· The Government to disclose the facts relating to the deal—especially those relating to the cost that the Exchequer has paid.
· The Opposition parties to press the Government relentlessly on this matter as, financial considerations apart, the Government has willfully by-passed institutions and violated procedures that have been evolved to safeguard national security.
· The media to do its duty by excavating the facts that the Government is trying so hard to conceal.
1. In accordance with requirements specified by the Indian Air Force, the U.P.A. Government issued a Request for Proposal (RFP) in 2007 for 126 Medium Multi-Role Combat Aircrafts (MMRCA). The RFP made clear that the bids were to be inclusive of cost of initial purchase, transfer of technology, licensed production, etc. [Annexure 1: Press Release by MoD dt. 28th August 2007]. Please glance at the underlined portion once again as it gives the lie to the Government’s repeated assertion that a higher price is being paid to Dassault now because of “add-ons”.
2. Six vendors, i.e. Dassault Aviation, Lockheed Martin, Boeing, Saab, Eurofighter GmbH, and Russian Aircraft Corporation submitted bids. After flight trials and technical assessment, the Indian Air Force announced in 2011 that Dassault’s Rafale and Eurofighter GmbH’s Typhoon fighters met the IAF’s requirements. In 2012, it was found that Dassault’s bid was the lowest and therefore negotiations began between Dassault and the Indian Government.
3. Intensive negotiations took place. They reached the penultimate state. Addressing the press on 25th of March, 2015 in France Eric Trappier, the C.E.O. of Dassault, stated: “You can imagine my satisfaction to hear … from the HAL Chairman, that we are in agreement for the responsibilities sharing, considering as well our conformity with the RFP in order to be in line with the rules of this competition. I strongly believe that contract finalisation and signature would come soon”. ().
4. The UPA Government steered the negotiations to fulfill three inter-related objectives. First, the Air Force should get some aircraft at the earliest possible, since the MiG-21 and MiG-27 fleet had completed their service lives and were being retired from service. Second, India’s aerospace industry has to be rejuvenated: for this to happen, the country must acquire access to advanced technologies; an order of such a large magnitude — buying 126 fighters — ought to be leveraged to obtain advanced technologies from the foreign vendor. Third, the one Indian company that had decades of experience in building aircraft — HAL — should build the fighter in India so that it would be in a position to maintain, service and overhaul the Rafale through its service life of 30-40 years. In the process, HAL would also acquire advanced manufacturing capabilities to become self-reliant in producing state-of-the art fighter aircraft.
5. Accordingly, the 126-aircraft deal envisaged that the first eighteen aircraft would be procured in a “fly-away condition”: that is, these would be fully built by the vendor. The remaining 108 fighters would be manufactured in India by HAL under a Transfer of Technology agreement. At the time the RFP was floated in 2007, the total cost for 126 MMRCAs was estimated by Government to be Rs. 42,000 crores. The final price that was being negotiated under the deal is not in the public domain. But in an interview to Doordarshan, broadcast on 13th of April, 2015, soon after Prime Minister Modi signed the deal, the then Defence Minister Manohar Parrikar disclosed that the price for 126 aircrafts would have been about Rs. 90,000 crores. He stated that, “We must remember that Rafale is a top-end multi-role fighter . . . but it is quite expensive. When you talk of 126 aircrafts, it becomes a purchase of about 90,000 crores.” (). That would place the price per aircraft at Rs. 715 crore (Rs. 90,000 crores divided by 126 planes). According to Parrikar this cost was inclusive of everything. ().
6. The cost per aircraft that is to be compared is: the cost at which the first 18 aircraft of the aborted MMRCA deal would have been obtained in the “fly-away” condition and the cost at which the 36 are going to be obtained in the “fly-away” condition under the new Agreement, to which we shall come in a moment.
7. Manifestly, the cost of manufacturing the aircraft by HAL in India would have been substantially higher than the cost of Rafale fighters procured in the “fly-away condition”. That is because, to manufacture in India, additional costs would have had to be incurred for setting up the requisite infrastructure and the plant, establishing the supply chain, developing vendors, etc. The supplier would also have charged a heavy fee for transfer of technology. Therefore, the price of the Rafale fighter in “fly-away condition," built in an already running plant in France, would have been substantially less than Rs. 715 crores.
8. On the 8th of April, 2015, India’s Foreign Secretary, S. Jaishankar briefed journalists regarding the forthcoming visit of the Prime Minister to France. During this briefing he stated,
· Did the Air Force urge that the original deal with its all-important multiple objectives be scrapped and a new one confined to 36 aircraft be concluded? How was the Air Force’s studied estimate that it is in dire need of 126 aircraft summarily jettisoned?
