Rafale: Whiff of a scandal

When Congress president Rahul Gandhi stood up to speak against Prime Minister Narendra Modi’s government during the no-confidence motion on July 20, he did not try to corner the government on the state of the economy, the many unfulfilled promises and alleged false claims of the government, or even the government’s inability to stop the spate of lynchings by cow vigilantes. Instead, he focused on the government’s refusal to make public the price details of the deal to buy 36 Rafale fighter jets for the Indian Air Force from France’s Dassault Aviation in a government-to-government deal. The inference, as the government sought to hide behind a ‘secrecy pact’ and refused to reveal what India was paying for each Rafale fighter, was that the government indeed had something to hide. The whiff of a scam in a high-profile defence purchase. And that, too, in a deal that was decided upon by none other than Prime Minister Modi himself.

That decision, made during the prime minister’s state visit to France in April 2015, came following a long and arduous process of selecting a combat aircraft to replace the IAF’s ageing fleet of fighters. It began in 1999, with the air force planning for the coming obsolescence of its MiG-21, MiG-23 and MiG-27 fighters. It requested for more Mirage-2000 fighters to replace these. By the time the request passed through the Indian bureaucratic process, Dassault, the maker of the Mirage fighters, had decided to shut down the assembly line, and the IAF’s own view of its requirements had changed. It sought a new generation of multi-role combat aircraft. In 2007, the government put out a Request for Proposal (RFP) for 126 Medium Multi-Role Combat Aircraft (MMRCA), budgeting $10 billion (about Rs 42,000 crore then) for the buy. Six companies responded, with a mix of single engine and twin-engine fighters – Lockheed Martin’s F-16 and the Swedish SAAB Gripen 39 were the single-engine contenders; the Russian MiG-35, the Boeing F/A 18, the Eurofighter Typhoon of a four-nation European consortium and Dassault’s Rafale were the twin-engine contenders. Extensive field trials later, in 2011, the Typhoon and the Rafale were shortlisted as the two aircraft that best met the requirements set out in the RFP. When commercial bids were opened, it was declared that Dassault had quoted the lowest price. It was declared ‘L1’ in the tender process.

Earlier this week, the Economic Times reported details of a brief made by the government which established clearly that after taking everything – life-cycle costing and technology transfer -- into account, Dassault Aviation’s pitch was not the L1 bid, after all. This is not the first time this fact has emerged. This journalist, writing in the defence news site StratPost, had as far back as October 2015 cited comments made by former air chief Arup Raha, in which he admitted that the MMRCA negotiations fell apart “because of various issues that cropped up in terms of compliance of the RFP.”

But even earlier, in 2012, shortly after Dassault’s bid for the Rafale was declared L1, Mail Today reported that two defence ministry officials, who were members of the Contract Negotiation Committee (CNC), had refused to sign the minutes of the committee before the L1 announcement. According to the report, “the two officials noted that certain assumptions had been made about Rafale’s bid to declare it as the lowest bidder, but no one had validated it.” The two officials ultimately signed off on the selection, after placing their reservations on record.

What did defence minister AK Antony do about this? In an apparent abdication of responsibility, “he instructed that the committee should settle the issue internally.” The winning bid in the MMRCA tender was not L1, but everyone seems to have played along. The current government has also acknowledged that Dassault’s bid should never have been declared L1.

In a press release issued in February 2018 defending its decision to stick with the Rafale, the defence ministry said, “In 2012, the then defence minister exercised an unprecedented personal veto on the laid-down institutional process then underway for procurement of 126 Medium Multi-Role Combat Aircraft.” In effect, the then government went ahead with the Rafale despite indications that Dassault’s bid was not the lowest.

A fundamental part of the MMRCA acquisition was technology transfer and licensed production of 108 fighters by Hindustan Aeronautics Limited (HAL). The NDA government’s analysis said that, “By applying a factor of 2.7 on the man-hours quoted by Dassault Aviation and EADS (which made the Typhoon fighter), the ratio of Net Present Value (NPV) based total cost of acquisition as on November 2011 would have undergone a material change to the extent that Dassault Aviation would have no longer remained L1 vendor and would have become L2 vendor.’ If the French bid was not the lowest commercial bid, how was it declared L1 in the first place?

As negotiations continued interminably, first with the UPA government and then with the Modi government, it would have become apparent that the L1 decision was a flawed one. Paragraph 26 (d) of the Defence Procurement Procedure (DPP) of 2006, which governed the MMRCA process, clearly offers a justification for such a move. “Submission of incomplete format enclosed along with commercial offer will render the offer liable for rejection.”

Why then did either government not declare the bid void and move on to the next bid in the MMRCA tender?

Instead, the Modi government decided to withdraw the tender and dropped the idea of acquiring 126 fighters. In its place, Modi decided to buy 36 fighters off the shelf. But the vendor and the product remained the same – Dassault’s Rafale.

The reason for sticking with the Rafale was ostensibly the fact that it had already been selected by the IAF. But if this selection was about technical qualifications, the Eurofighter had also qualified. And if it was about the L1 declaration, it had become abundantly clear by now that the Eurofighter and not the Rafale was the lower of the two bids. Why did the government not feel it worthwhile to check with the Eurofighter team for a quote for 36 aircraft?

In its February press release, the defence ministry countered, “It seems to have been conveniently forgotten that the then government itself had rejected that company’s (Eurofighter’s) unsolicited offer made days after closure of the bid process, declared Rafale (DA) as the L1 bidder and had commenced negotiations with it in February 2012.” That defence is flawed.

The decision to order 36 Rafales was separate from the MMRCA tender. The Modi government would have had to reject the unsolicited offer from Eurofighter if it had to stick to the MMRCA tender. But in the separate case of the 36 Rafale aircraft order, there was no reason not to check with Eurofighter, given that not only had the Eurofighter Typhoon, like the Rafale, technically qualified but it was the actual L1. What’s more, it was willing to submit a revised offer.

Even if the Modi government had its heart set on the Rafale, an offer from Eurofighter would have encouraged the French to make a more competitive offer. Finally, after dropping the idea of acquiring 126 fighter aircraft, the government has again initiated a contest for 110 fighters, with the majority of them to be built in India. The same six aircraft are competing, including the Rafale and the Eurofighter, underlining the absurdity of cancelling the earlier tender.

And given that experience, how seriously could any of the bidders in the new contest be expected to take the integrity of the process, if the Government of India can select the wrong bid as L1 and then adamantly persist with it.

(The writer is the Editor of the defence news website StratPost)

Also read: ‘It’ll take 4-5 years to seal new deal for 110 fighters’