Three news reports and a row: Ahead of Lok Sabha polls, Rafale deal shrouds BJP's campaign, gives impetus to Congress

A government-to-government agreement between India and France to procure 36 Rafale jets has all Opposition parties up in arms months before the biggest electorate event in the country. Ahead of the Lok Sabha elections 2019, where the ruling NDA alliance led by the Bharatiya Janata Party will be fighting to win another mandate at the Centre, the controversy around the Rafale deal has exploded to huge proportions.

As three separate news reports threw fresh light on the controversial deal, the issue has rocked the Parliament in the ongoing Budget session. This session is also the last sitting in the 16th Lok Sabha. The government is scheduled to present a CAG audit report in Parliament on Tuesday. The Opposition has also raised questions about the credibility of the government auditor alleging a "conflict of interest". Congress has asked the Comptroller and Auditor General (CAG) Rajiv Mehrishi to recuse himself from the audit as he was finance secretary when the jet purchase was negotiated. Union Minister Arun Jaitley, however, has rebutted the claims, saying the Congress was casting aspersions on CAG based on "falsehood".

Two investigative reports by The Hindu and a report by The Indian Express brought the controversial deal back in the political discourse. Before these reports, a statement by former French president Francois Hollande last year on how Anil Ambani's Reliance Defence came into the picture acted as a real trebuchet to put the issue into the political cauldron with both the Opposition and the ruling party slaloming between accusations and counter-accusations. Here are the major flashpoints which catapulted the deal into the limelight.

Representational image. Reuters

Representational image. Reuters

François Hollande's admission

As the issue whipped up a political storm in India, admission of former French president François Hollande opened up a new attack front for the Opposition. Hollande was quoted in an article by a French website Mediapart claiming that the Indian government had asked the French government to nominate Reliance Defence as its India partner in the deal. “We did not have a say in this,” Hollande was quoted as saying. "The Indian government proposed this service group and Dassault negotiated with Ambani. We did not have a choice, we took the interlocutor who was given to us." In 2015, when Hollande was the President of France, the deal to purchase 36 Rafale fighter jets from France was announced by Modi.

Hollande's statement gave Opposition's allegations that Modi had unfairly picked Ambani-led Reliance Defence Limited to be the French firm's Indian partner, a shot in the arm.

Congress chief Rahul Gandhi said that the Rafale deal was doctored "behind closed doors" by Modi. "The Prime Minister personally negotiated and changed the Rafale deal behind closed doors. Thanks to François Hollande, we now know he personally delivered a deal worth billions of dollars to a bankrupt," Rahul had tweeted.

Swifty reacting to control the damage, the French government issued a statement soon after. "The French government is in no manner involved in the choice of Indian industrial partners who have been, are being or will be selected by French companies," it said. The statement further said: "In accordance with India's acquisition procedure, French companies have the full freedom to choose their Indian partner companies that they consider to be the most relevant, then present for the Indian government's approval the offset projects that they wish to execute in India with these local partners so as to fulfil their obligations in this regard."

Dassault Aviation also released a statement, saying, "This offsets contract is delivered in compliance with the Defence Procurement Procedure (DPP) 2016 regulations. In this framework, and in accordance with the policy of 'Make in India', Dassault Aviation has decided to make a partnership with India's Reliance Group. This is Dassault Aviation's choice."

The deal was initially estimated to be worth Rs 54,000 crore. The NDA government insisted that it got significantly better terms than those quoted in the original bid under the UPA government, with a total reported saving of more than €1,600 million (€350 million in the cost of aircraft with a further reported saving on weapons, allied maintenance and training package amounting to around €1,300 million or Rs 12,600 crore). However, a cost breakdown of Rafale in the original bid under UPA and in the 36 aircraft in the government-to-government deal under NDA are not in the public domain.

The Hindu reports

Two consecutive reports by The Hindu (read here and here) sparked a fresh debate over the Rafale deal as the report quoted a 2014 note written by the Ministry of Defence which raised strong objections to 'parallel negotiations' conducted by the Prime Minister's Office (PMO) with the French side. Stating that it was clear that such parallel discussions by the PMO had "weakened the negotiating position of MoD and Indian Negotiating Team," the note, dated 24 November, 2015 brought this to the attention of the then defence minister Manohar Parrikar. The Hindu quoted the defence ministry's note and reported: "We may advise PMO that any Officers who are not part of Indian Negotiating Team may refrain from having parallel parlays [parleys] with the officers of French Government,” it suggested that “in case the PMO is not confident about the outcome of negotiations being carried out by the MoD, a revised modality of negotiations to be led by PMO at appropriate level may be adopted in the case."

The second report in The Hindu claimed that the deal involved "major and unprecedented concessions from the Indian government, with critical provisions for anti-corruption penalties and making payments through an escrow account dropped days before the signing of the inter-governmental agreement (IGA)." The Modi government, which rode to power in 2014 on the promise of culling corruption out of the country, came under intense criticism after the report was released on 11 February.

