PMO monitoring Rafale deal not parallel talks with French side:SC

PMO ‘monitoring’ Rafale deal progress is not tantamount to parallel talks with French side, govt tells SC

The Prime Minister’s Office (PMO) was “monitoring” the progress of the 36 Rafale jets’ purchase deal, but this cannot be taken as “parallel negotiations” with the French side, the government told the Supreme Court on Saturday. The submission follows the court’s directive on Tuesday last that the government respond to the Rafale deal case review petitions by Saturday. The Centre had sought a whole month to respond.

“The monitoring of the progress by the PMO of this government to government process cannot be construed as interference or parallel negotiations,” the government said.

A series of reports published by media had revealed that the PMO was conducting “parallel negotiations.” A Defence Ministry note that was published said the “parallel parleys” had “weakened the negotiating position of MoD [Ministry of Defence] and Indian Negotiating Team.”

A Rafale aircraft. File

But the government denied any reason for objection from the Ministry. It referred to how then Defence Minister Manohar Parrikar himself had noted that “it appears that PMO and French President’s office are monitoring the progress of the issues which was an outcome of the summit meeting”.

The government said these “selective” reports, based on “some incomplete internal file notings procured unauthorisedly and illegally” did not reflect the final decision of the competent authority of the Union government. They cannot form the basis of a review petition in the apex court.

The two affidavits filed by the MoD said the actions of the review petitioners, who include former Union Ministers Yashwant Sinha and Arun Shourie and senior lawyer Prashant Bhushan, “tantamount to questioning the sovereign decision concerning national security and defence.”

The government attacked the court’s April 10 judgment agreeing to hear the review petitions on the basis of the Rafale purchase documents published in the media.The government said the judgment would now be taken to imply that any secret document can be obtained through any means and put in the public domain without attracting penal action.

The submission follows the court’s directive on Tuesday last that the government respond to the Rafale deal case review petitions by Saturday. The Centre had sought a whole month to respond.

“This could lead to the revelation of all closely guarded State Secrets relating to space, nuclear installations, strategic defence capabilities, operational deployment of forces, intelligence resources in the country and outside, counter-terrorism and counter insurgency measures etc. This could have implications in the financial sector also if say budget proposals are published before they are presented in Parliament. Such disclosures of secret government information will have grave repercussions on the very existence of the Indian State,” it cautioned.

The government countered that the Defence Procurement Procedure (DPP) was turned on its head when Prime Minister Narendra Modi and the French President announced the purchase in a joint statement on April 10, 2015 – that is, well over a year before the Cabinet Committee on Security (CCS) approved the purchase on August 24, 2016. The DPP mandates that any defence deal worth over Rs. 1000 crore first requires CCS approval.

To this, the government simply claimed “DPP does not mandate approvals prior to conveying an intent or making an announcement.” It said a waiver of sovereign guarantee in Inter Governmental Agreements (IGA) was “not unusual”.

In contracts signed with Rosoboronexport, the requirement of bank guarantees was waived off in view of assurances provided through a ‘Letter of Comfort’ from the government of the Russian Federation, the government said, adding, “Similarly, in Foreign Military Sales (FMS) with the US government, no sovereign/bank guarantee is signed.”

Further, in the Rafale procurement, the French government had proposed to provide ‘outstanding guarantees’ as per the IGA and a ‘Letter of Comfort’ from the French Prime Minister, the government noted.

It reiterated that it had no role in selection of the Indian Offset Partner, which is a commercial decision of Dassault Aviation.

The government dismissed allegations such as the “Reliance Group paid 1.48 million Euros to former French President Francois Hollande’s partner’s venture.” It said these charges were “matters of individual perceptions” of the petitioners.

It said DPP-2013 was followed and approval of the Defence Acquisition Council was taken for the procurement of the Rafale aircraft. The Indian Negotiating Team conducted comprehensive negotiations with the French side for about a year, holding 48 internal and 26 external meetings with the French side. The approval of the CCS was taken before signing the IGA.

Besides, the Comptroller and Auditor General (CAG) had concluded that the price of 36 Rafales was 2.86% lower than the audit aligned price, apart from additional benefits that would accrue.

The CAG has acknowledged that the Rafale deal was a better bargain than the earlier aborted deal with Dassault for 126 Medium Multi-Role Combat Aircraft (MMRCA). Though the price discovery of 126 MMRCA was determined out of a global competitive tender, the reasonability of the price for Rafale through the IGA was established by CAG audit, the government pointed out.

While the past process of 126 MMRCA could not come to a conclusion in 15 years, the Rafale deal was concluded in over a year. The Rafale procurement was on schedule with the deliveries of the aircraft commencing September, 2019 and training of the Air Force team had begun in France, the government said.

NEW DELHI, MAY 04, 2019 


Rafale: Modi govt gave unprecedented waivers- N. Ram

Rafale: Modi govt. gave unprecedented waivers in offset agreements

         By N. Ram

The Cabinet Committee on Security (CCS) headed by Prime Minister Narendra Modi gave exceptional and unprecedented waivers to M/s Dassault Aviation and M/s MBDA in the offset contracts they signed with the Indian government on September 23, 2016 as part of the €7.87 billion  Rafale deal. These waivers, granted on August 24, 2016 at the highest level of political decision-making, were exemptions given to the two private French companies from having to comply with provisions of the Standard Contract Document of the Defence Procurement Procedure, DPP-2013.

The waivers concerned two key issues — the provisions to be made in the offset contracts for arbitration (Article 9) and access to books of accounts of the industrial suppliers (Article 12).

