How the Rafale purchase turned out to become a boondoggle — meaning a wasteful, unnecessary or fraudulent project in Americanese — is an interesting story. It tells us how ignorance, vested interests and bureaucratic turf wars hijack our system.
It all began when the Indian Air Force put in a requirement for more Mirage 2000 fighters, to augment its small fleet of these fighters, particularly since they were deemed to have done well in the Kargil War. Since we already operate the Mirage 2000, bought during Rajiv Gandhi’s time, the IAF reckoned buying more under the Defence Procurement Procedure (DPP) would circumvent the cumbersome procedure of buying a new aircraft. But they didn’t contend with the creative minds of the Ministry of Defence (MoD) bureaucracy when it comes to obstructing any proposal. Complying with the IAF's requirement, the French manufacturer Dassault Aviation offered the Mirage 2000-5, the latest variant of the original Mirage 2000s purchased in 1982.
But technology and the strategic environment had changed by 2000. The Mirage 2000 was a fighter designed in 1972 and entered service a decade later. By 2000, the competition had moved on. Newer variants of the F-16 had begun entering service and Dassault needed to upgrade the 2000. The Mirage 2000, renamed Vajra by the IAF, did not have the capability to engage multiple targets simultaneously, and its weapons load capacity was smaller than the F-16 variants. Dassault now called it the Mirage 2000-5.
The MoD bureaucrats seized on the "dash five" suffix and deemed it a new aircraft and hence, not covered by the DPP route. There had to be a fresh tender. Since it was going to involve a lengthy procedure, the IAF saw it as an opportunity to buy many more new squadrons. The MIG 21, 23 and 27 fleet was rapidly depleting and so they too had to be replaced. That’s how the tender for the 126 MMRCAs came to be.
We know what happened to the MMRCA shootout. It was a shootout between apples and oranges, involving aircraft of capabilities, tonnages and ranges. Of the six competing, two were single engine light fighters, a better replacement for the fleets being replaced. At that time an IAF officer joked that it was a race between Maruti 800s, Honda Citys and BMWs. After seven long years two contenders were shortlisted: The Eurofighter Typhoon and the Dassault Rafale. The Rafale was chosen.
But Prime Minister Narendra Modi suddenly canceled the order for the 126 Rafale aircraft. He was visiting France in April 2015 and announcing the Rafale purchase was his way of crowning the visit. So he announced it quite dramatically. "I have asked President Francois Hollande to supply 36 ready-to-fly Rafale jets to India," Modi said at a news conference on the first day of a State visit to France. "Our civil servants will discuss (terms and conditions) in more detail and continue the negotiations," he said, speaking in Hindi through an interpreter.
The official joint statement read: "Government of India conveyed to the Government of France that in view of the critical operational necessity for Multirole Combat Aircraft for Indian Air Force (IAF), Government of India would like to acquire 36 Rafale jets in fly-away condition as quickly as possible."
"The two leaders agreed to conclude an inter-governmental agreement for supply of the aircraft on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway; the delivery would be in a time frame that would be compatible with the operational requirement of IAF; and that the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by IAF, and with a longer maintenance responsibility by France."
But did he consult the IAF? The then defence minister Manohar Parrikar too had publicly voiced misgivings about the cost of the fighter. It would now seem only Anil Ambani's Reliance Defence — set up two weeks earlier to serve as Dassault's offset partner — was privy to this.
In the Air Staff Qualitative Requirements (ASQR) provided by the IAF, there were 13 "India-Specific Enhancements" demanded by India in the 126-aircraft MMRCA contract. These included radar enhancements, helmet-mounted display, towed decoy system, low-band jammer and the ability to operate from high-altitude airfields.