The Hindu reported: "Official documents available to The Hindu reveal that the Defence Acquisition Council (DAC) chaired by the then Defence Minister, Manohar Parrikar, met in September 2016, and “ratified and approved” eight changes in the IGA, supply protocols, offset contracts and offset schedules (see Box 1). This was done after the IGA and associated documents had been approved by the Cabinet Committee on Security (CCS), chaired by Prime Minister Modi on August 24, 2016. The most significant among these eight changes, recorded in a note signed by Vice Admiral Ajit Kumar, DCIDS (PP&FD) who was the member-secretary of the DAC, is at sub-para (c). This states: “Non-inclusion of the Standard DPP Clauses related to ‘Penalty for Undue Influence,’ ‘Agents/Agency Commission’ and ‘Access to Company Accounts’ in the Supply Protocols."

Three members of the Indian negotiating team dissented to the direct dealing with the commercial suppliers under cover of an IGA and it was highlighted in a note, the report said. On the direct dealing with the two companies, they noted: “Notwithstanding the fact that the procurement is on Government-to-Government basis, the IGA involves ‘Transfer of Rights and Obligations’ relating to supplies of equipment and related industrial services by French Government to the French Industrial Suppliers, and the payment is also being made to the French Industrial Suppliers and not to the French Government; therefore, it is not advisable to sacrifice the basic requirement of financial prudence.”

On 8 February, after The Hindu report surfaced, Congress chief Rahul Gandhi called for a press conference and called the prime minister a "thief" for favouring "friend" and businessman Anil Ambani for the deal. Rahul minced no words before accusing Modi of interference during the negotiation process with France as claimed by the newspaper citing various documents.

"Now, it is clear that the prime minister has stolen Rs 30,000 crore of your money and given it to his friend Anil Ambani. It is an open and shut case. The defence ministry has said this itself that the prime minister has interfered. Nirmala Sitharaman and Narendra Modi have lied to you. It is proven that chowkidaar chor hai," Rahul said in a press conference. The Congress president also included the "youths and the soldiers of the country" in his brief statement adding "This is about your future. You defend us, protect us, fight for us, even die for us." "NoMo anti corruption clause. The chowkidar himself opened the door to allow Anil Ambani to steal 30,000 Cr. from the IAF,” Rahul tweeted tagging the report.

The Congress president met Andhra Pradesh chief minister N Chandrababu Naidu on Sunday and said, "The Prime Minister became prime minister saying he will fight corruption. Have you read today's Hindu? It is very clear in today's (Monday's) Hindu article that the prime minister removed the anti-corruption clause. Every defence deal has an anti-corruption clause."

The India Express reports

The Indian Express, in its report, said that in March 2015 before Modi announced officially procuring the 36 Rafale jets from France, industrialist Anil Ambani reportedly visited the then French defence minister's office in Paris and had a meeting with his top advisors. Special advisor to the then defence minister Jean-Yves Le Drian met Ambani with industry advisor, Christophe Salomon; and his technical advisor for industrial affairs, Geoffrey Bouquot. Ambani’s meeting was described by Salomon to a top official of a European defence company as 'confidential and planned as you can imagine with very short notice'. The report also stated that when Ambani visited the French defence minister's office, it was known that Modi would make an official visit to France from 9-11 April, 2015. Subsequently, Ambani was part of the prime minister's delegation during the visit where the deal for 36 Rafale aircraft was announced in a joint statement issued by both India and France. Reliance Defence was incorporated on 28 March, 2015, in the same week as this meeting.

Reacting to the Indian Express report, Rahul said, "The Prime Minister is acting as Anil Ambani's middleman. National security has been compromised. An MoU (Memorandum of Understanding) is known to a businessman before it is drafted before anybody else. Like I said, the Prime Minister has done something that spies do."

An UPA-era deal, which is haunting BJP-led NDA govt

Prime Minister Narendra Modi announced in April 2015 that India will buy 36 "ready-to-fly" Rafale jets manufactured by French company Dassault Aviation. Rafale was chosen in 2012 over rival offers from the United States, Europe and Russia. It was a necessary step to upgrade India's ageing fighter fleet. The original plan was that India would buy 18 off-the-shelf jets from France's Dassault Aviation, with 108 others being assembled in India by the state-run Hindustan Aeronautics Limited in Bengaluru. The Modi-led NDA government, however, rolled back on the earlier UPA government's commitment of buying 126 Rafale jets saying that the deal will be too expensive. Negotiations for the high-profile deal had dragged on for three years with deadlocks over the costs and subsidiary clauses frequently stalling the process. Finally, the Modi government decided to buy 36 "ready-to-fly" fighters instead of trying to acquire technology from Dassault and make it in India.

The decision prompted the principle Opposition parties to criticise the BJP-led Centre of non-transparency in the multi-billion dollar deal and called it "one of the biggest failures" of the 'Make-in-India' programme.

In January, 2016, India confirmed the order of 36 Rafale fighter jets with France. In September, 2016, India signed an inter-governmental agreement with France, dubbed as 'Rafale deal', in which India will pay about Rs 58,000 crore or €7.8 billion for 36 off-the-shelf Dassault Rafale twin-engine fighters. About 15 percent of this cost was being paid in advance. As per the deal, India will also get spares and weaponry, including the Meteor missile, considered among the most advanced in the world.

In November 2016, a political warfare broke out between ruling and Opposition parties in India with the Congress claiming that the government has caused "insurmountable loss" to taxpayers by signing Rs 58,000 crore-deal and suggested that the deal was struck to facilitate Anil Ambani's defence venture. The Congress alleged that the cost of each aircraft was three times more than what the previous UPA had negotiated with France in 2012.

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Updated Date: Feb 12, 2019 14:32:40 IST

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