These had been sent up to the CCS for its “final review and approval” by the Defence Acquisition Council (DAC) headed by Defence Minister Manohar Parrikar. He had evidently felt uncomfortable with sanctioning, at his level, major deviations from the Defence Procurement Procedure. But that was not all.

Two other mandated provisions of DPP-2013 that prohibit the “Use of Undue Influence” and “Agents/ Agency Commission”, Articles 22 and 23 respectively of the Standard Contract Document, and provide for penalties against private industrial suppliers in case of transgressions, had been quietly dropped along the way by the DAC. Curiously, while the deletion of these vital integrity provisions from the Supply Protocols, which were themselves only annexures to the Inter-Governmental Agreement (IGA), went up to the CCS for “final review and approval”, their deletion from the offset contracts, which had been insisted on by the French industrial suppliers, did not have to.

These salient facts, which were not disclosed by the government in its submissions to the Supreme Court of India, as well as other aspects of an open-ended and murky set of offset arrangements which were enabled by a major change in offset policy in August 2015, come to light in the final report of the Indian Negotiating Team (INT), dated July 21, 2016, to which The Hindu has access.

What needs to be noted is that nothing in our current series of investigative articles raises any questions about the quality of the Rafale, or indeed the rival EurofighterTyphoon, combat jet, or about the need to modernise the Indian Air Force. Interestingly, and as a matter of record, this was also the case during The Hindu’s Bofors investigation of the late-1980s, when neither the quality of the Bofors, or the rival Sofma, howitzer nor the need to upgrade the Indian Army’s artillery resources was in question.

0% offsets in first three years

There has been a major political controversy over Dassault Aviation’s choice of Indian Offset Partners (IOPs), notably Anil Ambani’s Reliance Group, and the non-transparent arrangements for the discharge of offset obligations. Offsets are ‘domestic content-based requirements’ imposed on an exporting foreign entity by an importing government or public entity as a quid pro quo for placing a large order with the exporting entity. ‘Offset’ is usually rendered in French as ‘contrepartie’ (compensation), as Eric Trappier, Chairman and CEO of Dassault Aviation, pointed out in an interview to AFP.

  • CCS gives exceptional waivers to Dassault & MBDA in offset contracts, exempts them from aligning Arbitration (Article 9) & ‘Access to books of account (Article 12) provisions with DPP-2013 Standard Contract.
  • Defence Minister Manohar Parrikar, uncomfortable with major deviations from DPP-2013, gets DAC to send unresolved issues up for “final review and approval” by CCS.
  • DAC drops DPP-2013 provisions on penalties for “Use of Undue Influence” and “Agents/Agency Commission” from offset contracts.
  • Offset obligations of around ₹30,000 crore are heavily back-loaded, to be discharged over 7 years, with zero discharge in first 3 years and 57% in 7th year.
  • INT’s efforts on offset issues weakened by parallel NSA talks.
  • Controversy breaks out over non-transparent & openended offset arrangements and choice of Reliance Group as Dassault’s only publicly known offset partner.

The total offsets to be delivered in the Rafale deal by Dassault Aviation (and its 21 Tier-1 sub-vendors) together with MBDA (and its 12 Tier-1 sub-vendors) have been fixed at 50% of the contract value. The contracted offset obligations, which are valued around ₹30,000 crore, are to be discharged over a period of seven years beginning in the fourth year, that is, from October 2019.

The discharge of offset obligations is heavily loaded on to the last two years of the seven-year period. According to the offset schedule, the two private French companies (along with their Tier-1 sub-vendors) will discharge 0% of the value of the total offsets for ‘Make in India’ in the first three years and 4% in the fourth year. After that, while Dassault (and its Tier-1 sub-vendors) will discharge 16% and 23% of the value of offsets in years five and six, the corresponding figures for MBDA (and its Tier-1 sub-vendors) will be 9% and 30%. No less than 57% of the value of total offset obligations will be discharged in the seventh year.

The INT’s final report reveals that the initial proposal of Dassault Aviation and MBDA had nearly 88% of offset obligations loaded on to the seventh year. The avenues proposed for offset discharge were also far from satisfactory. A meeting held in the Defence Ministry on January 4, 2016 decided that in view of advice received from the Ministry of Law and Justice, the French side should be informed that the offsets “will have impact on the commercial proposal” and that the French industrial suppliers should be advised to submit revised offset proposals urgently.

“After extended negotiations and on INT’s insistence”, the report goes on to say, “DA and MBDA reduced the offsets in the last two years (6th & 7th) and brought down the offset obligations in the last year from 88% to 57%. Another milestone was achieved as INT was able to persuade DA to increase the percentage of offsets in the avenue ‘direct purchase’ from the initial value of 9% to 72% and reduce offsets in the avenue ‘investment in kind (equipment)’ from the initial value of 30% to 20%. This would facilitate greater direct investment in India by the French vendors.”

Summary of offset proposal of Dassault Aviation

Avenue for offsets/Make in India % of offset/Make in India Total offset (%)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Direct purchase of eligible products 0% 0% 0% 1% 10% 17% 44% 72%
FDI in joint ventures (equity investment) 0% 0% 0% 1% 0% 0% 0% 1%
Direct purchase through investment in kind through ToT 0% 0% 0% 0% 1% 2% 4% 7%
Investment in kind in terms of equipment 0% 0% 0% 2% 5% 4% 9% 20%
Provision of equipment and/or ToT,
Technology acquisition by DRDO
Annual offset obligation 0% 0% 0% 4% 16% 23% 57% 100%

(*)Technology Acquisition (TA) projects with DRDO are foreseen to be incuded in the Offset Contract, following discussions to take place between Dassault and the DRDO after coming into force of the Offset Contract. Depending on the outcome of these discussions, the Offset Schedule will be amended to reflect the TA projects and their associated offset value agreed between Dassault and the DRDO. However, such amendment will not affect the Annual Offset obligation indicated in the table above.

