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Rafale deal controversy

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The Rafale deal controversy is a political controversy in India related to the 2015 purchase of thirty six multirole fighter aircraft for a price estimated to be worth Rs 58,000 crore (7.8 billion euros) by the Defence Ministry of India from France's Dassault Aviation. The origin of the deal lies in the Indian MRCA competition.[1][2]

Background

Further information: Indian MRCA competition

On 31 January 2012, Indian Ministry of Defence announced that Dassault Rafale had won the MMRCA competition to supply Indian Air Force with 126 aircraft along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology.[3] The negotiations with Dassault dragged on over disagreements on warranty for aircraft produced by HAL. India wanted Dassault to ensure the quality of aircraft produced by HAL, but Dassault refused to do so.[4][5] In March 2012, TDP Member of Parliament, Mysura Reddy claimed in a letter to the defence minister that the bids were manipulated to help the Rafale proposal win. [6]He also raised concern about Rafales having been outperformed by British Typhoons in Libya operations. Defence Minister A K Antony ordered a review of the evaluation process following Mr. Reddy's claims.

In January 2014, it was reported that the cost of the deal had escalated to $30 billion (₹1,86,000 crore), with each aircraft costing $120 million (₹746 crore).[7] In February 2014, defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in fiscal year 2013-14 due to budgetary constraints.[8] In March 2014, HAL and Dassault signed a work share agreement to manage logistics of license manufacture.[9] After the 2014 Indian general election in April–May 2014, National Democratic Alliance led by Bharatiya Janata Party took control of the government from United Progressive Alliance, led by the Indian National Congress.

As disagreements over cost and warranty for aircraft produced by HAL continued, defence minister Manohar Parrikar said that Sukhoi Su-30MKI could be acquired as an alternative to Rafale.[10][11][12] Air Chief Marshal Arup Raha disagreed, saying that Su-30MKI and Rafale had different capabilities and one could not replace the other.[13] In February 2015, it was reported that the Rafale purchase was headed for cancellation as it was misjudged to be the lowest bidder due to an incomplete bid submitted by Dassault.[14] During an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity".[15] In July 2015, defence minister Manohar Parrikar informed the Rajya Sabha that the tender for 126 aircraft had been withdrawn and negotiations for 36 aircraft had begun.[16] In January 2016, India and France signed a memorandum of understanding for acquisition of 36 aircraft.[17] In September 2016, after 17 months of negotiations, India and France signed an inter-governmental agreement (IGA) for the acquisition of 36 aircraft at a cost of €7.87 billion (₹58,891 crore).[18] According to The Hindu, citing defence sources, the agreement involved many components, which were better compared to the original deal, especially the weapons package.[18] It was reported that India would acquire 28 single-seat aircraft at a cost of €91.1 million (₹681.7 crore) each and 8 dual-seat aircraft at a cost of €94 million (₹703.4 crore) each. The deal also included enhancements specific to Indian Air Force at a cost of €1.8 billion (₹13,470 crore), spares and establishment of two aircraft maintenance and overhaul facilities at a cost of €1.8 billion (₹13,470 crore), a weapons package costing €710 million (₹5,313 crore) and a performance-based logistics agreement at a cost of €353 million (₹2,641 crore).[19]

The agreement included a 50% "offset clause", which requires the companies involved in the agreement—primarily Dassault, Thales, Safran and MBDA—to invest 50% of the contract value (approximately €3.9 billion or ₹30,000 crore) back into India, with 30% of the total (approximately €1.2 billion or ₹9,000 crore) reserved for Defence Research and Development Organisation (DRDO).[18][20] Of this 50%, 74% (approximately €2.9 billion or ₹22,200 crore) will have to come from purchase of goods and services from India, which is expected to bolster the government's efforts to promote Indian defence equipment manufacturers.[21]

On 3 October 2016, Reliance Group and Dassault Aviation issued a joint statement announcing the creation of a 51:49 joint venture named Dassault Reliance Aerospace Limited (DRAL) to focus on aero structures, electronics and engine components as well as foster research and development projects under the "Indigenously Designed Developed and Manufactured" (IDDM) initiative.[22] Dassault intends to invest in excess of €100 million in the joint venture as part of its offset obligations.[23] The joint venture will manufacture components for Legacy Falcon 2000 series of jets such as the nose, cockpit and doors at the DRAL facility in Nagpur starting from January 2018.[24]

