Saturday, 24 September 2016

India signs Euro 7.8 billion deal for 36 Rafale fighters; no options for more

Each bare-bones Rafale to cost Rs 686 crore; will be IAF’s most expensive fighter

By Ajai Shukla
Business Standard, 24th Sept 16

On Friday, India drew the curtain on a tortuous, nine-year selection process for a medium, multi-role fighter, signing up to buy 36 Rafale fighter aircraft from French aerospace vendor, Dassault, for Euro 7.8 billion (Rs 58,000 crore).

In New Delhi, Defence Minister Manohar Parrikar signed an inter-governmental agreement (IGA) with his visiting French counterpart, Jean-Yves Le Drian; while officials signed commercial components of the actual contract.

“Rafale is a potent weapon which will add to the capability of IAF,” Parrikar said.

Senior ministry of defence (MoD) officials, speaking anonymously after the signing, said the average cost of each Rafale was fixed at Euro 91.7 million (Rs 686 crore). This included 28 single-seat fighters, each costing Euro 91.07 million (Rs 681 crore); and eight twin-seat fighters priced at Euro 94 million (Rs 703 crore).

Surprisingly the contract for 36 fighters has no “options clause”. This means the Indian Air Force (IAF) must operate just two squadrons of this new fighter --- the seventh type in the IAF inventory --- or negotiate afresh for additional Rafales.

With 36 bare-bones aircraft costing Euro 3.3 billion, the remaining Euro 4.5 billion is for India-specific enhancements (Euro 1.7 billion); spares (Euro 1.8 billion), logistics (Euro 350 million) and weaponry (Euro 700 million), say MoD officials.

The weapons package includes a stockpile of Meteor “beyond visual range air-to-air missiles” (BVRAAMs), which can shoot down enemy fighters that are 120-140 kilometres away. Each Meteor missile, built by Franco-British-Italian vendor MBDA, has a ticker price of some Euro two million. The Meteor is currently integrated into three fighters --- the Eurofighter Typhoon, Gripen NG and Rafale.

The contract also includes a stock of the million-dollar SCALP missile --- a French acronym for General Purpose Long Range Standoff Cruise Missile --- also known as the Storm Shadow. The SCALP, which can be fired from standoff ranges at ground targets 500 kilometres away, allows the Rafale to strike heavily-defended airfields, military headquarters and strategic infrastructure.

Like the Mirage-2000 that Dassault supplied the IAF earlier, the Rafale can be modified to carry nuclear weapons. Its long operating range --- it can strike targets more than a thousand kilometres away --- make it especially suitable as an aerial nuclear delivery platform.

Following the model of the C-17 Globemaster III procurement from the US, a large share of the Rafale payout is for “performance based logistics” (PBL). This means that for the first five years of a Rafale’s service, Dassault will supply all spares and components, including engines, and technicians needed to keep the fighter flying. The vendor is liable to ensure that 75 per cent of the fleet is available at all times.

The IAF has the option to extend PBL to 12 years, subject to a fresh contract being negotiated for the next seven years.

Says a top ministry official: “We are currently getting 55-56 per cent availability from the Sukhoi-30MKI fleet. The Rafale will give us 20 per cent more.”

Air power experts note that this sounds better than it actually is. Over a fleet size of 36 Rafales, an extra 20 per cent amount to 7 extra fighters operational at any time.

MoD officials cite Dassault’s claim that the Rafale’s quick “turnaround time”, or the time between two sorties, allows each fighter to do five operational sorties each day. While this claim would need verification during actual usage, the IAF has determined during trials that the Rafale’s engine can be replaced in just 30 minutes, compared to eight hours for replacing a Sukhoi-30MKI engine.

The contract stipulates that the first Indian Air Force (IAF) Rafale must be delivered within 36 months, i.e. in September 2019. The entire order must be delivered within 67 months, which means the last Rafale must join the IAF by April 2022.

Even though this is a significantly slower induction rate than what the MoD had promised, Dassault will be hard pressed to deliver in this time frame. It was building 11 fighters per year for the French air force and navy, which are likely to slow down induction. Last year, Egypt and Qatar ordered 24 Rafales each. It is not clear how quickly Dassault can raise production or how it will sequence these commitments.

Indian officials say some delay was inevitable because the IAF demanded a range of India-specific improvements to customise the Rafale and “make it more potent than the French air force Rafales”.

These include operational features like “helmet mounted display sights” that allow pilots to aim their weapons merely by looking at a target; a “radar warning receiver” to detect enemy radar and “low band jammers” to foil it; a radio altimeter, Doppler radar, extreme cold weather starting-up devices for airfields like Leh, and others.