Summary of offset proposal of MBDA

Avenue for offsets/Made in India Yearly fulfilment of offset* Total Offset**
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Direct purchase or executing export orders (avenue 3.1 (a)] 0% 0% 0% 0% 2% 6% 12% 20%
FDI (avenue 3.1 (b)] 0% 0% 0% 0% 0% 2% 0% 2%
Investment in kind through ToT to Indian enterprises [avenue 3.1 (c)] 0% 0% 0% 0% 1% 0% 1% 2%
Investment in kind in terms of provision of Equipment to Indian enterprises (avenue 3.1 (d)] 0% 0% 0% 2% 4% 14% 26% 46%
Provision of equipment and/or ToT to government institutions including DRDO Technology acquisition by DRDO (avenue 3.1 (e) & (f)] 0% 0% 0% 2% 2% 8% 18% 30%
Annual offset / Make in India obligation (%) 0% 0% 0% 4% 9% 30% 57% 100%

*Yearly fulfillment of offset/Make in India obligation (in %) of the total offset/Make in India obligation)
**Total Offset/ Make in India (%)

French reluctance to mention ‘offsets’

The INT report reveals that the French negotiators were initially “not ready to mention the word ‘offsets’ in the IGA” but upon insistence by the Indian side, they “relented and added ‘Make in India’ initiative through Offsets at Article 12 of the IGA”. The proposal originally submitted by Dassault Aviation and MBDA was titled ‘Rafale Make in India initiative in the frame of the procurement of 36 Rafale aircraft’. This “neither mentioned the word ‘Offset’ nor provided the desired avenues/percentages/yearly discharge, etc., as mandated by the DPP-2013 guidelines”. It was only after extended discussions that the two industrial suppliers agreed to provide their offset offer “as per the format specified in DPP-2013”.

Article 12 of the IGA reads: “The French Party will facilitate the implementation of ‘Make in India’ initiative by the Industrial Suppliers notably through offsets as specified through direct contracts between the Indian Party and the Industrial Suppliers for 50% value of the Supply Protocol”.

However, the INT report notes, certain Articles of the offset contracts “were not consistent with the standard contract document provided in DPP-2013. Specifically, the French side was not ready to include the Articles on ‘Arbitration’, ‘Use of Undue Influence’, ‘Agents and Agency Commission’, ‘Access to Book of Accounts’ and ‘Offset Performance Bond’.”

The two waivers

Dassault Aviation and MBDA proposed the inclusion of the same clause on arbitration in the offset contract as in the IGA. Article 16 of the IGA, the dispute resolution provision, stipulates that both parties make their best efforts to settle the dispute through direct negotiations and that if any dispute cannot be settled through direct negotiations within 24 months, it will be settled in accordance with the arbitration clause of the Supply Protocols.

Article 21 of the Supply Protocols stipulates that all disputes be settled by direct discussions and that if any dispute cannot be resolved in this way within 24 months, it will be settled by arbitration in accordance with the prevailing United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules in Geneva.

The Indian negotiators contended that the IGA formulations could not be applied to the offset contracts, which would be signed directly by the Government of India with the two industrial suppliers. The offset contracts were clearly not part of the IGA. Acting on directions from the DAC, the INT repeatedly pressed the French side to` agree to the alignment of Article 9 of the offset contract with Article 21A of Chapter V of the Standard Contract Document of DPP-2013. But Dassault Aviation and MBDA dug in and refused to do this, citing three reasons: “(i) Simple and efficient wording; (ii) Agreed by both governments; (iii) No confusion or risks of overlap in Arbitration procedure for any dispute spreading from the Supply Protocols to the Offset Contract.”

The INT’s efforts on this issue had been weakened, if not undermined, by the parallel talks conducted by the National Security Adviser, Ajit Doval, in Paris in January 2016. The Indian negotiators found themselves up against a wall. Eventually, in July 2016, two months before the Rafale deal was signed, the DAC decided to send the issue of the lack of alignment of Article 9 — the arbitration provision in the offset contracts with the French industrial suppliers — with the mandated DPP-2013 provisions to “the government”. On August 24, 2016, the Cabinet Committee on Security decided to give a waiver on this issue to the two French companies.

Subject to France’s blocking statute

The INT report reveals that although the French side agreed to have a provision on ‘Access to Book of Accounts’ (Article 12) included in the offset contracts, it “introduced an additional formulation over and above the DPP guidelines”, which read: “However Dassault shall comply with French Law No. 80-538 dated 16 July 1980.” This is France’s controversial blocking statute which criminalises the communication of economic, commercial, industrial, financial, or technical documents or information to foreign individuals or foreign legal entities. France’s anti-corruption agency, the Service Central de Prévention de la Corruption, has recommended changes in Law No. 80-538, and in December 2016 a new anti-corruption law was enacted. But the blocking statute remains in place and can be invoked if needed.