Allegations

Allegations of price escalation

The day after the signing of IGA between France and India, Indian National Congress spokesperson Manish Tewari asked for details of the agreement to be made public and questioned if there was an escalation of per-aircraft cost from ₹715 crore to ₹1,600 crore.[25] A couple of months later in November 2016, minister of state for defence Subhash Bhamre informed the Lok Sabha that the cost of each Rafale aircraft acquired under the IGA was approximately ₹670 crore.[26][27] In November 2017, Congress leader Randeep Surjewala alleged that procurement procedures were bypassed in acquisition of Rafale and questioned if there was an escalation of per-aircraft cost from ₹526.1 crore to ₹1,570 crore.[28] Defence minister Nirmala Sitharaman denied the allegations of procedural wrongdoing and said that approval from Cabinet Committee on Security had been obtained before signing of IGA. She said that the prices could not be compared as the tender for 126 aircraft and the agreement for 36 aircraft had different requirements.[29][30] Air Chief Marshal Birender Singh Dhanoa also denied the allegations and said that the agreement for 36 aircraft was signed with better terms than the one that was being negotiated under MMRCA tender.[31] French government officials also rejected the allegations of violation of procurement procedures.[32]

In an interview, former chief of air staff Arup Raha said that Defence Procurement Procedure allows for government-to-government procurement and there was no procedural bypass in signing of the IGA. He added that the agreement for 36 aircraft was cheaper than the previous proposal and had a better maintenance and weapons package including provisions for training, a better performance-based logistics package and two aircraft maintenance and overhaul facilities that were not present in earlier proposal. He said that most of the confusion over cost was due to comparison of prices from different base years and comparison of different deliverables.[33]

Allegations of favouritism

In November 2017, Congress leader Randeep Surjewala alleged that HAL was bypassed in the Rafale contract and questioned the presence of Anil Ambani in France during Modi's announcement to acquire 36 fully built aircraft. He also alleged that the necessary government approvals were not obtained before the formation of joint venture between Dassault Aviation and Reliance Defence Limited. Anil Ambani's Reliance Defence Limited denied the allegations and released a statement that he was present as a member of Indo-French CEO forum. The statement added that no government approvals were required for foreign investments of up to 49%.[28] Congress vice-president Rahul Gandhi accused Indian prime minister Narendra Modi of dropping the requirement of licensed manufacture by the state-owned Hindustan Aeronautics Limited to ensure that the privately-owned Reliance Defence Limited obtained an offset contract from Dassault.[34] Defence minister Nirmala Sitharaman denied the allegations and said that transfer of technology to HAL would not be economically feasible in a smaller contract for 36 aircraft, which was an emergency purchase to make up for a decade-long delay. She said that no government approvals were required for the joint venture between two private companies.[29] Air Chief Marshal Birender Singh Dhanoa also denied the allegations and added that technology would be transferred to DRDO.[35] French government officials also rejected the allegations, saying that the offset contracts would be handed by four companies including Dassault and 500 companies would benefit in total.[32]

Controversy

2017

While campaigning for 2017 Gujarat Legislative Assembly election, Rahul Gandhi raised the issue of Rafale deal to attack Narendra Modi. He repeated the allegations of price escalation and favouritism towards Reliance Defence Limited.[36][37] Former defence minister Manohar Parrikar justified the costs, saying that the cost of the aircraft is often eclipsed by the cost of equipment required to make it combat-ready and the new agreement includes development costs for integration of a helmet-mounted display and a serviceability agreement. He blamed his predecessor in the previous United Progressive Alliance government, A. K. Antony for delaying the acquisition by creating uncertainty over the lowest bidder.[38]

In December 2017, Nirmala Sitharaman informed the Rajya Sabha that IGA had better aircraft pricing along with an improved maintenance package and a faster delivery schedule, although she admitted that a direct comparison of prices was not possible due to differences in deliverables. She added that negotiations under MMRCA tender had reached a deadlock and the 36 aircraft were being procured to meet a critical necessity of the Indian Air Force.[39][40]

2018

In February 2018, in response to demands for details of the agreement to be made public, Nirmala Sitharaman said that the details were classified under a security agreement signed by Indian and French governments in 2008. She said that no state-owned or privately-owned companies were included in the IGA.[41] Rahul Gandhi alleged that the secrecy over pricing was evidence of a scam.[42] Randeep Surjewala alleged that Eurofighter GmbH had reduced the price of its Typhoon jet by 20% and questioned why it was not considered.[43] In response, the Ministry of Defence released a statement saying that the parliament had been informed with approximate cost of aircraft and revealing item-wise costs would compromise national security and violate the 2008 agreement. The statement went on to say that selection of offset partners had not been made by Dassault Aviation and it was free to select its partners. On the Eurofighter question, the statement said that the previous government too had rejected an unsolicited bid from Eurofighter that was made a few days after the lowest bidder was announced in 2012.[44][45] Finance minister and former defence minister Arun Jaitley defended the government's stand by providing examples of two instances where ministers under the previous UPA government had claimed that details of arms expenditure was classified and said that there were 15 such instances in total.[46] Rahul Gandhi responded by presenting examples of three instances where ministers under the UPA government had provided pricing of defence deals.[47] The Communist Party of India (Marxist) joined the Congress in its demands for details of the purchase to be made public.[48] Aam Aadmi Party alleged that there was corruption involved in the Rafale deal and repeated the allegations of price escalation.[49]

