The Indian Express explains the issues in the controversy over the deal to buy the Rafale warjets
What is the Rafale controversy about?
The Opposition parties have alleged that the NDA government bought 36 Rafale fighter aircraft, built by Dassault Aviation of France, under a direct government-to-government agreement at a much higher price than the one that was being negotiated for 126 aircraft by the previous UPA government under an open tender.
India’s intention to buy the 36 aircraft in “fly-away” condition was announced by Prime Minister Narendra Modi during his visit to France in April 2015 and, a few days later, then Defence Minister Manohar Parrikar had announced that the earlier 126-fighter deal — stalled over price since 2012 — was dead. The deal for the 36 aircraft — a new acquisition — was signed by Parrikar and his French counterpart Jean-Yves Le Drian on September 23, 2016.
The IAF had issued a tender for 126 Medium Multi-Role Combat Aircraft (MMRCA) in 2007, and at the end of a stringent selection process in 2012, Rafale fighters were chosen.
The Opposition has also alleged that the deal for the 36 aircraft does not include transfer of technology, whereas, in the older proposal, 108 of the 126 fighters were to be assembled by the Bengaluru-based Hindustan Aeronautics Ltd (HAL). The current deal, however, has a 50% offset component — Dassault has agreed to manufacture items worth 50% of the deal in India. But the Opposition alleges that the discharge of offsets has been done to favour a particular private Indian defence company.
The controversy sharpened on Monday after Defence Minister Nirmala Sitharaman declined to share the cost of the Rafale fighters under the new deal with Rajya Sabha. In her answer, she said that “As per Article 10 of the Inter-Governmental Agreement (IGA) between the Government of India and the Government of France on purchase of Rafale aircraft, the protection of the classified information and material exchanged under IGA is governed by the provisions of the Security Agreement signed between the two nations in 2008.”
But hasn’t the government shared the price earlier with Parliament?
Yes, it has. On November 18, 2016, Minister of State for Defence Subhash Bhamre told Lok Sabha in a written reply that the “cost of each Rafale aircraft is around Rs 670 crore”. This is the basic price of each of the 36 fighters, without any add-ons or weapons systems. At the time of its signing two months earlier, the 36-aircraft deal was said to be worth around Rs 59,000 crore. On Wednesday, the Defence Ministry said in a statement that “in not revealing the item-wise details of the contract, the Government is merely following in letter and spirit the confidentiality provisions of a bilateral India-France Agreement of 2008 signed by the previous Government”.
And what exactly does the 2008 Agreement say?
Article 11(3) of the “Agreement between The Government of the Republic of India and The Government of the French Republic concerning the Protection of Classified Information and Material in the field of Defence”, signed in New Delhi on January 25, 2008, states: “For any contract or sub-contracting contract that includes classified information and material, a security annex shall be drawn up. In this annex, the competent security authority from the Party forwarding the information or the material, shall specify what has to be protected by the Receiving Party, as well as the corresponding classification level, applicable to it.”
Article 18(3) of the Agreement, however, stipulates that “This Agreement shall remain in force for a period of 10 years. It shall be renewed by tacit consent for new 5-year period unless one of the Parties notifies the other Party of its intention not to renew it in writing 6 months prior to the end of its current period of validity.”
The initial 10-year life of the Agreement ended on January 24 this year. It is not clear if it has been renewed by “tacit consent” by the government.
So, are no “item-wise details” of the contract available at all?
Immediately after the signing in September 2016, top Defence Ministry officials had given a break-up of the € 7.878 billion (approximately Rs 59,000 cr) deal: the basic cost of the 36 aircraft was € 3.402 billion (approximately Rs 670 crore per aircraft), the weaponry was for € 710 million, spare parts for € 1,800 million, weather and terrain compatibility fits for € 1,700 million, and performance based logistics support for € 353 million.
OK, what was the price that the previous government had negotiated of each Rafale aircraft?
No official figure was ever given. The price for 126 aircraft that was quoted nearly a decade ago, was never finalised, and no contract was signed or executed. No details of what was included in the per-aircraft price quoted in the aborted deal are known.
Is it possible to make a comparison of the prices, then?
Not with any accuracy. Some sort of assessment of whether the current price is reasonable, can be made if the “benchmark price” decided upon by the Defence Ministry’s Contract Negotiation Committees (CNC) for the two cases are made public. Before a company’s commercial offer is opened, a benchmark price is fixed to assess the reasonableness of the price quoted by the company. On its part, the Ministry has declared that “the deal secured by the (current) Government is better in terms of capability, price, equipment, delivery, maintenance, training, etc”. This was also the line that Defence Minister Nirmala Sitharaman took in her press briefing last November, during which she said the Ministry would provide comparative prices.
And has it been the practice generally to share the cost of defence deals with Parliament?
In several cases, costs have been shared; in others, those details have been kept secret for reasons of national security. But the government is duty-bound to share the full pricing details with the Comptroller and Auditor General (CAG) and the Public Accounts Committee (PAC) of Parliament.