Nearly a month before the deal for 36 Rafale aircraft was signed between then Defence Minister Manohar Parrikar and his French counterpart in New Delhi in September 2016, a senior officer of the Ministry of Defence, who had been part of the Contract Negotiations Committee (CNC), raised questions about the deal’s benchmark price and put his objections on record, The Indian Express has learnt.
This officer was then Joint Secretary & Acquisition Manager (Air) in the MoD and the one meant to initiate the note for the Cabinet’s approval.
Sources have confirmed to The Indian Express that his objections delayed the Cabinet note approving the deal and its signing which only happened after his objections were “overruled” by another senior MoD official, Director General (Acquisition).
The note by the JS & AM (Air), as part of the Rafale deal file, is currently with the office of the Comptroller and Auditor General (CAG) who is studying the deal which has set off a political controversy.
Sources said the CAG is likely to submit its report by the winter session of Parliament in December. The CAG report, sources said, is likely to refer to the note containing objections to the Rafale deal and will also mention how these objections were over-ruled.
The CNC was headed by the Deputy Chief of the Indian Air Force (IAF) and had arrived at the final price after more than a dozen rounds of negotiations with a French team headed by a General.
One of the key objections raised by JS & AM (Air) was over the benchmark price for the French aircraft in the new 36-Rafale deal which had been pegged higher than the benchmark price for the shelved 126-Rafale proposal. The benchmark price is decided to provide a reference to the CNC about the reasonableness of the lowest price quoted by the suppler.
The government-to-government deal for 36 Rafale aircraft was announced by Prime Minister Narendra Modi during his visit to Paris in April 2015.
This led, on June 24, 2015, to the cancellation of the proposal for 126 Rafale jets which was part of the Medium Multi-Role Combat Aircraft (MMRCA) tender issued in 2007.
Under the MMRCA tender, the Indian Air Force had conducted trials of fighter aircraft of six firms and after negotiations began with Dassault after its bid, along with that of Eurofighter, was opened in 2012.
The note by JS & AM (Air) also pointed to the fact that EADS, Germany, the maker of Eurofighter — the second aircraft which had qualified in the IAF trials — had offered a 20 per cent discount on its bid price to the Indian government in July 2014.
The note argued that a similar 20 per cent cut should be applied for rates in the case of 36 Rafale aircraft as a competitor was offering that discount.
Another observation in the note referred to the fact that the fleet of the IAF consisted of the Russian Sukhoi Su-30 MKI, which were being manufactured by Hindustan Aeronautics Limited in India.
The note said that the IAF could get more Sukhoi aircraft from HAL for the same amount.
The note, sources said, was considered by the Defence Acquisition Council (DAC), chaired by Parrikar in mid-August of 2016. That DAC meeting had been scheduled to approve the 36-Rafale deal and initiate the process of preparing a note for the approval of the Cabinet.
It was meant to be in time for the visit of French Defence minister Jean-Yves Le Drian to New Delhi to sign the deal in first week of September. His visit was then postponed.
Following the DAC meeting, however, the objections in the note of JS & AM (Air) were over-ruled by DG (Acquisition) who said that the benchmark price had to be compared with the price offered for 18 Rafale aircraft, as part of the MMRCA proposal, which were to come in flyaway condition from France.
She was also supported by the IAF which justified the need for Rafale aircraft, as compared to more Sukhois.
The JS & AM (Air) then proceeded on a month’s leave and the 36-Rafale deal was approved by the DAC in first week of September 2016.
Finally, the Cabinet note was initiated by another official holding charge of JS & AM (Air) and was approved by the Cabinet in third week of September 2016. This led to the Rs 59,262-crore deal being signed between Parrikar and Le Drian on September 23, 2016.
According to French news website Mediapart.fr, then French President Francois Hollande had said that the original deal was to be 126 aircraft, “but with the change of government (in India in 2014), the Indians reformulated their proposal, which was less attractive for us, since it was 36 aircraft only. But the manufacture was planned in France, contrary to the previous proposal. So we lost on one side, but we won the other.”
Hollande was also quoted as saying that the Indian government had “proposed” Anil Ambani’s Reliance Defence as the offset partner for Dassault Aviation in the 36-Rafale aircraft deal, which he told AFP was part of a “new formula” from the Indian government after Modi became Prime Minister. But the government said that it played “no role” and that “unnecessary controversies” were being created.
Late last Friday, French Ministry of European and Foreign Affairs had also issued a statement after the Mediapart.fr report saying that it was in “no manner involved” in the choice of Reliance Defence. Dassault Aviation too issued a statement asserting that “in accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group” and that “it is Dassault Aviation’s choice, as CEO Eric Trappier had explained in an interview”.