India Today and The Economic Times, quoting unnamed Ministry of Defence officials, reported that the price that was being negotiated under the UPA government amounted to €99 million for the aircraft without weapons and other addons while the cost of the same under the new agreement was €91 million. They added that the new agreement included additional deliverables such as Meteor air-to-air missile that was absent in the MMRCA tender and 13 India-specific enhancements.[50][51] The Indian Express, also quoting unnamed government officials, reported that the cost of ₹525 crore or €79 million quoted by Congress leaders was from Dassault's 2007 bid for MMRCA, which included an annual price inflation of 3.9% that would have taken the costs to €100.85 million in 2015. The report detailed the costs in the new agreement as €91.7 million for each aircraft, €1.8 billion for spare parts, €1.7 billion for weather and terrain customizations, €710 million for weapons and €353 million for performance-based logistics along with index-based inflation with a cap of 3.5%.[52]

In an interview with India Today, French president Emmanuel Macron said that details of the deal has to be kept secret to protect the commercial interests of companies involved in the agreement and he would not have any objections if the Indian government decided to reveal some details of the agreement while keeping commercial sensitivities in mind.[53][54] A few days later, India and France signed a new agreement that governs the exchange of classified information between the two countries to replace a similar agreement signed in 2008 that was about to expire in 2018.[55]

Congress leaders Ghulam Nabi Azad and former minister of state for defence Jitendra Singh, citing Dassault's annual report, claimed that Egypt and Qatar had paid ₹1,319 crore per aircraft in comparison to ₹1,670 crore paid by India, which represented an increase of ₹351 crore per aircraft. They claimed that acquiring 36 aircraft instead of 126 adversely affected national security.[56] Dassault's CEO, Éric Trappier responded by saying that the numbers were not comparable as India's total included costs for Mirage-2000 support and the deliverables for each country was different. He said that India's deal included after-sales support which was absent from other countries' deals.[57] On 12 March 2018, Subhash Bhamre informed the Rajya Sabha that the cost of each Rafale was approximately ₹670 crore, although this cost did not included the costs of "associated equipment, weapons, India specific enhancements, maintenance support and services".[26][58]

On 21 July 2018, during a debate on the no confidence motion, Rahul Gandhi, president of the main opposition party, Indian National Congress, made direct accusations toward the Prime Minister of India, Narendra Modi.[59] The prime minister dismissed the allegations as the program's interactions are between the governments of India and France, without any middlemen. Both governments have then officially refuted the charges.[60][61]

Indian National Congress directly blames the Indian Government led by Narendra Modi for overlooking the capabilities of government-owned Hindustan Aeronautics Limited (HAL) in favour of Reliance Defence for the offset deal with Dassault.[62] Indian defence minister Nirmala Sitharaman rejected these charges by saying that " Hindustan Aeronautics Limited (HAL) was dropped from the jet deal by the previous UPA regime after French manufacturer Dassault Aviation and the state-owned entity failed to agree on production terms.[63]

French Government response

Former French President Francois Hollande has been quoted by an article on a French Mediapart, an online investigative and opinion journal as stating that the Indian government had asked the French government to nominate Anil Ambani's Reliance Defence Ltd. as its India partner in the Rafale deal,[64][65] but later Hollande clarified that "it on the sidelines of a meeting in Canada on Friday that France “did not choose Reliance in any way.” When asked whether India had put pressure on Reliance and Dassault to work together, Mr. Hollande said he was unaware and “only Dassault can comment on this.”as reported by AFP[66]

Contradicting Hollande's claim, French government issued a statement mentioning that French companies have the full freedom to select Indian firms for the Rafale contract.[67] Dassault also clarified that Anil Ambani was Dassault Aviation’s choice[68]

Indian Government response

Finance minister Arun Jaitley later dissmised the charges as factually false.[69]

Indian government's Defence Ministry reiterated its earlier stand while responding to later claims of former French President Francois Hollande about involvement of a particular private firm's Rafale offset contract by saying "Neither government of India nor French government had any say in the commercial decision".[70]

Allegations against Anil Ambani and Reliance Defence Ltd

Indian National Congress accused Indian business magnate Anil Ambani's Reliance Defence Ltd of getting the part of the contract by unfair means.[71] The offsets contracts in the deal is alleged as the biggest example of crony capitalism [72]

In response, Anil Ambani threatened to sue Congress Party for defamation.[73]

Reliance also sued NDTV regarding its reporting on the matter which was noted by New York based Committee to Protect Journalists[74].

