One of the most talked-about defence deals in recent times was the purchase of the Rafale fighter aircraft from France in 2015-16. There were allegations of procedural wrongdoing, inflated costs, and cronyism by the Narendra Modi-led National Democratic Alliance (NDA) government.
Recently, journalists Ravi Nair and Paranjoy Guha Thakurta published a 500-page book detailing the many unanswered questions in the government’s acquisition of 36 aircraft in a “fly-away condition”, the scrapping of a previous deal, and the unilateral decision of the Prime Minister in this matter. Excerpts from their interview to Frontline:
The Rafale deal has been described as India’s largest arms deal scandal by N. Ram in the foreword to your book. Your comments.
Ravi Nair: As of now, this is the largest capital procurement deal for our defence forces. Defence experts have described this as the mother of all defence deals. Though the number of aircraft bought was fewer, the amount that was spent was about Rs.60,000 crore. It is not just about the money that was paid but the procedural violations that were involved. There is no evidence that the air force or the Defence Ministry was consulted, or that the then Defence Minister was aware.
Paranjoy Guha Thakurta: To add to what Ravi has said, if one looks back at the Bofors deal in 1986-87, and factoring in inflation, the amount [in the Rafale deal] is much bigger. Bofors pales into insignificance if compared to the Rafale deal. The Bofors deal was around Rs.64 crore. Rafale involved 36 aircraft, Rs.60,000 crore and an offset part of the deal which is half of that amount. It is not just the procedures that were not followed, but the offset deal was given to a group, the Anil Dhirubhai Ambani Group, that had no experience in manufacturing defence aircraft. This was a group that was steeped in debt. Their lawyers had told a London court in so many words that he was bankrupt.
RN: What was curious was that the offset contract was given to a company that was incorporated two weeks before the Prime Minister’s announcement. The benchmarking price of domain experts in the Indian negotiating team was 5.3 billion euros. When the deal was concluded, it went up by 2.5 billion euros. It was not a small amount.
PGT: It went up by 40 per cent. What we have documented in the book is that the views of the MoD and Law Ministry officials were ignored. Some of them were also shunted out. That is why it is a big scandal. In the Bofors case, there was a money trail. In this case, the procedural lapses were immense.
RN: In the case of Bofors, the government was ready to order an investigation. But in this case, the government was not ready to do so. The Enforcement Directorate has documents relating to the money transactions of this particular deal and relating to a particular individual. Dassault had engaged a sub-contractor in India to supply flight simulators, and optical and electronic systems for aircraft.
PGT: The company was called Defysys. It had no prior experience of manufacturing replica aircraft. One Sushen Mohan Gupta was the director of the company, and it had been blacklisted by the MoD as it was allegedly involved in the AgustaWestland deal when the United Progressive Alliance (UPA) government was in power. But the same man [Gupta] who was also involved in the Rafale deal is not being investigated. In the Bofors deal, there was a Joint Parliamentary Committee. It is another matter that nothing came out of it. In this case, whatever investigation is happening is taking place in France.
Your book details many procedural lapses. You also quote unnamed sources. Would it have helped if air force or defence personnel had pointed out the flaws in the deal publicly?
RN: A couple of years ago, the government issued a notification that any retired senior government official writing an article or being quoted by journalists needed to take permission. When we started, many retired personnel came forward but requested us to withhold their names for obvious reasons.
PGT: One retired government official from the Indian Administrative Service, Sudhanshu Mohanty, had the courage to come forward. We have quoted him. We contacted several people, including the former head of Hindustan Aeronautics Limited, Suvarna Raju. He gave short interviews to the media urging that the government should disclose the agreement between Dassault Aviation and HAL so that people would know how the negotiations for 126 Medium Multi-Role Combat Aircraft were still on and how it was scrapped.
You question the declaration of intent by the Prime Minister in your book. Why was it wrong? Surely, the executive is empowered to take decisions.
RN: The executive is not one person. There are around 80 Ministries. Every Ministry has a certain portfolio to handle. The Defence Ministry is there to handle Defence purchases. The reason why there is a thing called the Defence Procurement Policy (DPP) is because public money is involved. The Defence Minister or the Foreign Secretary had no clue that the Prime Minister would make such an announcement. Manohar Parrikar, the then Defence Minister, said he received a call from National Security Adviser Ajit Doval that the Prime Minister had made an announcement. He said it was the bold decision of a strong leader.
PGT: Whatever we have been able to reconstruct of what happened that day is based on reports, including that by Col. Ajay Shukla who revealed at our book launch on December 5 that the person sitting next to Manohar Parrikar told Shukla that the Minister was ashen- faced when he got to know that the old deal had been scrapped. Parrikar was on his way to Goa. If everything was hunky-dory and it was a statement of intent, why were procedures suddenly put in place after the announcement? The Defence Procurement Policy is the government’s own policy.
RN: The announcement was wrong due to other reasons as well. The government issued a Request for Proposal, or RFP, and six companies submitted their bids. The government told the Supreme Court that the process to withdraw the (old) RFP began in March 2015 and in July 2015 it was withdrawn. When the negotiations were still officially on, the Prime Minister should not have announced an intent to acquire a lower number of 36 aircraft on April 10. It created another problem. The IAF wanted 126 aircraft. In a way, the Prime Minister’s unilateral announcement put national security at risk. After this, the government had to go for another RFI [Request for Information] from the same set of manufacturers. But that did not reach the RFP stage even.
