The Rs 59,000-crore deal sealed by Prime Minister Narendra Modi with France in 2016 for purchase of 36 Rafale fighter jets from D’assault Aviation has put the BJP-led NDA government in India in trouble. Opposition parties have accused the Modi government of paying an inflated price for the fighter jets and of ‘crony capitalism’ in selecting the Indian offset partner to D’assault. Mounting pressure on the government to divulge the price, the opposition charged Modi with purchasing the aircraft at Rs 1,670 crore for each, over three times the Rs 526 crore negotiated by the UPA government with the company for the same aircraft. But the NDA government, hiding behind the secrecy clause, is reluctant to disclose the price. It maintains that the clause is essential for safeguarding the country’s security. Now, with the intervention of the Supreme Court in the wrangle, people in the country are in the wait and see mode that whether the non-disclosure of the price of the aircraft is in the country’s interest or in the interest of the Modi government.
Purchase of 36 Rafale fighter jets from French company D’assault Aviation has become an albatross around Prime Minister Narendra Modi’s neck. The Rs 59,000-crore deal was sealed by Modi with the French company in 2016 by row backing the earlier tender for 126 Rafales, initiated by the UPA government. The Bharatiya Janata Party (BJP) government at the Centre and the Opposition are having a face-off over the deal ever since former French President Francois Hollande said India had urged France to nominate Indian industrialist Anil Ambani’s Reliance Defence Industries as its partner. The deal has been the subject of heated claims and counter-claims on two broad issues that the contract to purchase French multi-role fighter aircraft from D’assault Aviation was grossly overvalued and that it was tainted by crony capitalism.
The Opposition has been accusing the Government of preferring a rookie company the Reliance Defence to the state run Hindustan Aeronautics Ltd (HAL) to benefit the private firm. The latest skeleton to tumble out of the Rafale cupboard is that the Centre admitting before a Supreme Court bench on November 14 that the deal hinges not on a sovereign guarantee which would require France to take full responsibility if the 36 fighter jets are not delivered. In the wake of the Centre’s admittance in the court, Congress president Rahul Gandhi slammed the no-guarantee clause in the deal. He wondered if it was indeed a government-to-government understanding or just another indication that the ‘watchman’ has sold out. Gandhi has been relentlessly taunting Prime Minister Modi in this vein ever since the latter asked voters to appoint him as a chowkidar (watchman) entrusted with protecting the national treasury at a public rally held in 2013.
However, the Centre has defended itself by stating that they have enough assurances from the French government as well as the aircraft manufacturer, D’assault Aviation, to determine that the acquisition is legally safe.
The Congress also finds fault with a ‘secrecy clause’ cited by the Centre to not reveal the total cost of the aircraft, besides D’assault Aviation’s decision to partner with Anil Ambani’s debt-ridden defence company over state-owned Hindustan Aeronautics Limited (HAL). While the Government maintains that the clause is essential for safeguarding the country’s security, Gandhi alleges that the lack of transparency in the deal is an indication of high-level corruption.
What is Rafale deal?
D’assault Rafale is a French twin-engine, canard delta wing, multirole fighter aircraft. Equipped with a wide range of weapons, Rafale is intended to perform air supremacy, interdiction, aerial reconnaissance, ground support, in-depth strike, anti-ship strike and nuclear deterrence missions. Its on-board Electronic Warfare (EW) systems can perform reconnaissance and radar jamming roles.
In August 2007, the Indian Air Force, to upgrade its ageing fleet, had advanced a proposal to buy 126 fighter aircraft and floated a tender inviting various aviation companies to participate in the bidding process.
The UPA government in 2012 had chosen French-manufactured Rafale fighter jets over rival offers from the United States, Europe and Russia. The original plan was that the country would buy 18 off-the-shelf jets from D’assault Aviation, with 108 others being assembled in India by the state-run Hindustan Aeronautics Limited or HAL in Bengaluru.