Judiciary's stand

In September 2018, the Supreme Court of India agreed to hear the PIL petitions related to the controversy.[75][76] while Congress said they would wait for getting the necessary documents before moving court on the matter.[77] On October 10 The Supreme Court asked the Central government to provide details of the decision making process in the Rafale deal with France in a sealed cover by October 29.[78]

On 14 December 2018, the court dismissed all the petitions seeking a probe into the alleged irregularities in the deal, and gave a clean chit to the Union government on all the three aspects, viz., the decision making, pricing and selection of Indian offset partner.[79][80][81][82] In its ruling, the court said it has "studied the material carefully" and is satisfied with the decision making process, and that it found no evidence of wrongdoing.[80][81] It expressed its satisfaction on the pricing aspect, after investigating the details, which were provided to it by the government.[80][83] It said that it had reluctantly asked the government to provide the details pertaining to the pricing in a sealed envelope, after initial reservation, coupled with the government's invocation of a confidentiality clause under the intergovernmental agreement.[80] "We have examined closely the price details and comparison of the prices of the basic aircraft along with escalation costs as under the original RFP (UPA regime’s) as well as under the inter-governmental agreement. We have also gone through the explanatory note on the costing, item wise," the court said while ruling that it did not consider it necessary to repudiate the government’s assertion that "there is a commercial advantage in the purchase of 36 Rafale aircraft".[80] It further added that it found no fault with the government's assertion that it got better terms relating to maintenance and weapons package.[80] "It is certainly not the job of this court to carry out a comparison of the pricing details in matters like the present. We say no more as the material has to be kept in a confidential domain," the court said.[80][83]

On the aspect of offset partner, the court rejected allegations of commercial favouritism, citing the lack of any substantive material.[80][84] "We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian government, as the option to choose the IOP (Indian offset partners) does not rest with (it)," the court said.[84] The court said "we find no reason for any intervention by this court on the sensitive issue of purchase of 36 defence aircrafts [sic] by the Indian government," adding that the "perception of individuals cannot be the basis of a fishing and roving enquiry by this court, especially in such matters."[85]

Chief Justice of India Rajan Gogoi while writing the judgement for the three-member bench, ruled that, "Adequate military strength and capability to discourage and withstand external aggression and to protect the sovereignty and integrity of India, undoubtedly, is a matter of utmost concern for the nation. The empowerment of defence forces with adequate technology and material support is, therefore, a matter of vital importance.”[86]

Reactions

Notwithstanding the Supreme Court's verdict, the main opposition party, Congress, repeated its allegations of corruption against the government and continued to demand a Joint Parliamentary Committee (JPC) to probe the deal, saying that the supreme court was "not the forum to decide the issue of such a sensitive defence contract."[87] The Indian government promptly rejected the demand.[88] The congress even went so far as to doubt the court's 'justification' of selection of Anil Ambani's Reliance Defence as offsets partner in the deal.[89] Rahul Gandhi, the Congress president, speaking at a press conference, reiterated the demand for a JPC probe, and alleged that the government misled the court on the issue, stating that the Comptroller and Auditor General (CAG) report was not shared with the Public Accounts Committee (PAC) as yet, and in fact no such report is in the public domain, contrary to the court's order.[89] Mallikarjun Kharge, a senior Congress leader and the chairman of the PAC, who was present along with Gandhi at the press conference, citing personal communication with the deputy CAG, said that neither the PAC, nor the CAG, was in possession of the said report.[89]

The ruling party BJP, on the other hand, welcomed the verdict, while saying that the falsehood on the issue was exposed.[90] BJP's Tamil Nadu unit president Tamilisai Soundararajan, while lashing out at the Congress, demanded an apology from the Congress leaders "to the nation" in view of the SC findings.[91] Union Home Minister Rajnath Singh, too, said: "The Congress President tried to mislead public for political benefit and maligned India’s image globally. He should apologise to the House and to the people of the country. He thought ‘Hum to doobe hain sanam tum ko bhi le doobenge’ (I have drowned so I will take you and drown),"[92]