The contract requires the IAF to pay a 15 per cent advance of about Rs 8,700 crore today. Since the IAF budget does not cater for this, an additional allocation would be needed. Another 25 per cent would be paid next year, for which the IAF would have to budget Rs 14,500 in addition to its other commitments. The balance amount would be paid to the vendor at stipulated delivery milestones over the coming years.

MoD officials say one of their biggest achievements during price negotiations was to peg annual cost inflation at the actual inflation level; or a maximum of 3.5 per cent. Earlier contracts with French vendors had stipulated annual inflation at 4-4.5 per cent.

“Actual inflation in Europe is barely one per cent, while we were paying four per cent. That means we have saved about three per cent per year; or Rs 4,000-14,000 crore over the contract period, depending upon the actual inflation in Europe”, says a senior MoD official.

The Rafale contract makes French vendors, Dassault and Thales, responsible for discharging offsets worth 50 per cent of the contract value, i.e. Rs 29,000 crore. While the vendors get to choose their offset partners, the contract stipulates that 74 per cent of the liability value must be discharged through component exports from India. There is also a “technology sharing component”, amounting to six per cent of the total offsets, which the vendors will negotiate with the Defence R&D Organisation.

The Rafale contract comes 15 years after New Delhi first issued a Request for Information (RFI) for 126 medium multi-role combat aircraft (MMRCA), of which 18 would be supplied in fly-away condition and 108 progressively built in India. After a tender was issued in 2007, the IAF evaluated six fighter aircraft --- Boeing’s F/A-18E/F Super Hornet: Lockheed Martin’s F-16IN Super Viper; RAC MiG’s MiG-35; Saab’s Gripen C, the Eurofighter Typhoon and the Rafale --- in what was hailed as “the world’s most professionally run fighter competition.”


In 2011 the IAF shortlisted the last two fighters, and finally named Rafale the winner in 2012. That was followed by three years of fruitless negotiations, dragged out by inconsistencies detected in Dassault’s commercial bid. The deadlock was broken in April 2015, when Prime Minister Narendra Modi announced on a visit to Paris that the IAF would buy just 36 Rafales, off the shelf.

16 comments:

Anonymous said...

NSR says ---

Sources said the "vanilla price" of just the 36 aircraft is about 3.42 billion Euros.

The armaments cost about 710 million Euros while Indian specific changes, including integration of Israeli helmet-mounted displays, will cost 1,700 million Euros. (Some source also says cold weather starting, improved radar, etc

Why do we need to pay for improved radar when we can use it and improve it when France does for their fighters...

Does these changes allow India to use its BVRM and nuclear bomb and Brahmos?
If it not, then it is very stupid to pay that much money for HMS...
It is better to cancel this charge and buy extra Rafales for 1700 million Euros...


Associate supplies for the 36 fighter jets will cost about 1800 million Euros while performance based logistics will cost about 353 million Euros.

Anonymous said...

Thanks for the excellent article as usual Col Shukla..Can you pls let us know who is accountable for bringing up availability of MKI fighters and the challenges in it?

Anonymous said...

good article Ajai, now you talk sense.
it's ok if there is no option clause, soon they will decide to make another 100 aircrafts in india so we have to wait and see who wins that contest.
I think budget will be the next big focus as well as contracts with the russians next month.

vamy said...

I read in the news that there is an option clause for 18 more Rafales? What is right?

Anonymous said...

Repeat after me. 36 is not enough. IAF shortfall is 250 fighters.

Anonymous said...

The Rafale is a good deal, it is a good mature plane as found by IAF. It would have been a nightmare to manufacture 100+ in India. The future of manned fighter is bleak at best. So the money saved should be invested in long range artillery that includes cruise missiles.

rajendra said...

A very typical article from Col Shukla, full of his usual pessimism towards any action by the current govt.
I am sure he would've been very excited and positive had the govt opted for American eqpt, obsolete as they may be.

M k Rathi said...

Can't understand how govt of India under non corrupt Modiji n Parikarj function in defence purchase decisions of this magnitude. First what compelled Modiji to ink the deal in his French visit. Overnight why did hurry emerge from the Pmo and not the defence ministry.Second why have negotiations deliberately left a window open for no clause of further purchase after 5years.Do they want Rafael to jack up prices if we lose a few Rafael in this intervening period ?thirdly why do you need frills such as helmet mounted visual display to enable pilot to shoot at sight. Doesn't manohar parrikar understand this much that this isNOT a essential requirement for an aircraft that is equipped to fire missiles from 100kms away, not for close dogfights.How many fighters are going to be stationed at Leh when you are ordering features like cold start. Very smart move by corrupt decision makers to double the price from 700 crores to 1600crores when essentially we could have got two additional squadrons. The earlier deal was a similar amount but had 126 aircrafts. How this deal is better beats me

Anonymous said...

