The acquisition of 36 Rafale fighter aircraft has been extremely problematic in all possible ways, perhaps bar the selection of the aircraft itself well before the present government took office. In the ongoing brouhaha over the deal, with a lot of media noise and emphasis on likely corruption, much attention has been focussed on the quest for the proverbial smoking gun and on the strained rebuttals thereof from government spokespersons. Defence hardware deals the world over are known to be a hotbed of shady transactions and highly complex kickback routes, so it should surprise no one if any quid pro quo is difficult to prove. In the meantime, however, issues vital to the national interest that the Rafale deal has thrown up, especially those relating to the armed forces’ technological self-reliance, are in danger of being overshadowed.
It needs reiteration that the acquisition itself, the way it was structured and the manner in which crucial decisions were taken were all deeply flawed, with grave implications for national security, the country’s technological self-reliance, defence industry capabilities and transparency and accountability in governance, all of which are the stated objectives of defence procurement policies in India. The strong smell of cronyism that also comes wafting through and appears to impinge on all the rest is by itself sufficient to raise ample doubts and to call for effective corrective measures without having to wait for the elusive smoking gun.
Depleted IAF strength not addressed
The government has not satisfactorily explained its decision to abruptly cancel the almost finalised tender for the acquisition of 126 Rafale fighters and to buy 36 jets outright, and its spokespersons have tied themselves in knots, lurching from one unconvincing reason to another contradictory one. The unbearable expense involved, the urgency of the requirement of the Indian Air Force (IAF)given its dangerously depleting fleet, and the apparently impossible hurdles in reaching a satisfactory agreement with Hindustan Aeronautics Ltd (HAL), a defence public sector undertaking (PSU), have all been cited. But these reasons do not add up, singly or together.
The IAF’s requirement of 126 fighters, with an option for an additional 74, was projected and approved at all levels way back in 2001 when the initial Request for Information (RfI) was floated for what was then called the multirole combat aircraft (MRCA) acquisition. These numbers and corresponding specifications were thought out and documented in detail, displaying a long-term vision in contrast to many earlier acquisitions that were often ad hoc or “emergency” in nature or involved filling gaps with a few specialised aircraft. The IAF is facing an impending sharp drop in strength and is already down from the sanctioned 42 squadrons to around 35, which is likely to drop rapidly with the phasing out of its ageing MiG-21, 23 and 27 aircraft. With the much-delayed indigenous Tejas Light Combat Aircraft (LCA) now appearing likely to come on stream, the IAF modified its MRCA requirement in type of aircraft and, in its 2004 Request for Proposals (RfP), called for medium-weight fighters, or MMRCA, but still wanted 126. Clearly, the IAF envisaged having a settled fleet mix of adequate numbers of Tejas LCA, the heavy Sukhoi-30 MkI air superiority fighters and the MMRCA and finally putting an end to its motley mix of a few squadrons each with a veritable menagerie of aircraft types, including the three MiGs and the Mig 29, the Jaguar, the Mirage 2000 and the Sukhoi, a logistical and maintenance nightmare for any force.
After technical evaluations of the six contending fighters and extensive field trials under desert and cold mountain conditions, the Eurofighter Typhoon from a European consortium and the Dassault Rafale from France were short-listed, and the Rafale was selected in 2011 on the basis of life-cycle cost. As per the MMRCA RfP, 18 aircraft were to be supplied by Dassault and the remaining 108 were to be made in India by HAL through technology transfer. With a sudden stroke of the pen, the new deal for 36 Rafales simply dumps this entire process and strategic acquisition plan.
Facing a storm of criticism, the government coerced a hapless IAF chief into defending the new deal, so he dutifully said the aircraft were very good and were badly needed. But neither point was disputed by anyone. Tellingly, he did not comment on how much the IAF would miss the 90 Rafales it would not get. After more than a decade of planning, tendering, testing and deciding on the best choice, the IAF now finds itself back to square one, with just two squadrons of medium-weight strike aircraft, a still badly depleted fleet, and having to make do with upgrades of mind-boggling variety in its fleet. Why?
