Sunday, 22 July 2018

Rafale deal: secrecy pact renewed in March, but cost details already revealed

Govt renewed secrecy pact with France in March, but governs technical details, not prices

By Ajai Shukla
Business Standard, 22nd July 18

The Bharatiya Janata Party (BJP)-led government, in declining to provide commercial details of its purchase of 36 Rafale fighters for the Indian Air Force (IAF), has sheltered behind a 2008 confidentiality agreement between New Delhi and Paris.

But on Friday, while arguing in parliament that the United Progressive Alliance (UPA) had signed the secrecy pact, the government kept silent on the fact that the agreement had expired this year. Nor did it mention that on March 28, during French President Emmanuel Macron’s visit to India, it renewed the pact for a decade more.

That detail is buried in a parliamentary question that the defence ministry answered in March. Also evident from its answer is the limited scope and nature of the Indo-French agreement.

On March 28, Minister of State for Defence Subhash Bhambre toldparliament: “An Agreement between India and France regarding the Exchange and Reciprocal Protection of Classified or Protected Information was signed on 10th March, 2018 during the State Visit (sic) of President of France to India. This agreement defines the common security regulations applicable to any exchange of classified and protected information between the two countries.”

Business Standard learns that the 2008 Indo-French agreement had covered exactly the same ground.

Experts say the scope of that pact – i.e. the “exchange of classified and protected information between the two countries” – does not include commercial details and costs. Its scope only extends to tactical and technical details relating to the capability of the platform in question, and its performance and tactics in combat.

The French government statement, issued on Friday, also asserts the confidentiality of “security and operational capabilities”, not price details. Paris said the agreement “legally binds the two States to protect the classified information provided by the partner that could impact security and operational capabilities of the defence equipment of India or France.” (emphasis added)

Further, as The Wire reported on Saturday, Macron himself is ambiguous about what France wants to be kept confidential. In an interview to India Today TV on March 9, Macron said: “There are some discussions to be organised by the Indian government, and they will have to consider which details they would want to be revealed to the Opposition and Parliament. I am not one to interfere in such a discussion and you too must realise that we have to consider commercial sensitivities.” (emphasis added)

Given that Paris routinely makes public details about what its military pays for each Rafale buys, Macron would be unlikely to restrain New Delhi from doing so.

Furthermore, the government is submitting the Rafale contract to a Comptroller and Auditor General audit. There is little reason to withhold cost details from a privileged parliamentary panel, such as the Standing Committee on Defence. 

On Wednesday, Bhambre had told Parliament: “The Comptroller and Auditor General (C&AG) is conducting the audit of the Capital Acquisition System of Indian Air Force including the Rafale aircraft.”

Air Vice Marshal Nirdosh Tyagi (Retired), who handled IAF procurements in 2008-2011, including the aborted tender for 126 medium multi-role combat aircraft (MMRCA), says the government should not shy away from revealing cost details of the 36-Rafale contract. “The is little reason to apprehend that other potential Rafale customers might benefit from knowing details of the Indian contract. Each contract has different components and comparing two contracts like comparing apples to oranges,” says Tyagi.

Further, the defence ministry has already revealed full details of the Rafale purchase. On September 23, 2016 – after then defence minister Manohar Parrikar inked an Inter-Governmental Agreement with his French counterpart, Jean-Yves Le Drian, while officials signed commercial components of the Rafale contract – a top defence ministry official conducted an off-the-record media briefing, giving out minute details of the Rafale contract.

Based on that briefing, the media reported widely the details that the government now calls confidential.

In Business Standard (September 24, 2016 “India signs euro 7.8-billion deal for 36 Rafale fighters”) it was reported that the average cost of each Rafale was fixed at Euro 91.7 million (today Rs 740 crore). At that price, 36 bare-bones aircraft cost Euro 3.3 billion (today Rs 26,610 crore).

With Euro 1.7 billion more (today Rs 13,710 crore) for India-specific enhancements to the fighter, the cost of 36 Rafales added up to Euro 5 billion (today Rs 40,318 crore). That means each Rafale fighter cost Euro 138.8 million (today Rs 1,120 crore).

Cost breakdown of 36-Rafale contract

Expenditure item
Details of expenditure
Cost



Cost of aircraft





Single-seat Rafale fighters
28 @ Euro 91.07 million each
Euro 2.55 billion
Twin-seat Rafale fighters
8 @ Euro 94 million each
Euro 0.75 billion
India-specific enhancements
Helmet sights, radar receiver, radio altimeters, Doppler radar, cold start 
Euro 1.7 billion



Total cost of 36 fighters

Euro 5.0 billion



Cost per fighter
Averaging for single/twin seaters
Euro 138.9 million



Cost of weaponry





Including Meteor, SCALP missiles
Total cost of weapons, mainly from French firm, MBDA
Euro 700 million



Maintenance expenses





Spare parts and items
Needed to keep aircraft flying
Euro 1.8 billion
Performance based logistics
Guarantee of 75% availability
Euro 350 million



TOTAL COST
Aircraft cost plus add-ons
Euro 7.85 bn


The ministry provided extensive details of the India-specific enhancements, which included “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 and extreme cold weather starting-up devices for airfields like Leh.