The INT report shows that despite being repeatedly asked to remove the additional formulation, the French side insisted that “they are bound to consider the French law as stated”. In July 2016, the DAC directed that “Article-12 of the Offset Contract on ‘Access to Book of Accounts’ which has been aligned with the Mirage 2000 MLU Contract, may be placed for a decision by the Govt”. This waiver was also approved by the CCS on August 24, 2016.

Offsets are made for controversy

Offsets, as we have seen, are domestic content-based obligations that the buyer imposes on the seller as compensation for placing a large order. Although the practice is often criticised for being trade-distorting, non-transparent, and riddled with corruption and has been generally prohibited by the World Trade Organisation (with an exception made for protection of the essential interests of a country’s national security), offsets are increasingly in vogue in the defence sector.

India’s “Defence Offset Guidelines”, which form Appendix D of DPP-2013, lay down that the Defence Acquisition Council may, after consideration by the Services Capital Acquisition Plan Higher Categorisation Committee (SCAP HC), “prescribe varying offset obligations above 30 percent or waive the requirement of offset obligations in special cases.” In the original process, initiated by the United Progressive Alliance government, to procure 126 Medium Multi-Role Combat Aircraft (MMRCA) as well as in the new Rafale deal for 36 fly-away Rafale jets, the DAC prescribed offset obligations to the extent of 50% of the contract value.

It is important to note that the offset contracts, which were concluded between the Government of India and the two private French companies, were not part of the Indo-French Inter-Governmental Agreement. Although signed on the same day, September 23, 2016, as the IGA, the two offset contracts were completely separate from it. This crucial fact was brought up in the official talks by the Indian Negotiating Team with a singular lack of success, mainly because their efforts had been undercut by the “parallel negotiations” conducted by officials of the Prime Minister’s Office and the National Security Adviser.

The significance of these offset-related issues and the ‘unacceptability’ of the French demands were brought out sharply by M. P. Singh, Adviser (Cost), A. R. Sule, Financial Manager (Air), and Rajeev Verma, Joint Secretary and Acquisitions Manager (Air), the three domain experts on the seven-member INT, in their June 1, 2016 note of dissent: “The offsets are not part of the G to G agreements and therefore the Offset Contract must be in line with the one prescribed in the Defence Procurement Procedure (DPP). In the MMRCA process also, the French Industrial Suppliers would have been required to follow the Offset Guidelines and the Standard Clauses of Contract prescribed in DPP. The proposed draft Offset Contract is still not aligned with the one prescribed in the DPP. The arbitration clause proposed by the French Industrial Suppliers in the draft Offset Contract is not as per the DPP and cannot be agreed to. The French Industrial Suppliers have insisted upon reducing the maximum ceiling for penalty from 20% as prescribed in the DPP to 8.5% of the Offset value, which is not acceptable. The French Industrial Suppliers are not agreeing to the requirement of confirmation of Performance Bank Guarantee for Offset Contract from Indian Public Sector Banks located in India. The French Industrial Suppliers proposed to include a clause on ‘Access to the Book of Accounts’ subject to French Law, which is not acceptable.”

As the official negotiations got under way, it became clear that the August 5, 2015 amendment to the DPP-2013 “Offset Policy Guidelines” allowed Dassault Aviation and MBDA a great deal of leeway. They were no longer required to submit their offset plans, including the identities of their IOPs, the details of their work share and specific products, and supporting documents indicating IOP eligibility at the bid stage, as laid down earlier.

They were not even required to provide this information at the time of signing the IGA and the offset contracts. They are now required to provide the information to the Indian government only “at the time of seeking offset credits or one year prior to discharge of offset obligations through that IOP”.

Questions that won’t go away

The controversy over Dassault’s choice of offset partners will not go away any time soon. As has been widely reported, Anil Ambani’s Reliance Group, with its subsidiaries, entered the defence manufacturing sector in January 2015. Reliance Defence Limited was incorporated on March 28, 2015, that is, two weeks before the new Rafale deal was announced in Paris; Reliance Aerostructure Limited (in which Reliance Defence Limited was a 99.988% shareholder as of March 31, 2018), was incorporated on April 24, 2015; and in October 2016 Dassault Aviation formed a joint venture with Reliance Aerostructure Limited’s subsidiary, Reliance Aerospace. The joint venture, which was incorporated in February 2017, has been named Dassault Reliance Aerospace Limited (DRAL).

The allegations revolve round the charge of crony capitalism – the charge led by Congress president Rahul Gandhi that as a quid pro quo for the new Rafale deal the NDA government had secretly nominated the younger Ambani scion as Dassault’s leading offset partner. It may be recalled that the controversy took off in September 2018, after the former French President, François Hollande, told Mediapart, the independent French online investigative journal: “We didn’t have any say in this matter. It is the Indian government which had proposed this service group, and Dassault who negotiated with Ambani. We didn’t have the choice, we took the interlocutor who was given to us.”

The allegations gained traction when Mediapart reported that it had obtained an internal Dassault document that revealed that “a senior executive of the French group told staff representatives that the joint venture with Reliance was agreed as a ‘compensation’ in the Rafale deal and that it was both ‘imperative and obligatory’ for Rafalein securing the fighter contract”.

The allegations have been denied by Dassault Aviation, by Anil Ambani, and by the NDA government, which has maintained that it has had nothing to do with the aircraft manufacturer’s choice of IOPs and has not even received official word on who they are. However, the Dassault chief, Eric Trappier, has gone on record to say that DRAL, the joint venture that was building a manufacturing facility in Mihan, Nagpur, would make components of the Legacy Falcon 2000 series of civil jets and deliver “about 10% of these offset obligations”.