The narrative put out by the government is that the “decisive” Prime Minister, realising that the MMRCA tender was irretrievably bogged down, had moved swiftly to strike a government-to-government deal and ensure at least an emergency purchase of two squadrons of Rafales. True, the overcautious Defence Minister of the previous United Progressive Alliance government, A.K. Antony, did not expedite negotiations, but such procurement delays have notoriously been the norm in India for many decades, regardless of the government in power. Yet the final detailed MMRCA negotiations, despite all the problems, were almost “95 per cent complete”, including the supposedly contentious areas involving HAL, as the Dassault CEO Eric Trappier confirmed at a press conference (available on video) as late as March 26, 2015, just weeks before Prime Minister Narendra Modi announced the new deal in Paris. Suvarna Raju, the recently retired Chairman and Managing Director of HAL, also confirmed this.
Even if there were difficulties, could not the Prime Minister, who could suddenly bypass all other decision-makers to buy 36 Rafales, have called the shots and, if necessary, banged the heads of HAL, the IAF and Defence Ministry bureaucrats together to push the MMRCA tender to a quick conclusion? As it turns out, in cancelling the MMRCA tender and going for the outright purchase of a mere 36 fighters instead of the planned and projected requirement of 126, the present government has seriously imperilled national security, especially preparedness for the oft-cited two-front conflict scenario. Since the new purchase order is too small to allow for any technology transfer, this new deal also prevents India from building its defence industry capability and obtaining advanced know-how in military aviation.
To add insult to injury, in April this year, the government issued a fresh RfI for 110 fighters. As expected, the same six companies that responded to the MMRCA tender have responded again. And the same process of considering inputs, issuing an RfP or tender, conducting technical evaluations and field trials, and then carrying out financial negotiations will follow, which will take several years. And why should the results be any different from what they were previously? Now, if all goes well, by 2020 or so, India will again be where it was in 2011 and maybe induct the 110 fighters by, say, 2025 to 2030. By that time, with only 36 Rafales, the IAF’s squadron strength may have dropped to below 30. If the urgency felt by the IAF owing to depleting squadron strength was the consideration in cancelling the MMRCA tender, the decision to buy 36 Rafales outright, with deliveries from 2019-22, has certainly not solved the problem. By any yardstick, it would have been far better to have stuck to the MMRCA tender and pushed for its expeditious finalisation.
However, the government seems to have given the IAF, senior bureaucracy and political leaders no opportunity for discussions, with the decision apparently having been taken at the very top and others being brought into the loop after the Prime Minister’s announcement in Paris. It is now clear that neither the then Defence Minister, Manohar Parrikar, nor the IAF chief knew about the decision until just a few days before Modi’s departure for Paris for a summit with the then French President, Francois Hollande. The Foreign Secretary, too, did not know (neither did HAL), even on the eve of departure, as was clear from his customary pre-departure press briefing in New Delhi.
In a recent extensive interview published in The Hindu (October 10, 2018), the current Defence Minister, Nirmala Sitharaman, danced around the issue of due process but stated that the Prime Minister’s announcement in Paris was only a statement of intent, which subsequently “fructified into a deal, in which the due processes were followed”. Upon being pressed, she further insisted that the joint statement with the French side was formulated in consultation with all concerned and that “post that is when… the due process will commence”. This is a complete misrepresentation, which seeks to hide a clear case of arbitrary exercise of authority behind a too-clever but completely incorrect interpretation of due process. The wording of paragraph 14 of the joint statement paragraph, that the “Government of India would like to acquire [36] Rafale jets in fly-away condition as quickly as possible” and that “the two leaders agreed to conclude an Inter-Governmental Agreement”, makes it absolutely clear that the Indian government had already taken the decision and conveyed as much to the French side and that only the nuts and bolts needed to be worked out thereafter. All subsequent “approvals” by the duly constituted bodies such as the Defence Procurement Committee or the Cabinet Council on Security were clearly only post facto ratifications of a decision presented to them as a fait accompli .
India has adopted an elaborate Defence Procurement Procedure (DPP), albeit over-bureaucratic and rigid, modifying it through several iterations over a period of many years, precisely in order to render processes more rule-bound, transparent and based on full stakeholder participation to ensure long-term strategic thinking and avoid the recurrent charges of opacity, arbitrariness or even corruption in decision-making in defence procurement by user services, the bureaucracy or the political leadership. Yet, all this was simply brushed aside by the political leadership, and an opaque, whimsical and virtually overnight decision taken to cancel an MMRCA tender that had been in play for over a decade. This oddity inevitably leads to speculation about extraneous factors.