All aircrafts build by the any country is according to their air force specifications. So we can never get any aircraft's wrt to IAF specification we need to always modify the aircraft according to our requirement. The cost of any critical machine is always considering its support and maintainance because that's where you spent more money on it. That's is the reason why rafales upfront cost is high but if we look at lifecycle costs an MMRCA is always lower. That is the reason why us is building the F35 and Russians are standardizing su30 or else they would have had only su 35.

Kunaal Gaikwad said...

A simplistic analogy - The wooden door of my house is rotting away, having steadfastly protected me from intruders for years. A strong kick now and it will give away. So, should I wait for another decade and half evaluating different door designs till the door decays completely? This is exactly what our defence planners have done with the MMRCA project, with the huge delay in finalising the MMRCA order.

The MMRCA competition started in the early 2000s, and circa 2016, we now have a partial deal for 36 nos. jets out of the projected 126 nos. which is being tom-tommed as a great victory for Indian negotiators! No one is talking of the balance 90 jets.

Dassault will begin delivery of the Rafales only by 2018 and complete by 2022, that too under ideal circumstances. By then, the IAF will have retired the MIG21s; the Sepecat Jaguars and MIG27s are nearing the end of their service life. Unless the Tejas induction speeds up, a huge hole has been punched in our air warfare capabilities, thanks to this long drawn process of "evaluation".

I mean, did we have the luxury of fifteen years for evaluation, given the two-front scenario of China and Pakistan ganging up against us. Why, the Egyptian Air Force started negotiations for 24 Rafales in November 2014 and an agreement was reached with Dassault by August 2015!

Crux of the matter is - our polity and our defence planners together has badly let us down as far as critical defence acquisitions, Rafale being a glaring highlight, are concerned, and have seriously hampered our war fighting abilities!

Anonymous said...

To avoid many different types, buy more Su-30MKI. Make in India + cheaper + potent fighter. Can do Air Superiority, Ground Attack etc. Even if Russian engines are not reliable, quantity will make up. Better than F-16 block 50, JF-17, Mirage 3/5, F-7.

1 SU-30 = 5 Mig-21, I read somewhere.....

Anonymous said...

Cost per Rafale is 1600+ crores (8.9 bilion/36=rate of INR).


5,93,31,85,00,000 crores if we go by todays rate.

Sof for each aircraft= 59,331,8500000/36= 16481069444 crores i.e 1600 crores per Rafale. This must be life cycle cost.

I dont think any of these Rafales will be stationed near western border, they will be only for China. I even remember an old article saying "MMRCA Aircrafts will be stationed in North East."

That makes sense. PLAFF's massive numbers and its steady rise is a cocern for Indian Policy makers. IAF may deploy mix of Super MKI+ Rafales+ Tejas on bases near eastern border.

I also think we need to take a look at Super MKI now that Rafale deal has been inked. PAK FA/ FGFA will take time. Its supposed powerplant izdeliye 30 is in development now and Pak Fa still has glitches.

Super MKI with is 15 ton engine, better avionics and AESA radar will be a huge asset.

Regards, Colonel.

Anonymous said...

Cost per Rafale is 1600+ crores (8.9 bilion/36=rate of INR).


5,93,31,85,00,000 crores if we go by todays rate.

Sof for each aircraft= 59,331,8500000/36= 16481069444 crores i.e 1600 crores per Rafale. This must be life cycle cost.


I dont think any of these Rafales will be stationed near western border, they will be only for China. I even remember an old article saying "MMRCA Aircrafts will be stationed in North East."

That makes sense. PLAFF's massive numbers and its steady rise is a cocern for Indian Policy makers and IAF may deploy mix of Super MKI+ Rafales+ Tejas on bases near eastern border.


I also think we need to take a look at Super MKI now that Rafale deal has been inked. PAK FA/ FGFA will take time. Its supposed powerplant izdeliye 30 is in development now and Pak Fa still has glitches.

Super MKI with is 15 ton engine, better avionics and AESA radar will be a huge asset.

Regards, Colonel.

Anonymous said...

Why Helmet Mounted Display Sights (HMDS)? Today's missiles have a wider field of capture than the sight mounted on the aircraft (off-boresight capability). Thus the pilot doesn't need to point the aircraft at the target to succesfully aim and launch a missile at it. So how does he designate the target and aim the missile (for an IR guided missile). Simple, turn his head to look at the target and use the HMDS to designate it.

Or her, of course.

Guru said...

Jane and TOI have both reported that deal is for 36 (firm) and 18 (options). Can you double check whether there is no options clause???

JAI BHARAT said...

Its highly disappointed that we have deal at this month if older cover take quick action then we have 100+ Rafael till date and have upper hand over China