That these were the same for the 36 Rafale jets ordered by Modi is made clear by the joint statement of 10 April, 2015 issued by Hollande and Modi, which reads: “…that the aircraft and associated systems and weapons would be delivered on the same configuration as has been tested and approved by Indian Air Force…”
There is much noise about the huge costs at which the 36 Rafales have been contracted. The comparable costs of the 126 and 36 deals can only be read when all the costs are factored in. The cost of the new deal for 36 Rafale fighters is €3.42 billion as the cost of the bare planes; €1.8 billion for associated supplies for infrastructure and support; €1.7 billion for India-specific changes to the planes; and €353 million for “performance-based logistics support”; with the weapons package of €700 million being the extra. So take €1,053 million out and you have the comparable cost, which means it is €7.1 billion euros. It appears the fiddle is in the India-specific costs, additional infrastructure and support, and performance logistics support.
But how much more are we paying for the "new" Rafales? According to Air Marshal M Matheswaran (retd.), the officer who participated in the evaluation of the six fighters bidding for the MMRCA contract, the Rafale was chosen as it was “an exceptional aircraft in a multirole capability, but was an expensive aircraft”. According to him the MMRCA tender was cleared "for $10.5 billion for 126 aircraft". The French Air Force acquired its Rafale for €55 million. The IAF was hoping for a minimum of four squadrons of Rafale fighters, but the Modi government kept the initial order down to 36 fighters in a flyaway condition for €7.8 billion or $9.13 billion (€1=$1.17).
Clearly a huge cushioning has been provisioned to meet the needs of all the parties concerned. Look at these other facts now. According to the Ministry of Company Affairs, Reliance Defence Ltd was registered on 28 March, 2015. On 11 April, Reliance Defence Ltd becomes the main partner to ensure the 50 percent offset clause, under which Dassault and other related French parties would invest half the contract value back in the country.
Government officials insist that 74 percent of the offsets will be exported, earning €3 billion for the country in the next seven years. The experience with all offsets suggests that this is far-fetched. It has not happened so far. In the AgustaWestland offsets, investigators discovered money trails from Mauritius, Singapore, UAE, Tunisia, the UK and British Virgin Islands linking the agents and the manufacturer.
Incidentally, Anil Ambani's flagship company, Reliance Communications Ltd (stylised as RCom), just defaulted on a major foreign loan and its future ability to fulfil its Rafale offsets commitment should now be in doubt. Recently, IDBI Bank filed an insolvency application before the National Company Law Tribunal (NCLT) seeking debt resolution of Reliance Naval and Engineering, the shipbuilding company, under the Insolvency and Bankruptcy Code. Yet Reliance Defence is so confident about fulfilling its Rafale-related obligations. I suspect there are no obligations. Reliance Defence is just a pass through.
Serving IAF officers are now being sent out to justify the purchase at the price now revealed. One IAF-deployed "spokesmen" have even been justifying the Rafale purchase because the package includes the Meteor air-to-air missile. The Meteor is the new game-changer in the air. It increases the "no-escape" zone for a hostile aircraft by about three times. The Meteor is an active radar-guided beyond-visual-range air-to-air missile (BVRAAM) developed by MBDA. It will offer a multi-shot capability against long-range maneuvering targets in a heavy electronic counter-measures (ECM) environment with range in excess of 100 kilometres (62 miles). According to the manufacturer, in a head-on engagement, the Meteor provides a no-escape zone three times greater than a conventionally-powered missile.
But the Meteor missile is not exclusive to the Rafale. The fact is that the Swedish Gripfen has now been integrated with the Meteor and open sources indicate the IAF too is contemplating integrating the SU-30MKI and the Meteor. Even the Tejas can be fitted out with Meteors. So we are not buying the Rafale for the Meteor. Besides, missile purchases can never be part of the capital cost of a fighter. Since they are expendable, and presumably meant to be expendable, they should be part of revenue expenditure.
Make no mistake. The Rafale is a top class 4+-generation fighter. Perhaps even the best. But we are concerned with prices and pay-offs. If this is a given, we must be happy that we made a good purchase.
The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
Updated Date: Sep 25, 2018 11:09:17 IST