Decoding The Rafale – The Controversy
Unless you’ve been living under a rock, you would know that recently the Indian aviation space on the internet has been exploding with questions & controversies on only one topic, The Rafale.
We got an entire gamut of questions, from the good, the bad, the ugly and this article is an attempt to address some of these questions from an unbiased & logical view. This article is going to be a series of two parts, the first part here discusses the elephant in the room, the Rafale deal controversy & the second part coming soon, talks about its capabilities & importance to the IAF. So let us fire the afterburners!
The Rafale deal controversy is a series of different controversies. Please note that all points covered in this section reflects the SC judgment & publicly available data with no bias.
The root of the controversy started when the NDA government chose to buy 36 “flyaway” Rafale after the 126 aircraft deal failed to materialize over disagreement on warranty & price (more on this later).
Firstly, a widely circulated number of INR 526 crore surfaced & the opposition (Congress/UPA) claimed that the price of a single aircraft escalated from INR 526 crore in the UPA deal to INR 1600 crore in the Mr. Modi led NDA govt. deal. This is a steep 3x rise in price. What the UPA missed was, that 526cr was actually the price of a basic Rafale aircraft as quoted by Dassault in 2007 without any support, weapons, or equipment needed to operationalize the aircraft. INR 526cr does sound like a fair price for a 4.5 generation fighter aircraft considering our own LCA Tejas costs 300cr per unit.
Then came the deal breaker, when Dassault Aviation said that to manufacture a complex machine like Rafale in India, HAL (Hindustan Aeronautics Limited) needed to spend 2.7 times more time & manpower to build a single aircraft as compared to an aircraft built in France. This 2.7x increase lead to a steep increase in the deal price to 746cr per aircraft in 2014 & the total deal for 108 fighters costed in excess of 30 billion USD or 2.5 times the initial budget allocated (for reference the defence budget of India in 2020 is 65 billion USD). In addition to it the French were not happy to provide warranty for the HAL built Rafale aircrafts. Thus no paperwork was done & the deal collapsed in 2015 due to cost overruns & warranty issues.
Government changed in 2015 & the NDA Government decided to buy 36 aircraft in flyaway condition (all made in France) in an emergency purchase to fulfill the dipping squadron strength in an inter-governmental agreement (IGA). This deal cost India 7.8 billion euro (INR 59,000cr) & was done following clearance from the Indian Cabinet Committee on Security. Simple math tells us that per aircraft cost in this deal was 1,600cr compared to 526 Cr which was originally envisaged by UPA in 2007, but here is the price break up:
Price per aircraft:
INR 687cr (which is almost same in 2015 as INR 526cr in 2007 after inflation adjustment of 3.5 %). Multiply that by 36 aircraft & we get almost INR 25,000cr.
Spares: INR 13,500cr. Dassault aviation is responsible for the supply of the entire stock of periodically required spare parts & components for the lifetime of the aircraft i.e. 40 years.
India Specific Enhancements: INR 12800cr. There are 13 customisations required by the Indian Air Force to adapt the Rafale for diverse Indian conditions. We’ll talk about this in detail in the second part of this series.
Weapon Package: INR 5300cr. What we get for this is Meteor Missile, MICA-IR/RF Missile, Hammer Guided Bomb & SCALPE-EG Cruise Missile.
INR 2650cr. Under the logistics agreement, Dassault’s team of engineers are responsible to maintain and service the Rafale to attain an availability of over 75% for the first 5 years after full delivery.
All this sums up to INR 59,000 crore (or 7.87 billion euros) which is the deal amount. Under the deal there is 50% offset which means 50% of the deal amount or near about INR 30,000 crore will be reinvested in India and 30% of this (INR 9000 crore) will go to DRDO.
The price per aircraft stands the same after adjusting inflation and didn’t escalate from INR 526 crore to INR 1,600 crore.
Another controversy surrounding the Rafale is NDA government’s favouritism towards Reliance Defence Limited (RDL). According to the offset deal, Dassault Aviation along with 3 other firms from France were supposed to invest around INR 30,000 crore in about 70 different companies in India. Congress claimed that RDL was getting preferential treatment as an offset partner of the deal and claimed that RDL was purposefully created to be an offset partner, they got their manufacturing license as recent as Feb 2016 & have no experience in aircraft manufacturing. Another allegation was that Reliance is benefitting by INR 45,000 Crore as a part of the Rafale Deal.
In its defence, RDL said choosing them as an offset partner was in the hands of Dassault Aviation and clarified that the Ministry of Defence had nothing to do with it. RDL further dismissed the claim saying that it was just providing the manufacturing facility in India as a part of the “Make in India” initiative and the technological knowhow was supplied by Dassault. The JV, named Dassault Reliance Aerospace Limited have 90 years of experience through Dassault Aviation. Also the claim that RDL is benefitting by a whopping INR 45,000crore is impossible as the total offset value is of INR 30,000 crore only, out of which INR 9,000 crore had to go to DRDO and the remaining INR 21,000 crore had to be distributed among almost 70 companies in India. Of this, Dassault’s share is only INR 6,500 crore which means, even if Dassault decides to make RDL its only partner, RDL is not gaining more than INR 6,500 Crore.
Supreme Court finally gave a clean chit to the IGA deal saying, “We have examined closely the price details and comparison of the prices of the basic aircraft along with escalation costs as under the original RFP (2007 – that of UPA regime) as well as under the inter-governmental agreement (2015 – that of NDA regime). We have also gone through the explanatory note on the costing, item wise”.
It further added that it found no fault with the government’s assertion that it got better terms relating to maintenance and weapons package.
On the aspect of offset partner, the court rejected allegations of favouritism and said, “We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian government, as the option to choose the IOP (Indian offset partners) does not rest with it.”
All facts stated here are aligned to the findings of the Supreme Court and the data regarding the same is referred from sources available in public domain. We hope you, the readers found the article beneficial and gained clarity and insights on the much talked about Rafale Deal.
RAFALE – PART 3