What part Reliance Defence Limited, other Indian companies, or the Defence Research and Development Organisation (DRDO), will play in the discharge of the offset obligations in the Rafale deal will be known only in the months and years to come.

Our present state of knowledge is that a group that entered the defence manufacturing sector some weeks before a new Rafale deal was announced in Paris is the only publicly known offset partner.

-Source:- The Hindu/ APRIL 09, 2019/

Rafale deal of NDA 2.86% cheaper than UPA’s: CAG

Rafale deal of NDA 2.86% cheaper than UPA’s: Comptroller and Auditor General

The much-awaited Comptroller and Auditor General (CAG) report on the acquisition process of 36 fighter jets on Wednesday said the NDA Government’s Rafale deal was 2.86 per cent cheaper than the UPA’s offer in 2007, but the Government made major concessions to the French vendor by including unwarranted India-specific enhancements that led to price escalation.

The report said that as per the deal signed by the NDA regime, the delivery of the aircraft would be faster by just one month compared to the UPA schedules.

Image result for rafale deal

While the CAG report contradicted the claims made by several Government Ministers that the current price of Rafale jets in fly-away condition was nine per cent cheaper than the UPA’s deal, it said the price of the 36 fighter jets was 17.08 per cent cheaper after equipping it with India-specific enhancements under the new deal.

The report tabled in Parliament noted that the Government overruled the IAF suggestion to postpone six enhancements till more Rafale aircraft were procured in future. The IAF proposal was not accepted by the Defence Ministry which said this would tantamount to dilution of Air Staff Qualitative Requirements (ASQRs). The Ministry said this was also not in consonance with the basic framework provided by the Joint Statement of April 10, 2015 by the Defence Acquisition Council that aircraft must have same configuration.

Moreover, during negotiation of 36 aircraft in 2015, in view of the huge cost escalation and the reduced number of aircraft to be purchased, the Indian negotiation team headed by the Deputy Chief of Air Staff proposed to reduce the number of India-specific enhancements. But the Dassault Aviation, manufacturer of Rafale jets, stated since its price was a total package the Defence Ministry would have to take up the matter with the French Government.

The Defence Ministry, while rejecting the IAF suggestion, said reduction of India-specific enhancements was not considered after due deliberation as it was a temporary deferment only for cost reduction measure. The CAG noted that four of these enhancements were stated to be not required in the technical and staff evaluations. The cost of these four enhancements constituted about 14 per cent of the India-specific enhancements contracted cost.

The Ministry stated that “scaling down the requirement to limit cash outgo cannot be considered as saving,” the CAG report said.

The Rafale deal was inked in 2016 after Prime Minister Narendra Modi and then French President Minister Francois Hollande in a joint statement on April 10, 2015 announced an inter-governmental agreement (IGA) to procure 36 jets from France in fly-away condition.

The NDA Government went in for the IGA after scrapping the nearly decade long negotiations under the UPA regime for procuring 126 medium multi-role aircraft (MMRCA) often termed as mother of all deals then. Rafale, manufactured by Dassault Aviation of France, emerged as the lowest bidder but differences over various issues delayed the final inking of the deal. The MMRCA envisaged buying 18 jets in fly-away condition and the remaining to be manufactured by the public sector aviation giant Hindustan Aeronautics Limited (HAL) under a transfer of technology pact. The overall deal at that time was pegged about Rs 45,000 crores.

While the Congress has all along alleged wrongdoings in the Rafale deal claiming that the NDA Government bought the each aircraft at a huge cost of Rs 1,600 crore as against the UPA offer of Rs 560 crore.  However, the Government in Parliament two years back said the cost of each aircraft without weapons was Rs 670 crores.

In the backdrop of the NDA Government justifying outright purchase of 36 Rafales urgently to meet the operational requirements of the IAF due to its depleting squadron strength, the CAG noted as per the Dassault offer in UPA regime for supplying 18 jets off the shelf covered delivery schedule between 37 months to 50 months from the signing of the contract.

Audit indicts Govt for useless India-specific enhancements that led to price escalation

The next 18 aircraft, which were to be manufactured by the HAL were to be delivered from 49th to 72 months. However, the CAG noted as against the delivery period of 72 months in the earlier offer, the contracted delivery schedule for the latest deal was 71 months, thus an improvement of one month.

The report also mentioned that the Indian negotiating team had asked the French side for a delivery schedule of first batch of 18 jets in 24 months and the next batch of 18 in 36 months.  However, the French offered 18 jets by 36 to 53 months and remaining 18 aircraft to be delivered in 67 months. This was better than the delivery schedule of 2007 by five months.

The Indian negotiation team had apprehensions about this delivery schedule of 71 months because at the time of signing the contract the Dassault had an order backlog of 83 aircraft. Considering its production rate of 11 aircraft a year, clearing this backlog itself would take more than seven years. The Defence Ministry in its response to the CAG said the project was currently on schedule and the progress was being closely monitored by the resident project management team and also through the inter Governmental bilateral high level group. As per the IGA, the first aircraft will be delivered to India in October this year while the last one will be handed over in October 2022.

Meanwhile, the CAG in its report said in terms of engineering support package and performance-based logistics, the deal was 6.54 per cent expensive. The report did not include controversial issue of pricing as the Defence Ministry maintained that price could not be revealed due to security concerns and therefore the pricing part was redacted from the CAG report.