The ministry official said another Euro 2.8 billion were paid for spares worth Euro 1.8 billion (today Rs 14,500 crore), weaponry worth Euro 700 million (today Rs 5,645 crore), and a logistics package of Euro 350 million (today Rs 2,822 crore) that requires the French to ensure that at least 75 per cent of the Rafale fleet is available at all times for the next five years. 

Further details were provided. The defence ministry said the weapons package includes Meteor “air-to-air missiles” that can shoot down aircraft 120-140 kilometres away. Also being provided was the Storm Shadow cruise missile for striking airfields, military headquarters and strategic infrastructure 500 kilometres away.

It was also revealed that the first Rafale must be delivered within 36 months, i.e. in September 2019. Dassault is to execute the entire order within 67 months, which means the last Rafale must join the IAF by April 2022.

The defence ministry also gave out details of the payment schedule. The IAF was required to pay a 15 per cent “signing advance” of about Rs 8,700 crore today. Another 25 per cent was to be paid in 2017. The balance amount would be paid over the coming years at stipulated delivery milestones.

12 comments:

Unknown said...

Sir,is the 75% serviceability clause is applicable 5 yrs after the delivery of 1st aircraft or the last aircraft or for individual aircraft as and when it's delivered ? Many thanks for the lucid article.

VIKRAM PRASAD said...

We could have got 126 fighters and could have had upgraded them to new specs

But today we have 36 SUPER RAFALE AT 1600CR PER UNIT

PERHAPS THE CHINA factor forced the govt in 2016

VIKRAM PRASAD said...

Today the US STEALTH FIGHTER COULD BE PURCHASED AT SIMILAR COSTS....

THE NEXT TENDER COULD SEE A LOWER BID FROM RAFALE

Anonymous said...

THE DEVIL IS IN THE DETAIL
Broadsword here, summarised the fraud landscape.
with the ‘investigative mind-set’
of the Financial investigator the forensic accountant.
But the exact transaction
(amongst the many ancillary purchases around the Rafael deal)
is more elusive, buried in the intricate detail,
something will not add up if investigated forensically.
Something,
someone
wants hidden
The price, the hook
to fish
It out
Ugh! The greed!
Even by those whose coffers already swollen from India’s billionaires.

Anonymous said...

It dawned on somebody suddenly, that if you hide everything then it’s easier to keep hidden what needs to be hidden. So what’s already in the open is now being classified

Anonymous said...

This dodgy behaviour by the BJP makes everyone involved suspect.
It’s a time for the opposition to call for the Parquet National Financier, the French Anti Fraud Authority to come in to independently to carry out investigations into alleged serious and complex fraud, into all the French suppliers involved in this deal.
There be no smoke, without Fire

Anonymous said...

If all these details are available , what is everyone trying to prove ? Where is the problem ?

There is no bribery involved , the way you have written the article. Yes evey industrial deal will have confidentiality clause. The defenxe more so . Do you think india will sell a Tejas without a confidentiality clause ( even if it is a special export veriosn one ).
If it does , will bloggers like you stand aside and watch ?

The scope of supply is different from MMRCA. That deal was never signed, so we cannot even speculate the prices.
It is like some one saying tomatoes cost 25 paisa a kilo, but having been able to buy even one !

All companies (from cycle to airplanes) will ensure R&D spend is a part the price of the product in some way , they have to.
Common sense. The manufacturing cost of Rafale is about 75-80 million euro as per french parliament (varies by year and model). The R&D cost is some 70-80 million euro per plane. So our price will be between 75 and 150 million euro, depending on negotiations and how France plans to recover its investments.

Why is everyone trying to prove a scam or incompetence where there is none.
There are parliamentary rules while making allegations of this kind, are they followed ?
I just parliament also pulls up loose mouthed bloggers too.

Anonymous said...

IAF is running short of 160-180 fighter Jet and Congress is playing with the national security .Can't imagine a 100 years old party backstabbing the country with all its vested interest

Unknown said...

Circumventing HAL and handing it over to a brotherly industrialist of PM's choice with zero experience in aircraft assembling proves Rahul's point beside other imbroglios that point the needle towards a potential scam.

Unknown said...

Omly enemy of country would like to know weaponry detsils
Who are we

VIKRAM PRASAD said...

Plain vanilla cost comparison between UPA and BJP Purchase price of rafale can be done by CAG.

Unknown said...

rafael deal with CAG. now CAG for governer of j&k. impartial audit secured.

offer of lucrative post retirement appointments to high constitutional authorities like judiciary, CAG ,Election Commissioners so as to affect their independence while on job