Saturday, 10 November 2018

Most “extras” in the 36-Rafale contract were also specified in the 126-Rafale tender

Govt has wrongly argued that capability add-ons, weaponry and logistic guarantees raised Rafale price in 2016


By Ajai Shukla
Business Standard, 10th Nov 18

In buying 36 Rafale fighters from French vendor, Dassault, in September 2016, senior defence ministry sources indicate the Indian government is paying 40 per cent higher than the price Dassault had quoted in 2012 for supplying 126 Rafales. That deal was eventually aborted.

As Business Standardreported on Friday, Dassault had quoted Euro 19.5 billion for 126 Rafale fighters, averaging Euro 155 million per aircraft. Before that deal could be finalised, the National Democratic Alliance (NDA) government purchased 36 Rafale fighters for Euro 7.85 billion in September 2016. That averages Euro 217 million per aircraft – 40 per cent higher than the earlier quote.

Defending the 2016 contract against Opposition charges of overpaying, the government argues that the new price included – over the basic aircraft cost of Euro 3.3 billion – four additional elements not included in the MMRCA tender.

These are “India specific enhancements” to the Rafale avionics to boost its combat capability (Euro 1.7 billion), a weapons package (Euro 700 million), additional spares (Euro 1.8 billion) and logistical guarantees (Euro 350 million).

Weapons package

Business Standard has carried out a detailed review of the Request for Proposal (RFP, or tender) for the MMRCA, issued on August 28, 2007. Contrary to the government’s argument, the 211-page document stipulates the supply of weapons, along with the first 18 aircraft.

“It is essential that the direct flyaway aircraft be delivered with a full complement of weapons and the weapons package should be integral to the flyaway aircraft,” says the RFP.

Part 1 of the RFP specifies the missiles and bombs to be supplied, such as 336 Active Beyond Visual Range (BVR) missiles, 168 All Aspect Missiles, etc. A separate section (Annexure IV to Appendix A) specifies the capabilities that the weapons must have. 

The BVR missiles are required to have a range “greater than 60 km against targets flying at high altitude”. This range would point to a lesser missile than the 100 km-plus-range Meteor that MBDA is supplying with the 36 Rafales. 

In the air-to-ground weapons category, the 2007 RFP specifies a “combination of stand off weapons with ranges of 100 to 200 kilometre… [and] a war head of more than 250 kg.” This may or may not cover the SCALP missile that is being supplied with the Rafale.

While the 2016 contract may have incorporated a superior BVR missile like the Meteor, the 2007 RFP also clearly had a weapons component, which was factored into the Euro 19.5 billion price.

India specific enhancements

The government has argued that India-specific enhancements have raised the Rafale’s price, including helmet mounted sights, radar warning receiver, radio altimeter, Doppler radar and cold start.

The 2007 RFP contains all of these elements. Annexures II and III to Appendix A specify a high-end avionics suite, including AESA radar, helmet mounted display sights, radar warning receiver, missile approach warning receiver and an airborne self-protection jammer.

Indian Air Force (IAF) sources explain there were Indian specific enhancements in both the Rafale configurations. The 2016 avionics might have had marginally improved capabilities, but with no significant effect on price.

Spares and logistical guarantees

Spares and maintenance were an integral part of the 2007 RFP and were included in the $19.5 billion tag. Appendix D to the RFP stipulates detailed requirements for spare parts and maintenance facilities needed to support 126 Rafales, operating from three bases. “The IAF would like to avoid dependence on the manufacturer in terms of factory repair. Thus all repairs… are to be carried out by this [Depot Level Maintenance Facility set up in India],” says the RFP.

The RFP specifies a detailed “Manufacturer’s Recommended List of Spares” (MRLS) needed to keep the 126 Rafales flying. “MRLS to sustain the equipment for a period of five years… will need to be provided.” This maintenance back up is priced into Dassault’s quote, in the same manner as in the 36-Rafale contract.

The 2007 RFP also requires vendors to ensure a 75 per cent aircraft readiness across the fleet – a requirement that the government claims to have paid an extra Euro 350 million in the 2016 contract for 36 Rafales.

Technology transfer

The greatest loss from replacing the 126-Rafale proposal with the 2016 contract for 36 Rafales might not be the extra money paid, but the opportunity that India’s aerospace industry lost of obtaining access to critical aviation technologies and manufacturing skills. The RFP that the IAF floated in 2007 for 126 medium multi-role combat aircraft (MMRCA), had detailed conditions that bound all competing vendors to transfer key aerospace technologies that would have proven invaluable to Indian scientists and technologies working on two futuristic fighter aircraft – the Advanced Medium Combat Aircraft (AMCA) and the Tejas Mark II.