The report said it examined 11 contracts pertaining to the IAF signed between 2012-13 and 2017-2018 with a total value of Rs 95,000 crores. These included Rafale, Apache attack helicopters, Chinook heavy lift helicopters, PC-7 basic trainer aircraft, pods, missiles, additional C-130 J aircraft, ammunition and associated equipment, reconnaissance systems, full mission simulator for SU-30 and Doppler weather radar.

-Microstat | 14 February 2019 | New Delhi

Rafale deal: UPA ‘stalling’ because “it didn’t get money”

Rafale deal: UPA ‘stalling’ because “it didn’t get money”: Nirmala Sitharaman

The Lok Sabha on Friday witnessed sharp exchanges between Congress President Rahul Gandhi and Defence Minister Nirmala Sitharaman, who asserted: “Bofors took the Congress down but Rafale will bring Modi back”.

In her reply to the debate on the Rafale deal, the minister sought to not only provide a point-by-point rebuttal to the Congress’s charges, but also initiated a counter attack.

Charging the Congress of ignoring national security, she accused the UPA government of ‘stalling’ the Rafale deal because “it didn’t get money”.

Related image

Ms. Sitharaman also informed the Lok Sabha that the draft report of the Comptroller and Auditor General (CAG) on all capital defence acquisitions, including the 36-aicraft Rafale deal, was with the Defence Ministry, which was preparing its responses to the CAG’s draft observations.

She said even the basic price of the aircraft as negotiated by the UPA would have amounted to ₹737 crore at today’s rates as against the ₹670 crore at which the NDA government was buying the jets. The minister further claimed that the government had condensed the delivery time by five months; the first Rafale jet would be landing in the country in September and the last one would be delivered in 2022.

Going on the offensive, the minister accused the Congress of misleading the country and claimed that there had been ‘no deal’ concluded during the UPA government’s term. The opposition party was shedding ‘crocodile tears’ for Hindustan Aeronautics Limited (HAL) and insulting Prime Minister Narendra Modi with a hug and a wink and by referring to her as a ‘liar’, Ms. Sitharaman said.

She also said for every AA (a term coined by Mr Gandhi to call industrialist Anil Ambani), there was an RV (a reference to Sonia Gandhi’s son-in-law Robert Vadra ) and a ‘Q’ during Congress governments.

An equally combative Mr. Gandhi hit back and said he didn’t blame Ms. Sitharaman or her predecessor, Manohar Parrikar, but only Mr. Modi, whom he accused of having committed a ‘bypass surgery’ of defence procurement procedures.

Later, speaking to reporters outside Parliament House, Mr. Gandhi accused the Defence Minister of running away by not replying to specific questions raised by him and asserted that there would be a “criminal investigation into the Rafale deal once the government changes in 2019 elections”.

Earlier during her reply, Ms. Sitharaman countered the Congress chief’s charge that the Prime Minister ‘unilaterally ordered’ 36 aircraft and claimed it was the Indian Air Force which suggested that the government buy two squadrons or 36 Rafale jets in ‘fly-away’ condition as against the UPA’s 18 planes.

“You are misleading the country by saying the NDA government reduced 126 Rafale jets to 36,” she said. “Congress was supposed to buy 18 in fly-away condition, the NDA raised that to 36.”

The minister said comparing the cost of ₹526 crore with ₹1,600 crore was like comparing apples to oranges. “Will the cost quoted in 2007 remain the same in 2016, because there is escalation cost and there is exchange rate variation,” she said.

The minister also asserted that the government had given contracts worth ₹1 lakh crore to HAL. AIADMK leader and Deputy Speaker M. Thambidurai too sought to know why the government had allowed the offset contract to be given to the Anil Ambani-led Reliance group instead of HAL.

Observing that the Anil Ambani group was selected as one of the offset partners by Rafale’s manufacturer Dassault Aviation, the Minister said the very same group had earlier obtained 53 waivers and concessions during the Congress-led UPA regime.

An emotional Ms. Sitharaman also accused the Congress chief of “insulting people with humble backgrounds”.

“Nobody has a right to call me or the prime minister a thief and a liar.. We all come from normal backgrounds…I come from a middle class. The Prime Minister comes from a humble background. The Prime Minister’s name is untarnished, he is not corrupt. I have my honour intact,” said a visibly angry Defence Minister.

Allowed by the Speaker to seek a clarification to the Minister’s reply — uncommon for Lok Sabha proceedings — Mr. Gandhi reiterated that the former French President Francois Hollande had publicly stated that Anil Ambani’s name had been given to the French side by Mr. Modi. He also said that the current French President Emanuel Macron had told him that the price was not a secret.

“When the Prime Minister had done a bypass surgery [of the earlier deal] did the officials object to it or not? Can you reply with a Yes or No?,” Mr. Gandhi asked.


Rafale deal: Jaitley says Hollande contradicted himself

Rafale deal: Arun Jaitley says Hollande contradicted himself; Dassault chose Reliance on its own

Finance Minister Arun Jaitley on Sunday said former French President Francois Hollande contradicted his own statement with regard to the Rafale deal and that neither the Indian nor the French government played any role in selection of Reliance as offset partner by Dassault.

A political controversy has erupted over Hollande’s statement that the Indian government wanted the Anil Ambani-led Reliance Defence to be chosen as offset partner of Dassault, the manufacturer of the Rafale fighter jets.

“The French Government and M/s Dassault Aviation have categorically denied the correctness of the former President’s first statement.

“The French Government has stated that the decision with regard to the offset contracts of Dassault Aviation are taken by the company and not the Government,” Mr. Jaitley said in a Facebook post.

