Decoding the Rafale deal

BRP Bhaskar

Gulf Today

 

A slanging match is on between the ruling Bharatiya Janata Party and the opposition Congress on the deal which Prime Minister Narendra Modi struck with France to acquire 36 Rafale warplanes.

According to Congress President Rahul Gandhi, Modi tweaked the agreement the previous United Progressive Alliance government had negotiated with a view to favouring a crony businessman.

The search for a new multi-role combat aircraft to replace the ageing fleet of Soviet MiGs began when the first BJP-led government was in power and continued under the two UPA governments.

After field trials in which six manufacturers participated, Dassault’s Rafale was adjudged the best, and in 2012 negotiations began for acquisition of 126 aircraft. 

UPA negotiated a deal to acquire18 aircraft in fly-away condition and manufacture108 in India in collaboration with the state-owned Hindustan Aeronautics Limited. Dassaault’s talks with HAL were inconclusive when the change of government took place in 2014.

On an official visit to France in 2016, Modi signed an agreement with President Francois Hollande to buy 36 Rafale aircraft in fly-away condition.

It dumped the 78-year-old HAL, which has produced some small planes and helicopters on its own, and manufactured, under licence, aircraft of foreign design like the British Vampire, Gnat and Jaguar and the Soviet Mig 21, Mig 27 and Sukhoi. Anil Ambani’s Reliance Defence, which was incorporated just weeks before the Modi-Hollande agreement, came in as Dassault’s Indian partner.

The Ambani firm cut into the deal under an offset clause in the agreement which requires France to invest half the contract cost in India. According to media reports, France will invest 30 per cent of the cost in India’s military aeronautics-related research programmes and 20 per cent in local production of Rafale components. 

The Congress says under the UPA deal an aircraft would have cost India only Rs 5.26 billion. Under the Modi deal the price goes up to Rs 16.70 billion.

The government refuses to give details of the price agreed upon, saying there is a clause in the agreement which binds it to maintain secrecy.

Defence Minister Nirmala Sitharaman claims the price fixed by UPA was for the bare aircraft while what India is now getting is aircraft fitted with sophisticated weapons. Experts aver the price difference is too high to be attributed to the difference in equipment ordered.

Ms Sitharaman is one of the most articulate BJP leaders. But the more she talks on this issue the more she wades into deep waters. 

She seeks to explain away HAL’s exclusion saying UPA did not pump money into it to enable it to take up manufacture of Rafale. She does not say why her government, instead of pumping money into HAL, brought in a private company with no experience of manufacturing even aircraft parts, let alone a whole aircraft.

She insists the government had no role in the selection of Reliance Defence as Dassault’s partner. Under the 2016 government guidelines, all defence offset proposals require the Defence Minister’s approval.

She is silent on how India will get 90 more aircrafts to meet the assessed requirement of 126.

Anil Ambani is the younger brother of Mukesh Ambani, who owns the larger of the two Reliance conglomerates. Both brothers have been close to Modi since his days as Chief Minister of Gujarat and are among the BJP’s financiers.

In July, Modi had invited flak by giving Mukesh Ambani’s Jio Institute, which has not even started working, “Institute of Eminence” status, making it eligible for a government grant of Rs 10 billion.

It is reasonable to assume that Dassault pushed up the price of the aircraft to cover the offset costs. The government has rejected suggestions for a probe into the Rafale deal by a joint parliamentary committee. Since the BJP will have a majority in the JPC there is no need to fear an adverse decision. But, then, the JPC will be able to call for information which the government is hiding.

As the Congress mounted an attack on the Rafale deal, Anil Ambani shot off two letters to Gandhi to say the party was misinformed, misdirected and misled by malicious vested interests and his corporate rivals. 

Taking a leaf from the book of BJP President Amit Shah’s son, Jay, who obtained a restraint order against the Wire.in, he also sent legal notices to the Congress’s official spokespersons and the Gandhi family–owned newspaper National Herald in a bid to stop them from pursuing the subject on pain of heavy damages claim.

When the Ambani family assets were divided in 2007, according to Forbes, Mukesh’s net worth was $49 billion and Anil’s $45 billion. The 2017 Forbes list puts Mukesh’s assets at $38 billion and Anil’s at 3.15 billion. Fall in the value of the Rupee may account for the decline in Mukesh’s assets. The steep fall in Anil’s assets points to business failures. The Rafale deal offers him a bailout.--Gulf Today, Sharjah, September 18, 2018