The Narendra Modi-led BJP government, however, rowed back from the commitment of the UPA government to buy 126 Rafales, saying the twin-engine planes would be too expensive. And, the deal fell through after nearly decade-long negotiations between India and France.
Modi then decided to buy 36 ‘ready-to-fly’ fighters instead of trying to acquire technology from D’assault and make it in India. In April 2015, he announced “India will buy 36 Rafale fighter jets off-the-shelf from D’assault.”
In January 2016, the Indian government confirmed the deal for 36 Rafale jets with France. Under this deal, D’assault and its main partners — engine-maker Safran and electronic systems-maker Thales — will share some technology with India’s Defence Research and Development Organisation (DRDO) and some private sector companies and HAL under the offsets clause.
In September 2016, India signed an inter-governmental agreement with France, dubbed as the ‘Rafale deal’, to buy 36 off-the-shelf D’assault Rafale twin-engine fighters for an estimated price of Rs 59,000 crore or 7.8 billion Euros. About 15 per cent of this cost is being paid in advance. As per the deal, India will also get spares and weaponry, including the Meteor missile, considered among the most advanced in the world.
Additionally, an accompanying offset clause was sealed through which France will invest 30 per cent of the 7.8 billion Euros in India’s military aeronautics-related research programmes and 20 per cent into local production of Rafale components.
Amid controversy, the Supreme Court of India has asked the Centre to provide details of the decision-making process in the deal in a sealed cover. The Central government, on the order of the court, submitted details on the decision-making process of the deal to the court on November 12, 2018.
The Apex Court on November 14 reserved its order on the petitions challenging the inter-governmental agreement between India and France for the purchase of 36 Rafale jets. A three-judge bench comprising Chief Justice of India Ranjan Gogoi, Justices U U Lalit and K M Joseph, held a marathon four-hour hearing on the petitions seeking a court-monitored investigation into the alleged murky deal. The bench said any discussion on pricing of the aircraft could only take place if the facts on the deal are allowed to come in the public domain. “The decision we need to take is whether to bring the fact on pricing in public domain or not,” the bench said.
The petitioners in the case include advocate Manohar Lal Sharma, lawyer Vineet Dhanda, AAP MP Sanjay Singh, former Union ministers Yashwant Sinha, Arun Shourie and activist lawyer Prashant Bhushan.
During the hearing, the petitioners have questioned the government-to-government deal between India and France for the purchase of 36 Rafale aircraft in flyaway condition.
Prashant Bhushan questioned Reliance as the choice of offset partner. Bhushan said it was contrary to the procedure laid down as the choice was not disclosed to the Cabinet, the Defence Acquisition Council and the Defence Minister. The government ‘short-circuited’ the acquisition process, as it took the Inter-Government Agreement route to avoid giving tender, he added.
On the price of the Rafale aircraft, Bhushan, who appeared on behalf of himself and Sinha and Shourie, said the government was hiding behind the secrecy clause of the agreement.
In response to Bhushan, Attorney General K K Venugopal, giving hypothetical arguments, said, “If the price is made public, adversaries would be able to relate it to the equipment.” He said the matter is for experts to decide on, not the court. The bench then asked for the assistance of an Air Force officer on the issue and Vice-Marshal J Chalapati appeared in the court to answer the queries.
The documents provided by the Government claimed that the delay in concluding the Medium Multi-Role Combat Aircraft (MMRCA) deal, during the UPA rule, gave India’s adversaries time to upgrade and equip their fighter fleets with advanced weaponry.
When asked by the CJI about the argument of the petitioner that France had not given a sovereign guarantee to the deal, the attorney general said there was “letter of comfort” from the French President.
Regarding the contentious offset details of the deal, Justice Joseph asked the additional defence secretary as to how the country’s interests would be protected if the offset partner did not carry out production. “What was the need to amend offset guidelines with retrospective effect?” Joseph asked. The official replied that it was for the Government to accept the choice made by the Original Equipment Manufacturer of the offset partner.