· Did the new deal have the approval of the Cabinet Committee on Security at the time that the Prime Minister announced it in April 2015 and included it in the India-France Joint Statement?
· As this was entirely a new deal, why were fresh tenders not invited? In particular, why was this not done in view of the fact that the suppliers Eurofighter GmbH had formally written to the then Defence Minister Arun Jaitley on July 4th, 2014, offering to reduce the cost of the Eurofighter Typhoon by a full 20 per cent? [Annexure 3]
9. In March 2014, it was widely reported that a Work Share Agreement was entered into between Dassault Aviation and HAL according to which HAL would do 70 percent of the work on 108 planes that were to be manufactured in India while Dassault would undertake the rest of the work [Annexure 4: News report dt. 3rd March, 2014]. Just days before the new deal was signed, two companies were incorporated: Adani Defence Systems and Technologies Limited on the 25th of March, 2015, [Annexure 5], and Reliance Defence Ltd. on the 28th of March, 2015 [Annexure 6].
10.Within days of these companies getting incorporated, on 10th of April, 2015, the Prime Minister announced that India would be going in for 36 Rafales in “fly-away” condition. This announcement had four startling features: [i] No one could make out what had happened to the original RFP, and the protracted and detailed negotiations that had been going on in pursuance of that; [ii] HAL was manifestly kicked out, and with it the much vaunted “Make in India”; [iii] all the talk of Make in India notwithstanding, there was no mention now of transfer of technology; [iv] and in little time, it became clear that Anil Ambani (who had accompanied the Prime Minister to Paris in April 2015) and his newly minted Reliance Defence Ltd. were going to be brought in to benefit from the billions of dollars of Offsets that would arise from the Rafale purchase.
11. After the formal contract, a new Joint Venture was struck between Reliance Defence Ltd. and Dassault Aviation with Anil Ambani as the C.E.O. Reliance is to hold 51 per cent of the equity and Dassault 49 per cent. This brand new company is the one that has been assigned 70 per cent of the Offset benefits — that is, orders worth Rs. 21,000 crore out of a total Offset liability of Rs. 30,000 crore.
12. Clause 8.6 of the Defence Offset Guidelines brought into force by this very Government on 1st of April, 2016, mandatorily requires that, “all Offset proposals will be processed by the Acquisition Manager and approved by Raksha Mantri, regardless of their value.” [Annexure 7] Thus, approval of the Defence Minister was mandatorily required to process Offset proposals. In an inexplicable abdication of its mandatory duty, the Government has now claimed that it has nothing to do with the matter — that it is the prerogative of Dassault to choose its Offset partner. Surely, the Government must be able to list the grounds on which its own company, HAL, was removed? And what experience and infrastructure and financial wherewithal did the new partner, Reliance Defence Ltd. have for doing the Offset work? Could an experienced manufacturer like Dassault have picked a company that had no experience whatsoever of manufacturing aircraft, one which had just been incorporated, without the approval from the government, which was necessary under its own offset policy? All the more so, because at the time, Reliance Defence, a year old company, had a debt of Rs. 8000 crore, and had an accumulated loss of Rs. 1,300 crore. In fact, almost all of the companies of the Anil Ambani group were heavily in debt and were experiencing extreme difficulties in meeting their obligations and completing the projects that they had already undertaken. [Annexure 8]
13. Neither Reliance Defence nor any of its allied companies have any experience of manufacturing aerospace and defence equipment. Its Pipavav Shipyard is facing serious difficulties in building Offshore Patrol Vessels (OPVs) for the Navy — a long-delayed order that is impacting the Navy’s operational effectiveness. In contrast, HAL has over 60 years of experience in aircraft manufacturing. As recently as 2014, HAL had entered into a Work Share Agreement with Dassault for manufacture of Rafale. During his Press Conference on 25th of March, 2015, Eric Trappier had stated “the choice of Rafale in 2012 was made after a demanding competition. Rafale is the next logical step. After outstanding amount of work and some discussion you can imagine my satisfaction to hear; on one hand from IAF Chief that he wants a combat proven aircraft which could be the Rafale and we would have signed which should be the next logical step; and on the other hand from the HAL chairman, that we are in agreement for the responsibilities sharing, considering as well our conformity with the RFP in order to be in line with the rules of this competition. I strongly believe that contract finalisation and signature would come very soon”().
