In line with the directions of the Supreme Court, the government submitted Monday details of the pricing of 36 Rafale fighter aircraft being purchased from Dassault Aviation of France to the top court in a sealed cover.
A separate government document shared with the petitioners — a redacted copy of its earlier response to the Supreme Court on the decision-making process leading to the award of the contract — said the delay in sealing the Medium Multi-Role Combat Aircraft deal (during the UPA rule) gave India’s adversaries time to upgrade and equip their fighter fleets with advanced weaponry.
“During this long period of inconclusive 126 MMRCA process, our adversaries inducted modern aircraft and upgraded their older versions. They acquired better capability air-to-air missiles and inducted their indigenous fighters in large numbers. Further, they modernised and inducted aircraft with advanced weapon and radar capabilities,” the government said.
“As per available information, our adversaries inducted more than 400 fighters (equivalent to more than 20 squadrons) during the period from 2010 to 2015. They not only inducted 4th Generation Aircraft but also inducted 5th Generation Stealth Fighter Aircraft. The combined effect of our own reducing combat potential and our adversaries enhancing their combat potential made the situation asymmetrical and extremely critical. An urgent need was felt to arrest the decline in the number of fighter squadrons in IAF and enhance their combat capabilities,” the government said.
On October 31, hearing PILs questioning the government-to-government deal between India and France for purchase of 36 Rafale aircraft in flyaway condition, a bench headed by Chief Justice of India Ranjan Gogoi had sought details on the pricing of the aircraft from the government. Attorney General K K Venugopal had then expressed difficulty in furnishing details of pricing, saying it had not been revealed even in Parliament.
The details have now been submitted in a sealed cover only for the perusal of the judges.
The redacted copy of an earlier response that the government shared with the petitioners said “the vendor/OEM (Original Equipment Manufacturer) is yet to submit a formal proposal in the prescribed manner indicating details of IOPs (Indian Offset Partners) and products for offset discharge”.
The government also put the onus on the delay in the initial plan for procuring 126 Rafale — 18 in flyaway condition and 108 to be licence-manufactured in HAL to be delivered over a period of 11 years from the date of signing the contract — on the then Defence Minister’s decision to order re-evaluation of the Contract Negotiation Process and differences between HAL and Dassault over the time required to manufacture the 108 aircraft in India, and unresolved issues related to contractual obligation and responsibility for these jets.
The government said that though Dassault was chosen as the main vendor (L1 vendor) in January 2012 and contract negotiations began in February 2012, the then Defence Minister, while allowing the Contract Negotiation Committee (CNC) to go ahead with the deliberations, had also directed that “after the CNC report has been finalized, the entire issue of approach and methodology adopted by the CNC to determine the L1 vendor may be re-examined by MoD (Fin) and MoD to ascertain that it is reasonable, appropriate and as per the laid down procedure.”
“In addition to the above, the contract negotiations could not conclude mainly due to unresolved issues related to 108 aircraft to be manufactured in India. These issues pertained to lack of common understanding between HAL and Dassault Aviation on following: (a) Man-Hours that would be required to produce the aircraft in India: HAL required 2.7 times higher Man-Hours compared to the French side for the manufacture of Rafale aircraft in India; (b) Dassault Aviation as the seller was required to undertake necessary contractual obligation for 126 aircraft (18 direct flyaway and 108 aircraft manufactured in India) as per RFP requirements. Issues related to contractual obligation and responsibility for 108 aircraft manufactured in India could not be resolved”, the government said.
These issues “remained unresolved for more than three years”, the government said, adding that “this delay impacted the cost of acquisition, as the offer was with in-built escalation and was influenced by the Euro-Rupee exchange rate variations”.
“As the contract negotiations reached a stalemate and RFP (Request For Proposal) compliance could not be ensured, the process for RFP withdrawal was initiated in March, 2015 and RFP for 126 MMRCA was finally withdrawn in June 2015,” it said. The government said it had followed the Defence Procurement Procedure-2013 (DPP-2013) in the purchase of the 36 Rafale.
“In the case for procurement of 36 Rafale aircraft, all the requisite steps i.e. preparation of Services Qualitative Requirements (SQR), Acceptance of Necessity (AoN) by Defence Acquisition Council (DAC), Technical Evaluation and acceptance of technically qualified platform, commercial negotiations by Contract Negotiation Committee (CNC) and approval of Competent Financial Authority (CFA) as per requirement of Defence Procurement Procedure 2013 have been followed…”, it said.
The government said that an Indian Negotiating Team (INT) was constituted to negotiate the terms and conditions of the procurement of 36 Rafale aircraft with the French government team. The INT was headed by the Deputy Chief of Air Staff (DCAS) of Indian Air Force.
“Negotiations between INT and the French side started in May 2015 and continued upto April 2016. A total of 74 meetings, which included 48 internal INT meetings and 26 external INT meetings with French side were held during the negotiations… The proposal for procurement of 36 Rafale was presented to the DAC (Defence Acquisition Council) on three occasions between 28th August-1st September 2015 and subsequently on 11th January 2016 and 14th July 2016 for approvals on various aspects of the negotiations and directions. As mandated by the DAC, the INT completed its negotiations and arrived at better terms relating to price, delivery and maintenance as compared to the MMRCA offer of M/s Dassault Aviation,” the government said.
On fulfilling offset obligations, it said “the Defence Offset Management Wing (DOMW) under the Department of Defence Production (DDP) is responsible for all matters relating to post contract management which includes monitoring of discharge of offset obligations including audit and review of progress reports received from the vendor”.
“Post contract, the vendor submits six monthly offset reports and necessary supporting documents to DOMW. These offset discharge reports are then independently audited by the Controller General of Defence Accounts (CGDA) to ascertain veracity of the transactions vis-à-vis offset contract. Based on the audit report submitted by the CGDA, offset credits are granted or penalties if applicable are levied. Offset guidelines also have provisions for change of IOP, product, offset component and rephasing of period of performance, which can be availed by vendor, post approval of MoD,” it said.