The attorney general said many lives could have been saved had there been Rafale jets in the Kargil war. “We had soldiers dying in Kargil War. If there were Rafale jets then, we could have saved lives. They could have shot over 60 km,” he said. To this, the CJI reminded the AG that the Kargil war took place in 1999-2000 while Rafale was first manufactured in 2014. “I said it hypothetically,” Venugopal replied smiling.
Advocate Prashant Bhushan said there could not be any secrecy over pricing of the fighter jets when the Government had disclosed the price in Parliament on previous occasions. “It’s a bogus argument for govt to say they can’t disclose pricing. In new deal, Rafale jets cost 40 per cent more than earlier deal,” he said.
This information is understood to have been placed before the court in sealed cover but it isn’t clear whether the price revealed is that of the basic cost of the aircraft without weapons and India-specific enhancements, or the cost of the fully loaded, made-for-India one. The government had resisted attempts by the court asking for price details of the jets. The Attorney General even went to the extent of telling the court that the pricing details are protected under the Official Secrets Act, 1923. So far, the Government has only shared price details of the basic model of Rs 670 crore with the Rajya Sabha.
The NDA government’s decision to enter $8.7-billion government-to-government deal with France to buy 36 Rafale warplanes made by D’assault was announced in April 2015, with an agreement signed a little over a year later. This replaced the previous UPA regime decision to buy 126 Rafale aircraft, 108 of which were to be made in India by the Hindustan Aeronautics Ltd (HAL).
The deal has also become controversial on account of the fact that one of the offset deals signed by D’assault is with a joint venture it has with Reliance Group. The Congress claims the earlier deal was scrapped and a new one signed just to provide Ambani this opportunity for an offset deal. Both the Government and the Reliance Group have repeatedly denied this.
Who is telling the lie-Trappier, Indian Government or Hollande?
D’assault Aviation chief executive officer (CEO) Eric Trappier, in an interview to news agency ANI, rubbished allegations made by Congress president Rahul Gandhi that he lied about details of the French military plane-maker’s offsets joint venture with Anil Ambani’s Reliance Group in the Rafale jet deal.
He also claimed the price of each jet in flyaway condition under the deal signed by the NDA government is 9% lower than the price offered by the company to the previous UPA government in a deal that wasn’t closed. Trappier’s interview came a day ahead of the Supreme Court’s hearing.
Trappier said as he has been quoted by Bloomberg, “I don’t lie. The truth I declared before and the statements I made are true. I don’t have a reputation for lying. In my position as CEO, you don’t lie.”
“Price of 36 was exactly the same when you compare with 18 flyaway; 36 is the double of 18, so as far as I was concerned, it should have been double the price. But because it was government-to-government, there was some negotiation, I had to decrease price by 9%. The price of Rafale in flyaway condition is less expensive in the 36 contract than the 126 contract,” he said.
About the initial agreement with HAL and the subsequent breakdown of talks with the firm for production of Rafale jets, the D’assault CEO said if the initial deal of 126 jets went through they would not have hesitated to work with HAL and Mukesh Ambani-led Reliance Industries Ltd. “It’s because the 126 didn’t go smooth that the Government of India had to reconfigure to urgently acquire 36 from France. And then I took the decision to continue with Reliance, and HAL even said in the last few days that they were not interested to be part of the offset. So, it has been done by my decision and the decision of Reliance to invest in a new private company,” added Trappier.
Talking about the aircraft, the D’assault CEO explained that the present planes will have all necessary equipment, but not weapons and missiles. “The weapons will be sent in different contract. But the aircraft with everything other than weapons will be dispatched by D’assault,” he said.
Earlier, in the documents featured in a French blog published by two unions of D’assault the Confédération française démocratique du travail (CFDT) and the Confédération générale du travail (CGT) Loik Segalenn, the number 2 in D’assault Aviation, had talked about the joint venture with Anil Ambani’s Reliance Defence.