14. Government of India has been insisting that it cannot disclose the price of the aircraft because of an Agreement of Secrecy with the Government of France. This claim is as much of a lie as it is baseless.
15. In fact, on 18th of November, 2016, in response to a question asked in the Lok Sabha on the acquisition of fighter aircrafts, the MoS, Defence stated that, “Inter-Governmental Agreement with the Government of French Republic has been signed on 23.09.2016 for purchase of 36 Rafale aircraft along with requisite equipments, services and weapons. Cost of each Rafale aircraft is approximately Rs. 670 crore and all the aircraft will be delivered by April 2022.” [Annexure 9].
16. Nor was this disclosure a sudden leap in transparency. On earlier occasions also, the cost of defence and aerospace equipment have been disclosed to Parliament and the people. For instance, in the Press Release [Annexure 10] that it issued on 26 March 2012, regarding the “Upgradation of Mirage Aircraft,” the Ministry of Defence stated:
17. Even more conclusive is the fact that the secrecy clause in the Agreement binds India not to disclose the technical specifications and operational capabilities of the aircraft. It does not bind India to keep the price secret. In fact, the French President, Emmanuel Macron himself stated explicitly in March in an interview to India Today that how much is to be disclosed in this regard is entirely up to the Indian Government.
18. It is also the case that anyone and everyone can get information about every aircraft, every component of every aircraft, every missile, every component of every missile that has been imported from data published officially by the Government of India itself.
19. The actual price of 36 aircrafts was also revealed in a Press Release by Dassault and Reliance Defence [Annexure 11: Media Release dt. 16th of February, 2017]and Financial Press Release statement ofDassaultfor 2016 [Annexure 12]. Both the documents show the total price of the deal to be about Rs. 60,000 crores (about 8.139 Billion Euros) for 36 aircrafts. THIS IS WHAT IS EMBARRASSING FOR THE GOVERNMENT for it works out to Rs. 1,660 crores per plane. This is more than double the price of the aircraft under the earlier 126 MMRCA deal. And almost Rs. ONE THOUSAND CRORE HIGHER PER AIRCRAFT than the price that was furnished by Government itself to Parliament on 18th of November, 2016.
20. Note in particular that the original RFP had clearly stated that in addition to the costs of direct acquisition, the cost of the aircraft would include cost of weapons and missiles, warranty for the first two years, license royalty for manufacture in India, of technology transfer as well as the cost of initial training. [Annexure 13]. The “India-specific add-ons” excuse that is now being pedaled to justify this enormous increase in the price — the missile, the helmet — are just a cock-and-bull afterthought. They are given the lie by the India-France Joint Statement of April 2015 which states explicitly that “the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by Indian Air Force” in the 126 MMRCA tender.
21. And there is further confirmation. On 19th of February, 2015, PTI quoted Eric Trappier as saying that, “The pricing issue is very clear. Our pricing remains the same from day one of L1 (Lowest bidder). So there has been no change on that front.” He added that, “We are exactly in line with our answer to RFP. This answer led the Government of India to select L1 which was Rafale. And we have stuck to the same commitment which is totally in line and compliant with the RFP.” [Annexure 14]
22. Finally, the Government’s refusal to disclose the price and terms of Rafale contract on the ground of a confidentiality agreement is literally a replay of what the then Government invoked for not giving details of the Bofors contract — no one had denounced that Government for hiding the facts behind the veil of confidentiality as leaders of the BJP itself. Thus, as was the case then so is the case now: in effect the government is claiming that they can spend any amount of public money for anything and refuse to disclose it to Parliament and to the people by signing a confidentiality agreement with a foreign government. Such a contention violates the basic principles of transparency and accountability in a democracy.
· Can any agreement with a foreign government override the authority of Parliament, and through it of the people to facts that bear directly on national security?
· Can any agreement with a foreign government override the laws of our country, such as the RTI Act, the CAG Act?
· If these details are confidential, how is it that some media outlets are claiming access to this confidential prized data and other information of India-specific upgrades, access from none other Government sources?
· National security has been jeopardised
· An enormous additional burden has been placed on the national Exchequer
· The one organization in the country which has had decades-long experience in manufacturing aircraft — HAL — has been kicked out of the project
· A private party which has had absolutely no experience in manufacturing aerospace and defence equipment has been handed an enormous financial benefit
Parliament and other agencies charged with the responsibility of overseeing the defence of our country, of preventing corruption, and of ensuring that Government remains accountable as well as media must exhume every fact about how the original project was jettisoned, and one without rationale has been put in its place.