However, the Euro 7.85 billion purchase of 36 Rafales that Prime Minister Narendra Modi unexpectedly announced on April 10, 2015 in Paris made no provision for any design or manufacturing technology transfer. All that the IAF will get is fully built aircraft and the skills and technology to maintain them.

The 2007 RFP imposed stringent conditions for transfer of technology (ToT) – essential when 108 of the 126 aircraft bought are to be manufactured in India.

The MMRCA procurement was based on guidelines issued by then Defence Minister AK Antony, who told the Defence Acquisition Council that the contract must give “Indian defence industries… an opportunity to grow to global scales.”

The RFP is forthright in demanding ToT, with Annexure I to Appendix M stipulating “key technologies” for transfer. The list includes 13 airframe technologies, such as super plastic forming, composite radomes and special coatings; nine engine technologies, including single crystal blades, thrust vectoring and radio crystallography; 21 avionics and communications technologies, such as weapon control radar, ring laser gyros and accelerometers; and 12 accessory technologies such as ejection seats.

“Technologies used shall be current, state of art as used in the contemporary systems… The ToT shall be comprehensive, covering all aspects of design, manufacturing know-how and detailed technical information… Design data shall include the details that are needed to analyse, carry out trouble shooting” of systems, stipulates Appendix M of the RFP.

“The Bidder should confirm in the proposal that all necessary Government approvals for ToT required for manufacture, repair/overhaul, upgrade and all the conditions indicated [above] are in place for the aircraft, engines and all its systems and components and that there would be no denial/delays in future for the ToT”, it says.

The RFP makes exceptions for highly sensitive and high-value technologies that the vendor might not be willing to share. Categorising these as “proprietary technologies”, it states: “The list of such items shall be far and few and generally restricted to components/processes specifically designed by the OEM for the licensed product.”

Delivery time-frame

If the government had signed the 126-MMRCA contract with Dassault on April 10, 2015 instead of announcing the 36-Rafale buy, the first squadron of 18 flyaway Rafales would be currently in delivery and completed by April 2019. 

According to the delivery schedule specified in the RFP, the first six Rafales would have been manufactured in India by April 2020, and all 126 fighters (six squadrons) would be in service by 2026. 

Now, however, the IAF will get just two squadrons of Rafales by late 2022. Another tender has been floated for 110 fighters, which seven global vendors have responded to. However, this could take years to even result in a contract.

(Tomorrow, Part III: Offsets and Integrity Clause)

23 comments:

Andy said...

Colonel you are writing about why the 2007/2012 offers by Dassault were so good but you are not addressing why they were not taken up and converted into a deal by A.K Antony,Manmohan Singh etc.

If everything was fine and as per IAF/MOD and GOI wishes Why the deal was stuck in negotiations more than 2 yrs after 2012?Seems that in your bias against the current dispensation you are deliberately overlooking these lacunae.Those people have to be held responsible for oversight that led to the logjam in the MMRCA tender.The simple fact is the terms of the 2012 offer were unacceptable to Manmohan Singh and company and what they were negotiating for was unacceptable to Dassault,hence there was no culimination of any sort to the 2007 and 2012 offers by the French.So harping on and on about how good those two offers were just doesn't gell with the actual facts of the time.

If Dassault SIGNS Rafale supply contracts with Egypt and Qatar at per unit costs of 263 and 217 million euros,why should they supply to India at 155 million euros a click?Last I heard the French dont have Diwali sales.

You need to address the issues of why the offers were not converted into agreement by Manmohan Singh /Sonia Gandhi if you want us not to question partisan reporting.

Andy said...

Re:"If the government had signed the 126-MMRCA contract with Dassault on April 10, 2015 instead of announcing the 36-Rafale buy, the first squadron of 18 flyaway Rafales would be currently in delivery and completed by April 2019."

If Manmohan Singh and company had signed the Rafale contract in 2012 then the first 18 would have been delivered by 2017 and the next lot would have been rolling out from a production facility in India.Hold them accountable for making a mess of the MMRCA tender before going into a biased spiral.

andy said...

Quote:;"The note accessed by Times Now dates back to 2012 and has been signed by the then defence minister AK Antony as well as the defence secretary at that time, Shashi Kant Sharma. The note reveals that Antony wanted the selection of lowest bidder for the Rafale aircraft re-examined. The move reversed an 11-year process of determining the lowest bidder, Rafale, thereby effectively compromising India’s security."

As I stated in a previous comment the L1 status of Dassault was in doubt,that means they had fudged the figures to emerge the lowest bidder in 2012.The above note signed by RM.Antony corroborates this fact.

So the whole case you are trying to build using the 2012 offer by Dassault is on shaky ground.The HAl was quoting 3 times the man hours to manufacture the Rafale than quoted by Dassault who would not guarantee the HAl produced Rafale.Cost of 50 to 60 critical items was not factored in the offer.