Segalenn was quoted as saying, “It was imperative and obligatory for D’assault Aviation to accept this ‘contrepartie’ (compensation) to obtain the export contract.”
A French publication, Mediapart, in a report had mentioned about the CFDT document, just after former French President Francois Hollande’s explosive statement that France had no choice when it came to selecting Anil Ambani and his company as offset partner for D’assault. Mediapart stated that an internal document of D’assault confirmed Hollande’s statement.
Whereas, the CGT statement says, “…a complete presentation of ‘Make in India’ with the creation of the enterprise ‘D’assault Reliance Aerospace’ at Nagpur was done for us.”
The second CFDT statement, published by French aviation website, Portail-Aviation, talks about ‘Make in India’ being ‘the inevitable consequence’ of the deal ‘imposed’ by India, and says a joint venture with Reliance was created to attain this objective. It is evident that the statements are not talking only about the offset obligation but also about the joint venture with Reliance.
However, D’assault denied the allegation, saying the reference in the document was to the obligation to make offset investments in India and not the compulsion to get into a joint venture with the Reliance Defence.
While the Modi government has insisted that the choice of offset partners is entirely that of the manufacturer, Hollande’s remarks were widely perceived as bolstering the Congress allegation that the deal was structured to favour Anil Ambani. Hollande’s statement has squarely contradicted what the Modi government has been saying all along.
In an interview to a French news outlet, Hollande disclosed that “It is the Indian government who has proposed this service group and it is D’assault that has negotiated with Ambani. We didn’t have a choice. We took the interlocutor that was given to us.”
In the storm that ensued, the clarifications issued by the Union government, the French Foreign Ministry and the D’assault Aviation did little to clearly address what Hollande had said.
But all this merely raise questions: Did the Centre suggest a partnership with Reliance Defence as Hollande said? Also, if so, what form did it take? A firm nudge in that direction? Who suggested to who and when?
Moreover, Modi’s 2015 declaration of a new deal clearly caught even many of his senior officials unawares, who were labouring under the belief that negotiations for the purchase of 126 Rafale aircraft, initiated by the UPA government, were still on. Modi had announced the procurement of a batch of 36 Rafale jets after holding talks with then French President Hollande on April 10, 2015 in Paris.
The joint venture referred to was D’assault Reliance Aerospace (DRAL), which Anil Ambani’s Reliance Group had formed with D’assault, with the former holding 51 per cent and the latter 49 per cent of the equity. DRAL was set up just days before Modi and Hollande made the shock announcement.
As such, greater transparency is the only way to clear the air. If the political war over the Rafale deal continues, it is defence modernisation that will become the real victim.
Congress president Rahul Gandhi launched a blistering attack on Prime Minister Modi alleging evidence of corruption in the Rafale deal which was exclusively negotiated by Modi to hand over a Rs 30,000-crore contract to Anil Ambani was undeniable. He said Modi and Ambani jointly carried out a ‘surgical strike’ on the defence forces.
“It is up to the Prime Minister to clear his name. We are absolutely convinced that the Prime Minister of India is corrupt. This question is clearly settled into minds of people that Desh Ka Chowkidar Chor Hai (the country’s watchman is a thief),” Gandhi said.
At a press conference, Rahul said this on comments made by former French President Francois Hollande, that D’assault Aviation was given no choice, but to partner with Anil Ambani-led Reliance Defence for the offset clause in the fighter jet deal. Gandhi said, “Modi has personally handed over Rs 30,000-crore contract to Anil Ambani who never made even paper aircraft in his life.”
“What the ex-President of France is saying is that Prime Minister of India is a thief. It is very important for the Prime Minister to either accept Hollande’s statement or say that Hollande is not telling the truth, and here is the truth. For the first time probably in Indian history, an ex-President is calling our PM a thief,” the Congress chief said.