PGT: The earlier deal was for 126 aircraft with 18 in a fly-away condition. The remaining were to be manufactured by HAL. The Prime Minister who talks about Atmanirbhar Bharat and Make in India grossly undermined the public sector.
So what would you say was the worst damage? The cost to the exchequer, procedural lapses, compromising national security, or cronyism?
RN: All of this. The procedural violations to help the cronies at a high cost put national security at risk.
PGT: It is like asking which is worse, corruption or communalism.
How serious was the undermining of the public sector?
RN: We have gone through the RFP of 2007 in detail. It clearly mentioned that the lead integrator would be HAL. This meant that there could be enough sub vendors but, at the end of the day, the main airframe, the avionics and the engine were to be manufactured by HAL. There was an MoU between Dassault and a subsidiary company of Reliance Industries Limited in 2012 to make certain parts of Falcon, the business jet of Dassault Aviation. This was not a fighter aircraft. After two years nothing happened. The MoU lapsed. It is an obfuscation by the government and the then CEO of Dassault Aviation, Eric Trappier, to claim that the Rafale deal was a continuation of the earlier agreement.
PGT: HAL as one of our Navratnas may have had a lot of limitations. It was unable to make the Light Combat Aircraft Tejas over decades. The IAF may have had its own problems with HAL. There were issues about who would guarantee the entire production. Dassault said it would guarantee the quality of the 18 aircraft. There were disputes about man-hours as well. The solution to the problem was not to finish off HAL but to strengthen it. One can say HAL needed to be better, but this was no way to bridge the trust deficit between the IAF and HAL.
The contract negotiating committee did not find anything wrong in the selection of Rafale. Both the UPA and the NDA opted for Dassault as it was among the lowest bids. Yet there were transparency issues in both governments.
RN: The then Defence Minister, A.K. Antony, set up two committees to look into complaints made by Mysura Reddy and Subramanian Swamy about the selection of Rafale. Both committees gave the government a clean chit. A third internal committee, comprising domain experts, submitted its report to the Narendra Modi government to say that Dassault was not the lowest bidder. It took three years for this to come out. This was unbelievable. These were domain experts who had all the documents to clear the lowest bidder. How did it take them three years to say that Dassault was not the lowest bidder?
The 2007 RFP was clear. HAL would be the lead integrator. Dassault was to give a guarantee of the entire lot of 126 aircraft and that it would work with HAL. The government had all the right to impose huge penalties on Dassault for creating obstacles after participating in the tender and winning the bid as the lowest bidder. The government could have encashed the security deposit.
PGT: We can discuss processes, lowest bid, etc. As in the case of Bofors, the issue was not about quality as much as the flouting of processes.
RN: The Prime Minister’s announcement put the government in a fix. It became a fait accompli. Dassault now knew the government would not penalise them for violating the agreement as per the earlier RFP.
PGT: By not insisting on a sovereign guarantee or a bank guarantee, and on an anti-corruption clause but just a letter of comfort, and by agreeing that the seat of arbitration would be in Geneva, the announcement weakened India’s negotiating powers with Dassault.
What we have also shown in this book is that India’s position got further weakened when the Indian negotiating team was sidelined and the NSA, who had no locus standi, participated in the Rafale deal.
RN: The involvement of the NSA compromised India’s negotiating position even further. Ajit Doval agreed to many of the terms put by the French side. The reason why Doval pushed it was because the Prime Minister had already announced it. The government said it was an emergency purchase.
Do you think that the powers to tweak the DPP at will lies at the crux of the problem?
RN: Interestingly, the government told the Supreme Court that it had followed the principles laid down in the 2013 DPP. The main agreement for Rafale was signed under that DPP. But the offset agreement was signed under an amended 2016 DPP. The same government imposed a fine on Dassault aviation in 2021 for not fulfilling its offset obligations. The Minister of State for Home, told Parliament that the government had fined Dassault and the main supplier of avionics.
PGT: We had a three-hour-long interview with Air Marshal Raghunath Nambiar. It was recorded. He defended the government. We redacted portions that he didn’t want published. According to him, the DPP was a sort of stumbling block. Short of saying scrap this document, he said, it was a big stumbling block.
RN: The current DPP was a creation of the Vajpayee government.
PGT: One of the most scandalous parts of this whole deal was that the government gave an unsigned note to the Supreme Court bench, led by the then Chief Justice of India. It said that the Comptroller and Auditor General had presented a report to the Public Accounts Committee with the pricing details.
RN: When the government said this, the CAG had not even begun its audit. It redacted the price at which the aircraft was bought. In the report, there is a list of 11 capital procurements by the IAF, including the 36 Rafale aircraft. If 10 deals are added up and one subtracts the remainder from the total, it emerges that roughly Rs.60,000 crore was spent on the eleventh one, the Rafale deal.
What do you think should be done now considering there is no money trail. There is a judicial probe in France.
RN: If the government feels its hands are clean, then it should order an investigation, either Supreme Court monitored or by a Joint Parliamentary Committee. It should especially explore the role of the defence broker Sushen Gupta and his offshore companies.
PGT: Having stonewalled all questions on the deal, it would be unrealistic to expect the government to investigate the deal. In France, when the French investigators went to Dassault Aviation and the former CEO, they were denied documents on grounds of national security. What may or may not happen in India in the foreseeable future, much depends on what happens in France.