“Dassault Aviation itself has suggested that they have entered into multiple contracts with several public sector and private sector companies with regard to the offset contracts and the decision is entirely theirs,” he added.

Union Minister Arun Jaitley. File photo.The partners (Dassault and Reliance) selected themselves as former President Hollande now says, Mr. Jaitley said in the post titled ‘A Questionable Statement Which Circumstances & Facts Demolish’

“This contradicts his first questionable statement which the French Government and Dassault have denied. The facts contradict the same. His second statement in Montreal, Canada to AFP (news agency) makes the veracity of his first statement even more questionable,” the minister said.

AFP reported that Hollande told it on the sidelines of a meeting in Canada Friday that France “did not choose Reliance in any way”. When asked whether India had put pressure on Reliance and Dassault to work together, Hollande said he was unaware and “only Dassault can comment on this”.

Full text of Mr. Jaitley’s statement

A controversy is sought to be created on the basis of a statement made by the former French President Hollande, that the Reliance Defence ‘partnership’ with Dassault Aviation was entered at the suggestion of the Indian Government. In a subsequent statement the former President has sought to suggest that Reliance Defence emerged on the scene after the agreement with the Indian Government was entered into. He has, in a subsequent statement, said that he is ‘not aware’ if Government ever lobbied for Reliance Defence and that ‘the partners chose themselves’. Truth cannot have two versions.

The French Government and M/s Dassault Aviation have categorically denied the correctness of the former President’s first statement. The French Government has stated that the decision with regard to the offset contracts of Dassault Aviation are taken by the company and not the Government. Dassault Aviation itself has suggested that they have entered into multiple contracts with several public sector and private sector companies with regard to the offset contracts and the decision is entirely theirs.

Without commenting on the correctness or otherwise of a controversy in the French media, it may be mentioned that the former French President, Hollande, is countering statement made against him with regard to a conflict of interest in his dealing with the Reliance Defence.

The accuracy of the statements made by the individuals may be questioned but circumstances never lie. This is evident from the following facts:

  • There is no ‘partnership’, as suggested by the former President, with regard to the 36 Rafale aircrafts to be supplied by Dassault Aviation to the Government of India. It was a Government to Government agreement under which the complete weaponised aircrafts are to come to the Indian Air Force. No manufacturing is to be done in India. It is, therefore, erroneous for anybody to suggest that there is a ‘partnership’ in the supply of the 36 Rafale aircrafts.
  • M/s. Reliance Industries Ltd., in February, 2012, had entered into an MoU with Dassault Aviation. This was reported by the PTI on 12.2.2012. This was at a stage when the contract relating to 126 Rafale aircrafts, of which 18 were to be manufactured in France and 108 in India, was at an advance stage of consideration by the UPA Government. Rahul Gandhi’s misplaced criticism could equally apply to the 2012 MoU.
  • The offset contract ensures investment by the original equipment supplier i.e. Dassault Aviation, in India, in as much as they make purchases from Indian companies to the extent of fifty percent (in this case). The choice of the offset partner under the 2005 offset policy is of M/s Dassault Aviation and they have selected several public and private sector companies to make the supplies.
  • The offset partner is selected entirely by the Dassault Aviation, the original equipment manufacturer, and neither the French Government and nor the Indian Government has any say in the matter.
  • It is no coincidence that on 30.8.2018 Shri Rahul Gandhi had tweeted that “Globalised corruption. This #Rafale aircraft really does fly far and fast! It’s also going to drop some big bunker buster bombs in the next couple of weeks.”

The former French President’s first statement rhymes with Rahul Gandhi’s prediction.

  • The Congress Party’s official handle on 31.8.2018 had carried the tweet of one of its leader “It is evident that Anil Ambani bribed President Hollande through his actor-partner to get the Dassault partnership.” For the Congress Party to allege that a former President had been bribed by an Indian business group and then use him as a primary witness, particularly when he is facing criticism for an alleged conflict of interest within his own country.
  • The former French President’s first statement that the Indian business group’s name was proposed by Government of India has now been substituted by him to the effect that the suggestion he is ‘not aware’ of the Government of India ever lobbied for Reliance Defence. He further said that the ‘partners’ chose themselves (AFP Report dated 22.9.2018).
  • Rahul Gandhi has made an absurd suggestion that the interest of Indian soldiers has been compromised with. By whom? The UPA which delayed the acquisition which would have added to the Military’s combat ability or the NDA which expedited the same at a lower cost.

The conclusion

One Reliance Group was a part of this deal since 2012. It dropped out of defence production. The other Reliance Group was already in defence. They are not partners in the Rafale deal. They have no contract with either Government of India or Government of France. They were not selected as one of the many offset partners by any Government. ‘The partners (Dassault and Reliance) selected themselves’ as former President Hollande now says. This contradicts his first questionable statement which the French Government and Dassault have denied. The facts contradict the same. His second statement in Montreal, Canada to AFP makes the veracity of his first statement even more questionable.


Hollande visit gainful, Rafale or no Rafale -Claude Arpi

  Hollande visit gainful, Rafale or no Rafale

By-Claude Arpi

The French President was in India to take the next big step in the Rafale deal, but does this mark an end to the tortuous process for the mega purchase? The final contract hasn’t been made. Promises must be kept this time

How is one to assess the state visit of a foreign dignitary? After following for two days, the visit of President François Hollande of France in Delhi earlier this week, it was the question I asked myself.