He also pointed out the many ‘flip-flops’ made by Defence Minister Nirmala Sitharaman on the issue of making the price of the Rafale aircraft public. The Congress has been demanding a joint parliamentary committee probe into the matter.
Escalating his attack, Rahul said D’assault had invested Rs 284 crore in a loss-making company promoted by Anil Ambani. The company used the amount to procure land in Nagpur, the Congress supremo said. “It is clear the D’assault CEO is lying. If an inquiry into it starts, Modi is not going to survive it. Guaranteed,” added Gandhi.
The Congress chief said D’assault was trying to protect one person and that is Modi.
In New Delhi, Congress’s chief spokesperson Randeep Singh Surjewala said: “The nation does not need doctored explanations but fair investigation. A fixed match between the BJP government and D’assault and public relations stunts of Modi and Eric Trappier can’t hide the blatant corruption.”
The statements of ‘mutual beneficiaries and co-accused’ hold no value. Beneficiaries and accused can’t be judge in their own case,” he tweeted. Surjewala’s colleague Manish Tewari referred to an earlier statement by former French president Francois Hollande to counter Trappier’s remarks. “Hollande had twice stated that they were told that the deal will be concluded only if the Reliance Defence is taken as the offset partner. So, who is telling the truth?” he asked.
The Congress party dismissed Trappier’s remarks, alleging a ‘fixed match’ between the Narendra Modi government and D’assault even as it reiterated its demand for a joint parliamentary committee (JPC) probe into the Rafale deal.
Senior Supreme Court advocate Prashant Bhushan said the Rafale deal was the ‘largest defence scam in India’ and urged the Centre to initiate a Joint Parliamentary Committee (JPC) probe into the matter.
Addressing reporters in New Delhi, he questioned how Anil Ambani’s Reliance Defence could be involved in the project when ‘most of his companies are in debt.’
“This is not only the largest defence scam in India, but is one where national security has been severely compromised. While the IAF wanted 126 aircrafts, it was reduced to 36,” Bhushan said.
Lashing out at Modi and Defence Minister Nirmala Sitharaman, Bhushan charged the Centre with making IAF officials ‘lie’ about the deal. “You have severely compromised national security, broke the IAF’s back, looted people’s money and defamed a public sector unit (HAL),” he said.
Earlier, the French Government, in a statement, had said they have no role in “the choice of Indian industrial partners” while D’assault Aviation (DA) said it was their choice of selecting Reliance Defence as the local offset partner. However, neither statement directly denied the claim by former French President Francois Hollande that it was the Indian Government which proposed the name of Reliance Defence. “The French government is in no manner involved in the choice of Indian industrial partners who have been, are being, or will be selected by French companies. In accordance with India’s acquisition procedure, French companies have the full freedom to choose the Indian partner companies that they consider to be the most relevant, then present for the Indian government’s approval the offsets projects that they wish to execute in India with these local partners so as to fulfil their obligations in this regard,” Spokesperson of the French Ministry of Europe and Foreign Affairs said in a statement. The statement added that the Inter-Governmental Agreement (IGA) signed on September 23, 2016, between the French and Indian governments for 36 Rafale aircraft concerns the obligations of the French government “solely with regard to ensuring the delivery and quality of this equipment.”
In November 2016, a political warfare over the deal began and the Congress accused the Modi government of causing ‘insurmountable loss’ of taxpayers’ money by signing the deal worth Rs 59,000 crore. It also claimed that the Anil Ambani-led Reliance Defence Limited had been unfairly picked to be the French firm’s Indian partner. The Congress alleged that the cost of each aircraft is three times more than what the previous UPA government had negotiated with France in 2012.
The deal has become controversial with the opposition claiming that the price at which India is buying the aircraft now is Rs 1,670 crore for each, over three times the Rs 526 crore, the initial bid by the company when the UPA was trying to buy the aircraft. It has also claimed the previous deal included a technology transfer agreement with HAL.
The delivery of the Rafale jets is scheduled to begin from September 2019.