It is regrettable that in seeking to deflect widespread criticism of the decision and related processes, a concerted effort has been made to put the blame on HAL, including by the Defence Minister herself under whose Ministry HAL functions. It is doubly unfortunate that the IAF chief joined in this chorus of denigrating the country’s premier aircraft manufacturer.
The Defence Minister’s most astounding claim was that HAL did not have the capacity to make Rafales. Is this not the same HAL that in earlier times manufactured the Gnat and its renamed upgraded version the Ajeet under license from Folland of the United Kingdom, which fighter distinguished itself during the 1965 war with Pakistan against the superior United States-made F-86 and F-104 fighters? Or manufactured the indigenous HF-24 Marut? Or, more recently, undertook a major upgrade of Dassault Mirage-2000s, manufactured under licence 200 upgraded RD-33 engines for MiG-29s, or manufactured over 200 advanced Sukhoi-30 MkI fighters from basic raw materials, or is manufacturing almost 100 Hawk-132 Advanced Jet Trainers under licence from BAE Systems, or has set up a completely new helicopter plant near Bengaluru? It is also HAL that is going to manufacture the 123 Tejas LCA, that too at a rate of 18 a year compared with the 12 a year rate at which Dassault will supply Rafales to India. Rubbing salt into the wounds, this scapegoating of HAL on grounds of capability was being done at the same time that Reliance, a company with absolutely no experience in aircraft manufacturing, was being assiduously promoted, if not pushed, as an Indian partner for Dassault.
Various stories appeared in the media in what appeared to be an orchestrated vilification campaign against HAL. Perhaps taking its cue from the political leadership, even Dassault executives joined in. This especially jars coming from Dassault, which, when it was conducting a PR campaign in India during the MMRCA tender process, spoke glowingly about the serial collaborations it had had with India and with HAL since the 1950s involving military aircraft such as the Mystere and later the Mirage. Worse, leaks to sections of the press cited reports supposedly by the then U.S. Ambassador to India questioning HAL’s capabilities. The U.S. and other Western powers have long done their best to prevent self-reliance in science and technology in India and have refused to share technologies. It is a shame that they are now being cited to discredit India’s own Navratna defence PSU.
There is a method in this madness, however. The present government seems hell-bent on destroying or at least downgrading HAL and other defence PSUs and has taken concerted steps to promote private sector defence industries, using the need to broaden the base of the defence industry in India as a pretext and, of course, the time-worn excuse of the “inefficiency” of PSUs. The same arguments have been used in the Rafale case.
Besides the spurious issue of capability and the false charge of not having arrived at a work-share agreement with Dassault, Suvarna Raju has clarified other issues brought up. He averred that HAL had offered to stand guarantee for the 108 aircraft to be made by it when Dassault disagreed with the unrealistic demand by India’s negotiators, not HAL, that Dassault stand guarantee for these too. Raju agreed that HAL prices were high due to weaker infrastructure compared with Dassault. However, this could have been worked out with HAL, with the government playing a proactive role and pumping in finances for advanced manufacturing equipment in the interests of self-reliance.
The IAF and HAL have long been at loggerheads over delivery schedules, quality and cost. HAL must take its considerable share of responsibility for this state of affairs, its poor work culture, low productivity and high costs. The IAF too, however, must overcome the persistent preference of many of its brass for imported equipment, with sometimes questionable motivations. But above all, it is the role of the government and the political leadership to bring about greater discipline and an efficient work culture in its defence PSUs and to resolve differences between the IAF and HAL.
As for private sector participation, this should be done systematically and in a planned and phased manner. HAL should promote and build capacities of component and sub-assembly manufacturers to augment production capacities, much like the Indian Space Research Organisation and the Baba Atomic Research Centre have done in the space and nuclear energy fields, and progressively graduate these into independent manufacturers. However, it is not clear if the government has the vision or patience to oversee such a long-term process as is evident from the way offsets have been visualised in the Rafale case.
Offsets and Reliance
Lastly, let us turn to the mysterious and vexatious selection of Reliance as an offset partner for Dassault for the 36 Rafales deal, which calls for 50 per cent expenditure on offsets contracts in India. Dassault has formed a 49:51 joint venture with Anil Ambani’s Reliance Group to execute these offsets. This has come as quite a shock, though perhaps not a surprise, since rumours to this effect had been circulating for some time.