Actually UPA or NDA should have kicked Dassault out for their perfidy but this did not happen,instead NDA chose to kick the MMRCA tender and buy 36 Rafale in a g to g deal.Thats because of the IAFs insistence on Rafale, but thats another story.

Finally stop treating the 2012 offer as the FINAL orice,it was not.It was subject to further negotiations as subsequently proven.

andy said...

Here is a passage from a piece written by Abhijit Iyer Mitra for the Institute of peace and conflict studies titled~ India and the Rafale~Anatomy of a bad deal. Written in April 2012.It should enlighten about the cost per unit in 2012.

Quote :"However in the 2009 French parliamentary report on defence finances the total cost of the Rafale programme spread over the 180 airframes produced so far comes to 39.6 billion Euros (55.44 billion USD at the 2009 annual average conversion rate of 1.4) – a whopping 308 million dollars per plane. This makes the Rafale – going by French official documents the single most expensive plane on earth – just 20 million short of the F-22. Needless to say inflation factored in the 2012 prices will be significantly higher. Simply taking the non procurement costs of the
Rafale thus far provides further reason for worry. Subtracting the unit procurement cost of 62 million from the 308 million leaves one with a
non productive cost of 246 million a plane – i.e. the plane costs nearly 4 times the price of the actual hardware involved. Multiply this by the
180 airframes produced till 2009 the total non productive costs factor in at 44.280 billion USD. Amortising this over the planned French production run of 294 airframes, this cost stands
at 151 million USD per plane. Added to the 2006 unit production cost this works out to 213 million USD per plane."

andy said...

Note that 213 million dollar figure per airframe of Rafale arrived at in the IPCS special report does not include cost of weapons or any other add ons.

vijayh123456 said...

Read only for entertainment value. Load of nonsense. How can you compare a UPA deal that was never inked with a NDA contract that was actually signed. The best we have to compare with is the Qatari and Egypt deal. And it is comparable, period.

andy said...

Price quoted by Dassault for 126 Rafale in 2012 was around 18 billion dollars as rightly reported by you, but it was jacked up in subsequent negotiations to around $30 billions by January 2014 when UPA was still inpower, Which means that Manmohan Singh and company were criminally negligent in not closing the Rafale deal quickly in 2012.

Now you are quoting the 2012 offer but omitting the subsequent price escalation by 2014 and stating that BJP is responsible for paying 40%more than 2012 price,when the benchmark should be January 2014 price offered by Dassault.

Note that the NDA was NOT in power either in 2012 or jan 2014.Maybe you should ask your MOD friends and confirm what Dassault was demanding by January 2014.This 40%extra canard has gone for a toss.

andy said...

Quoting from the dna 26 January 2014 edition ~
"India’s biggest deal of procuring 126 medium multi-role combat aircraft (MMRCA) for $18 billion (Rs90,000 crore) has hit rough weather. Two years after French aircraft maker Dassault Aviation bagged the deal for its Rafale fighter jets on account of being the lowest bidder, its cost has now shot up by 100 per cent.

In January 2012, when Rafale was declared the winner, its price was quoted between $60-65 million (Rs373-Rs400 crore). A top defence ministry official said the price of a fighter jet made by Dassault could now cost $120 million (Rs746 crore). The second bidder, Eurofighter, had quoted $80-85 million (Rs497-Rs528 crore).

The price hike would mean that the deal would cost India nothing less than $28-30 billion (Rs1.75 lakh crore-Rs1.86 lakh crore),” said an Indian Air Force (IAF) official, who is privy to discussions of the cost negotiation committee.

The defence ministry headed by AK Antony has developed cold feet after the cost doubled compared to the original estimate. With the general elections just months away, Antony is unsure about the fate of the deal, a defence ministry official said. “As the negotiations continue, the cost is spiralling out of hand. It is a major worry,” he said."

bijju said...

Nicely written sir.

India 2050 said...

Modi govt has done a national service by ordering these plans.Congress wanted a cut for Vadera to which Dusalt did not agree.Hence the deal was cancelled by Manmohan govt.

Arun Mehta said...

India Modi ke hatho me safe nahi he.

VIKRAM PRASAD said...

Meteor and scalp could have been purchased in 2025. ONCE THE R&D COST HAD BEEN AMORTIZED....DOKLAM/ Kargil like situations stare us in the face.