In December 2010, when former French President Nicolas Sarkozy came to India; after the ritual signatures of agreements at Hyderabad House, while travelling in the bus taking us back to the Press room, a Press councellor to the President was grilled by the French journalists, they wanted ‘figures’. The official took his pen and started adding ‘figures’ and triumphantly announced ‘17 billion euros’.

The bulk of the then total was related to the ‘Jaitapur deal’ for two EPR nuclear plants from Areva of France. More than five years later, many projects, including the EPRs have not yet manifested (though the joint statement during this present visit mentions the possibility for six nuclear plants in Jaitapur).

The moral of the story is that  there is often a gap between ‘signed agreements’ and the reality of few years later. Things often take more time than expected in India. This raises the question of the ‘Rafale deal’.

Let us be clear, President Hollande did not come to India to discuss the change of climate with Prime Minister Narendra Modi, though the Paris conference, for which France worked hard for several months, has been an example of fruitful collaboration.

Neither did the French President come to ride to Gurgaon in the metro to inaugurate a International Solar Alliance (with India as one of the main pillars). He also did not spend three days in India to promote Chandigarh, the first ‘smart city’ in India, built by the Franco-Swiss architect Le Corbusier. Mr Hollande came to India to take the next step in the Rafale deal.

Fourteen agreements were announced at Hyderabad House after the talks between the Indian Prime Minister and the French President. Listed first was a memorandum of understanding between India and France for the purchase of 36 Rafale aircraft; it was signed by Jean-Yves Le Drian, the French Defence Minister and Manohar Parrikar, his Indian counterpart.

Does this mark the end of the tortuous process for the mega deal?  No, though the initial Request for Information had been announced in 2001, 15 years ago! Six years later, a complex Request for Proposal was issued by the then Defence Minister AK Antony, who added new clauses and ‘complicated’ the issue. Five years later, Dassault Aviation was selected for supplying 126 planes (with transfer of technology to Hindustan Aeronautics) to the Indian Air Force.

Realising the difficulty of the project and to avoid going back to the starting blocks, last April in Paris, Mr Modi opted for 36 planes off-the-shelf. On Monday, commentators were quick to point that the process had not come to a conclusion.

Mr Modi and Mr Hollande did not agree on the final contract which should include not only the price of the planes, the cost of their maintenance, the required armament, the training of the pilots and mechanics etc, all this still needs to be finalised. Mr Hollande said it would be done in ‘a few days’; some of his collaborators spoke more prudently of ‘a few weeks’, while Dassault, the constructor announced ‘four weeks’.

Will it go the way the 2010 EPR framework agreement between Areva and National Thermal Power Corporation Limited went or will the promises be kept this time? Though the price offered by Dassault and what India is ready to pay still has a wide gap, both sides seem determined to finalise the project as soon as possible. From the Indian side, the IAF immediately needs these two squadrons (while praying for a third one!) and from the French side, though Dassault’s position is radically different from one year ago, being in a better position to negotiate, with an order book full after Egypt and Qatar selected the fighter plane (and with Saudi and Malaysia ready to sign), the French firm would like to conclude the deal.

The big change is that after the visit, Mr Modi and Mr Hollande are determined, and this should help to finalise the price and other technical details (according to some sources, there could be an option for 18 more planes); it then could get done during the following months, if not weeks.

Several members of the French delegation (including a senior Minister) privately admitted that Mr Modi is ‘different’ from his predecessors; he is a doer ‘with whom we can talk’. The Prime Minister used his personal charm, not only when he went to receive Mr Hollande in Chandigarh, a symbol of the India-French collaboration, but also when he invited for the first time since independence, foreign troops to participate in the Republic Day parade; these troops were French soldiers of the 35 Infantry Regiment, who had recently participated in the Shakti-2016 joint exercises with the two Garhwal Rifles of the Indian Army in Bikaner, Rajasthan. The 35 Infantry Regiment is one of the most decorated units of the French Army, presently associated with the seven Armoured Brigade. Its 1,200 men and women are famed as the best infantry troops in France. The way the contingent of 76 were cheered by the on Rajpath on the Republic Day, was telling.

Another point of closeness is that France, like India, has lately been a victim of terrorism. As the French Government was recovering from the November 13 horrific attack and commemorating the killings of several journalists of Charlie Hebdo, the symbol of the French liberté of expression, attackers from the other side of the Indian border, stepped into the Pathankot air base and created havoc for nearly three days.

A joint communiqué after the meet at Hyderabad House affirmed: “Prime Minister Narendra Modi and President François Hollande strongly condemned the heinous terrorist attacks that have struck many parts of the world recently and expressed their shared anguish and outrage at the loss of innocent lives in Paris, Bamako, Beirut, Tunis, San Bernardino, N’Djamena and the Lake Chad Basin Region, Kabul, Gurdaspur, Istanbul, Pathankot, Jalalabad, Jakarta, Ouagadougou and Charsadda.”

Both leaders affirmed that such terror attacks were an attack on the whole of humanity and foundational human values. But more powerful, for the first time, Pakistan was expressively and strongly named: “Stressing that terrorism cannot be justified under any circumstance, both leaders asked for decisive actions to be taken against Lashkar-e-Tayyeba, Jaish-e-Mohammed,  Hizbul Mujahideen, Haqqani network and other terrorist groups such as the Al Qaeda.”

This is indeed a serious basis to take the 1998 strategic partnership to a much deeper level, and in a few months time, the Rafale deal should be the cherry on the cake of a successful visit and a new deeper partnership.

Courtesy- The Pioneer |28 January 2016 |