Given the fact that the Ambani conglomerate has no experience in aviation, or even in the manufacturing space in general, and has a huge debt burden, suspicions of cronyism have been hard to avoid. The “coincidental” appearances of Anil Ambani at different Rafale-related events and the registration of different Ambani companies have added grist to the mill. Reliance had no land, machinery or qualified personnel at the time it was supposedly selected by Dassault, with proximity to the Nagpur airport apparently being its main asset. As with almost all other aspects of the Rafale deal, the value of offsets assigned to Dassault Reliance Aerospace Limited (DRAL) has also been hidden behind a cloud of contradictory statements. A Dassault press statement in September said that besides the Reliance Group it had also tied up with many other partners in India for offsets and discussions were “ongoing with a 100-odd other potential partners”. Later, Dassault said that Reliance was handling only about 10 per cent of the offsets. However, a recent letter from the CEO, Reliance Defence, to The Hindu (October 18, 2018), in response to an op-ed piece, stated: “DRAL is the only Indian offset partner of Dassault Aviation.”
It would be instructive to know what due diligence, if any, was conducted by Dassault with respect to the Reliance Group in selecting it as a major offsets partner since the many other smaller partners it has picked, as per its press kit of September, are companies with established track records in their respective fields.
With all this, there has obviously been much controversy as to whether hints were given or pressure brought to bear on Dassault from high places in the Indian government to pick Reliance. The closest to a smoking gun so far has been an interview to a French website by President Hollande wherein he stated that France had no choice in the matter other than to accept the partner India suggested. This was, of course, refuted by statements from Dassault and the Indian government, both with much to lose if the perception of cronyism gains currency.
Some aspects of these offsets are important not only to the Rafale deal but to the defence industry in India in general. It was initially learnt that DRAL was not going to make any part of or components for the Rafale but some parts, perhaps nose cones, for Dassault’s civilian executive jet, the Falcon 2000. Perhaps as an afterthought in view of the snowballing controversy, the above Dassault press statement in September said that some parts for the Rafale would also be made by DRAL. However, none of these will amount to significantly enhancing the capability of India’s defence industrial base, which is the stated goal of offsets as per DPP 2016.
Even though such offsets unrelated to the main hardware being acquired have been permitted in amended versions of the DPP, this defeats the very purpose of offsets, which are meant, as is the case in several other countries that have adopted this method, to build and enhance technological capability in the acquired hardware and in related areas. Even in assembly or sub-assembly of the Falcon, Reliance, with no capability of its own, would end up playing a junior “screwdriver” role while Dassault runs the whole venture, resulting in zero or marginal absorption of know-how within the Indian manufacturing ecosystem.
The Defence Minister’s oft-repeated statement that offsets are a matter between the foreign equipment manufacturer and any Indian partner it chooses and that the government has nothing to do with such arrangements is not only disingenuous, it belies the very purpose of offsets. The Rafale is a government-to-government deal and surely India’s government must have a say on how it should be executed. Indeed, while giving the foreign original equipment manufacturer (OEM) leeway in identifying offset partners, the DPP insists on the government approving each offset contract so that it does, indeed, work towards the broader goal of enhancing indigenous know-how besides retaining some of the contracted money and jobs in India. Offsets are not, or should not be, only about money but should be strategically planned and executed so that the country can acquire know-how and manufacturing capability in critical and gap areas. It is high time that the DPP was amended to ensure this.
This is especially important in view of ongoing efforts to sideline HAL or other PSUs. The Strategic Partnership category for defence procurement, under which the new acquisition of 110 fighters will take place, provides for contracts in which the foreign OEM would transfer technologies and enter into partnership with an Indian entity to be identified by the Indian government to manufacture most of the hardware in India. Earlier, this category had specifically kept PSUs out of the picture and reserved it for the private sector, supposedly so as to build its capacities. The provision was later amended, under pressure, to include PSUs, but it remains to be seen whether this will actually be done in practice. The fact is that in sectors such as aviation one certainly cannot build advanced capabilities overnight from scratch. Such fledgling private companies, unlike PSUs like HAL, would only be able to act as subordinate subcontractors and not be able to absorb advanced technologies. This suits the foreign OEMs, not India.
If India wants to avoid another, bigger case of cronyism, it will be prudent and entrust the Indian manufacture to PSUs with proven capabilities and exercise careful oversight and supervision so as to improve productivity and genuinely build indigenous capability instead of serial licence-production. No more Rafale deals of the present kind, please!
D. Raghuna ndan is a defence analyst with the Delhi Science Forum.
