAL? Did he or anyone in his Government convey to Dassault that HAL was full up and was reluctant to tie up with Dassault to service offset? Was Anil Ambani part of his entourage? Were media reports of Anil Ambani and his meeting with officials of Dassault on the sidelines true?

In September 2015 the Hindu newspaper wrote that every major aspect of the Rafale deal is entwined in difficulties and then adds that “(a)mong them are French side’s concerns about a major Indian private conglomerate whose services are being recommended by some sections of Indian Government”. The “key” concern is the role Indian company will play in the deal. Josy Joseph wrote that due diligence done on the “recommended” conglomerate has thrown up questions over its financial capabilities.” (“Rafale Deal faces hurdles”; Josy Joseph, The Hindu 30/09/2015).

So could it be that the higher price paid was to make Dassault agree to the conditions laid down by Modi Government for offset deal with ADAG?

The other tell-tale sign is that on June 24, 2016, Government opened up an automatic route for FDI of up to 49% requiring no prior approval from the Union Cabinet or the Cabinet Committee on Security. On September 23, 2016, Rafale deal for purchase of 36 fighter jets was signed valued at Rs 59,000 Cr. Ten days later on October 3, 2016, Dassault and ADAG set up a joint venture to service 50% offset value of the deal.

The long and short of it is that there are too many skeletons in BJP-RSS closet leaving behind a long trail of tall claims which fall flat on examination. So rhetoric will not suffice. Public money is involved and public needs to keep asking is if Eric Trapper CEO of Dassault was lying when he claimed that Government gave them to understand that HAL had backed out from offset deal with Dassault? Can the Government confirm or deny this? Why is it that the only corporate honcho which finds mention in media during PM’s visit to Paris in 2015 is Anil Ambani? Why did the Government push Anil Ambani group as offset beneficiary against a done deal with HAL? Why has the Government paid out thousands of crore more for a fighter plane even without ToT, relaxed rules to enable automatic route for 49% FDI in the military sector, and partnership with one private party with zero experience in the military sector with a long list of questionable dealings? And finally is it some kind of a quid-pro-quo for Anil Ambani who was the first corporate owner to come out in support of Narendra Modi’s prime ministerial candidacy?

In other words, the Rafale deal stinks. This scam is going to cost Indians dearly, and profits will be made by a private corporate house at the expense of public exchequer. Instead of being a mark of decisiveness it shows how arbitrary decisions and appeasement of corporate groups go hand-in-hand. It is an old adage that empty vessels make a lot of noise. BJP-RSS government fits this to the tee.