Dassault Aviation, on the same day of the verdict, issued a statement to the press welcoming the Indian Supreme Court's verdict. "Dassault Aviation welcomes the decision of the Supreme Court of India rendered today dismissing all petitions filed on the Rafale Contract signed on 23rd September 2016 in the frame of an Inter-Governmental Agreement between India and France," the statement read. It also reiterated its commitment to ensure "successful production in India through Dassault Reliance Joint Venture in Nagpur as well as through a full-fledged supply chain network".[93]

The petitioners in the case, former minister Yashwant Sinha, former journalist Arun Shourie and lawyer Prashant Bhushan, issued a press statement expressing 'shock' and 'disappointment' over the court's decision to dismiss their petitions and said that the verdict "neither addressed the documented facts nor dealt with their main prayer seeking an investigation into the deal to purchase the French fighter jets,"[94] adding that "some of the facts mentioned in the court judgment are not only not on record but are patently incorrect".[94] While claiming that "no portion of the CAG report has been placed before Parliament or placed in the public domain," the trio accused the court of taking a "conservative view of judicial review in cases of defence deal corruption involving high functionaries."[94][95] The trio claimed that the verdict had used as facts, the statements by the government through affidavits and the sealed covers handed only to the court and not with the petitioners, and that these factually incorrect statements were based on the statements made by the government to the court in sealed covers and the factual inaccuracies show how dangers associated in verdict based on unverified statements. They demanded a "full public disclosure of all the facts" along with "a comprehensive and independent investigation into the deal".[95]

On 16 December 2018, the Indian Prime Minister Narendra Modi launched a "sharp attack" on Congress for its refusal to accept the Supreme Court's decision to reject the petitioners' demands of probes, and accused it of lying, saying: "The country's defence ministry is also a liar. The country's defence minister is also false. Officers of Indian Air Force are also liars. The French government is also false. Now they have started to call the highest court of the country a liar too". While quoting Ramcharitmanas, Modi said, "lies are what they eat and lies are what they give to other people, as they accept these lies themselves," adding that while the government is committed to increase the strength of the Indian military, the Congress is standing with the forces that do not want to see it to be strong.[96] The BJP, on the same day, announced that it will held as many as 70 press conferences across different areas of India to "expose" the C,ongress for what it said was plotting conspiracy against the Modi government on the issue of Rafale deal.[97][clarification needed]

Samajwadi Party Chief Akhilesh Yadav, who had previously demanded a JPC probe, took a stance contrary to that of the Congress after the court's verdict, saying that the decision on the issue has been given by the Supreme court, which "is supreme in the eyes of people", and hence doubts, if any, should be raised in that court. Upon being asked about the change in his party's stance, Yadav said that his party had demanded a JPC probe before the Supreme court's verdict. "I had said JPC should be set up as there can be many things in it. But now the verdict has come and the Supreme Court has deliberated on all angles," he said.[98] Communist Party of India (Marxist) supported the calls for a JPC.[99]

Plea for corrections in verdict

On 15 December, the Union Defence Ministry in a press conference suggested that the Supreme court may have misinterpreted the government’s statements on the Rafale deal and requested corrections.[100] The ministry during the press conference had pointed to the mixing of the tenses, "perhaps on account of misinterpretation of a couple of sentences in a note handed over to this Hon'ble Court in a sealed cover." The government filed an eight-page application for corrections in the verdict by the Supreme Court stating "observations in the judgment have also resulted in a controversy in the public domain."[101][102] By proposing these correction, the government tried to rectify that the CAG report had not yet submitted its report and the PAC has not examined it. No redacted portion, has been placed either in the Parliament or in the public domain.[101] The ministry claimed that the note simply mentioned the procedures followed on CAG reports and the note was not specific to the Rafale deal CAG report.[101] The verdict had mentioned four steps related to the CAG report out of which 3 were incorrect. The court has not responded to the governments application as it is closed for Christmas.[101][103]

On 16 December, the Congress asked the Supreme Court, not to entertain the Governments application of rectification of judgement. Congress also urged the court to recall the Rafale judgment as being "self-contradictory"[104] and to issue notices to the government for "perjury and contempt of court as it provided false information to the top court."[105][103] The Chairman of the PAC Mallikarjun Kharge and the Congress stated that "no portion of the CAG report has been placed before Parliament or was in the public domain".[103]

The Government's correction application may have an open court hearing in January,[102] along with a review petition from the petitioners.[102]

See also

References

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