126 RAFALES ARE MORE THAN ENOUGH TO BLOCK PAK AIRFORCE.

Anonymous said...

a lot of good things are going on and all you care is to sniff a scandal where none exists! anyways matter is before the supreme court so wait for a month and then everything will be clear....
what I find bizarre is the figure you quote from the previous mmrca contest - we can't take this as baseline as there was no contract and hence this value could have moved in any direction. so this is a flawed thinking and argument. I firmly believe that there can't be corruption in a G2G deal as there are too many people involved. offsets is another topic altogether. if indeed reliance benefited then it must show in his companies balance sheet and offsets in India take decades to fructify. besides that company is busy making parts for civilian plane!
I feel that the new MMRCA contest will not materialise as we won't have the budget to buy so many planes, we should just focus to add more tejas and sukhois both of which can be built by the super efficient HAL. we should also focus on force multipliers.
I know rafale is keeping you busy but can you also write on recent important inductions (arihant, artillery etc)!!

jayachandran said...

Then why couldn't the previous UPA Govt conclude the deal?
Does your argument also factor in HAL's 2+ labor hours, escalation & conversion rates? (Quality of work, pls refer SU30-MKI).
Does previous "Extras" also include Scalp & Meteor missile? Specify.
How did earlier defense contracts help Indian defense industry in self sufficiency? (Refer Boeing)Except Bofors.
We have faced & facing the realities of over-dependency on one country for defense needs. Even with TOT, refer T-90 tank, amphibious vehicles.
At-most we can speculate based on certain sources, but decisiveness matters when it comes to defense matters.
Only few are privy to defense related matters, more over your not serving or your previous rank doesn't ensure you all info.
You referred to longest serving RM, what is his contribution. There isn't basic rifle/bullet proof vest/helmets till now, leave alone capital assets.Only Navy has done some progress towards indigenization.....

Unknown said...

Great investigation Sir

Jean Luc Picard said...

Dear Editor, thank you for the very thorough reporting on Rafale aircraft acquisition.

However, can we now please *folds hands* move to other important subjects. For example : what is going on with our cantonments under the current Raksha Mantri ?

Why has she only invited retired Vice Presidents of cantonment boards and a retired IAS official to reform control of Defence Land and no serving Military officials to a meeting about cantonments in Pune ?

Can you or any of your journalist bretheren please ask her for an interview and question her on exactly what is her vision, intention and strategy regarding cantonments ?

Can you kindly investigate whether she has any personal benefit in all of this...such as house, property or profit or even an advantageous relationship with the builder/real estate Mafia ?

These are the topics that really impact a lot of people. Retired or serving, civillian or military.

Thanks

Anonymous said...

performance payments... Experience... Mirage 2k... over the years... can't afford lightning II fiasco... DOWN 31...

Teewsbby said...

Sir, can you please show me the deal agreed and signed with UPA and the detailed pricing of all the components (basic aircraft, weapons, electronics, training, maintenance, etc.)? And then we can compare it with the NDA signed deal. Until then it is apples to oranges comparison when you compare it with the RFP (there was not deal signed with UPA and for a reason). It like me saying I have a budget to buy a car which the dealer has not agreed to. But I am saying that my friend paid more than me, although I never bought it. And there is no clarity in terms of what I was buying and what extras he got when he bought the car. Also, you keep saying that we lost out on technology. But there is a separate 114 aircraft to be bought which will bring the tech. And it be Rafale or some other plane. If we had signed 124 Rafale then it would have come with it, now it will come with the 114 aircraft. So are you missing this points, purposely or otherwise?

Anonymous said...

specified... not accounted... broke-down...

Anonymous said...

NSR says ---

Just remember the Mirage 2000 upgrade saga...

India paid $45 /fighter to upgrade it and it does not even include a new engine...At that time Lockheed Martin was selling their top F-16 without armaments for that price...

I think France has inside track in Defense and IAF branches so they know all the strengths and weaknesses and drag the contract negotiations for long time until the situation becomes very desperate...
So you end up updating Mirage-2000 for $45 million
So you end up buying Rafale at whatever price France dictates...

However, considering the two nuclear armed neighbors and many wars and skirmishes fought with them, India badly needs Rafale…
So they must order 36 or 54 more with plenty of Meteor missiles and locate them at strategic locations and it will deter the enemy...

On the other hand, India should have gone to G2G on SU-34 fullback fighter bomber with Russia and it did real well in Syria and could have been a great deterrent to Pakistani and China...
They are cheap and also use same heritage AL-31FP engine as SU-30MKI...
India could have bargained hard for full engine technology and avionics transfer...

I guess IAF is obsessed with fancy stuff...they have no vision...how can they with AM like Tyagis…

Unknown said...

UPA government was stupid. But the buck has to stop here. NDA should not take advantage of that stupidity. In all areas. Period.

Dumb_Dodo said...

Must be so very nice in your drug addled world.

Shreehari Lele said...

The supreme Court has vindicated the deal and has also stated that specific details cannot be mentioned as they influence national security. It's time for the media and general public to show some faith in the SC and stop digging into this issue.