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Rafale Fighter Deal: Unwarranted Controversy

The deliberate embroiled controversies are generated by desperate inimical forces encouraged by paid sources to coerce the decision makers having impact on  even for future procurement thus jeopradising defence capabilities...

The political controversy around purchase of 36 Rafale Fighter Aircraft over contract costs, alleged crony capitalism and allegation of national interest being compromised are non issue and raised mainly for political ends. Raising such controversy is an error of epic proportions created for parochial reasons is waste and impact in degrading national security. Such controversies on corruption allegations on Bofors deal or Augusta Westland VVIP helicopter had no tangible political corrective measures or fixing accountability rather than complicating the process. Any sensible Indian can make out that the issue raised about the combat aircraft was bought at unfavorable terms has political tones for gains before the upcoming elections.

Rafale was shortlisted due to its obvious cost effectiveness and operational superiority. The Government signed an Inter-Governmental Agreement (IGA) with France for the purchase of 36 Rafale fighter jets at a cost of around Rs. 59000 crores. The exact price for the 28 single-seat Rafales was approx Rs. 681 crore each; and that of each of the eight tandem-seat Rafales was approx Rs. 703 crore. After adding up the cost of weapons, maintenance, simulators, repair support and technical assistance the average cost comes to approx Rs. 1,646 crore while the ones negotiated for by the UPA would have come to Rs. 1,705 crore. Broad Provisions and Cost in INR in Crores are as under:-

  • Cost of Platform - Single - seat @ Rs. 681 crore and Tandem-seat@ Rs. 703 crore each
  • Total cost - @ average of Rs. 688 Crores = ~ Rs. 24768
  • Infra and Spares - Rs. 13620
  • Weapons plus support equipment - Rs. 5370
  • India Specific Additions - Rs. 12858
  • Performance based Logistics - Rs. 2700
  • Total ~ Rs. 59000

Despite spending Rs. 9,855 crore more on the India Specific Enhancements in the planes in the deal done by the present government, the cost of the planes is coming to Rs. 59 crore less than the UPA price for each aircraft.

We are not deliberating the whether the cost of acquisition is confidential or not and the reasons for Govt not disclosing the cost of acquisition, however we acknowledge giving details in public domain of the break up cost of individual sub systems may impact the security and operational capabilities of the defence equipment.

Such deliberate embroiled controversies are generated by desparate inimical forces encouraged by paid sources to coerce the decision makers having impact on even for future procurement thus jeopradising defence capabilities. The present case is not akin to Bofors or Agusta Westland irregularities. One wonders why such ruckus is rare in deals with G2G deals. The present deal is like Foreign Military Sales (FMS) of US or G2G deal with Russia and has sovereign backing of France Govt. As per Inter Govt contract, India will pay money to the French DGA which in turn will disburse the respective amounts to the various sub-contractors & the prime contractor. There is no option clause and the deliveries are slated to begin after 36 months and to be completed in 67 months The whole deal is little over Rs 1640 Crores per aircraft including the under mentioned provisions ;-

  • Logistics and ground support and ensure that there is 75 percent are operationally available at any time against normal Fighter fleet which has an operational availability between 55-60 percent.
  • Besides the aircrafts in fly-away condition with helmet mounted displays, radar warning receiver, infrared search, weapons, and simulators.
  • Spares, maintenance, and performance based logistics support for five years.

  • The weapons package includes MBDA manufactured Meteor radar guided Beyond Visual Range (BVR), an air-to-air missile with a beyond-visual-range over 100 km, and Storm Shadow a long range air to ground cruise missile with a range of over 560 km.
  • The contract also has 13 India-Specific Enhancement (ISE) capabilities to provide a significant capability edge to the IAF over India's adversaries. These includes integration of the
  • Rafael-supplied Litening target acquisition/designation pod.
  • Rafael-supplied Spice-1000 standoff PGM and its related data-link pod.
    MBDA-supplied Meteor BVRAAM and ALARM anti-radiation missile.
  • Rafael-supplied X-Guard towed-decoy and development of its on-board location cabinets.
  • TARGO-2 HMDS supplied by Elbit Systems .
  • Bomb's FOG-based inertial navigation system with the Rafale's on-board Sigma-95N RLG-INS through a MIL-STD-1553B interface.
  • Installation of Thales- supplied traffic collision avoidance system (TCAS) and standby radar altimeter.
  • Upgradation of the SPECTRA EW suite to accommodate low-band, medium-band and high-band directional jammer apertures.
  • Optimisation of the M88 turbofan's jet-fuel starter for operating in sub-zero temperatures at altitudes above 9,000 feet ASL.
  • Increase in the capacity of the on-board OBOGS.
  • Addition of weather-mapping mode of operation in the Thales- supplied RBE-2 AESA-MMR.
  • Development of quad-pack ejectors for the DRDO-engineered and Spice-250 PGM-derived SAAW EMP-generating standoff PGM.
  • Assistance in flight-qualification of DRDO- developed 450kg laser-guided HSLD bomb and modification of the Sigma-95N RLG-INS' coupled GPS transceiver in order to receive MIL-STD PY-code coordinates from India's NAVIC/IRNSS constellation of GPS satellites.

There is no point in comparing with MRCA RFP response. The deal for 126 aircraft was never signed. How can one compare a non-deal with a deal? The current Rafale deal does not entail manufacture/assembly of the fighters in India. It is unreasonable to compare the deal with earlier quotes, given that the deal of 2016 was for a different configuration of more weapons, a much lesser number than the 126 planned earlier and without the clause mandating them to be built in India. One needs to compare the comparable and keep in mind the Foreign Exchange rates, Cost escalation, requirement of enhanced specifications, add on besides the Offset cost. Significantly in earlier deal, Dassault was unwilling to take responsibility for the quality of output and had reservations about HAL ability to accommodate the complex manufacturing technology.

Offset Obligation

The deal has offset obligation of 50 percent of the main Rafale contract amounts to almost $4.4 Billion (Rs. 29500 Crores approx.), the largest-ever offset contract signed by India and is almost the same amount of cumulative Offset contracts signed so far. The defence offsets that India is targeting under the deal include:

  • Sourcing of components (74 percent of the offset value) for future French operations through component exports from India.
  • Setting up of manufacturing facilities in India.
  • Providing high-tech job training.

The OEM Dassault Aviation is liable to discharge only a portion of the offset obligations. Besides Dassault, the other Tier-I vendors (and partners of OEM Dassault) namely Safran, Thales and MBDA are also likely to have a share in discharging offsets in proportion to their share of work in the main platform with the their own JV with Indian industry. As per offset provisions an OEM and its Tier-1 vendors are free to choose its offset partners and Govt has no say in the selection of partner. It is a business decision and through will execute the offset obligations which have penalty provision for not meeting the timely obligations. An OEM or its Tier-1 are the IOP provide details at the time of seeking offset credits, or one year prior to discharge of offset obligation.

Joint Ventures

The offsets contract has been awarded to a JV called Dassault Reliance Aerospace and as such Reliance is not the sole beneficiary of offsets. Rafale and its Tier-1 vendors have identified more than 70 firms as IOP for sourcing airframe, its Snecma M88 engines, radar, electronic warfare and avionics, aeronautical components, engineering and software. The main being Dassault-Reliance joint venture firm (DRAL) and Snecma- HAL Aerospace Ltd for aero-engine components and Thales's joint ventures with India's SAMTEL for multifunction cockpit displays.

  • Airframe Fuel tanks/pylons
  • Toolings
  • Mechanical Parts and Sub-assemblies
  • Aero Engines Mechanical parts, tubes, pipes
  • Radar, EW and Avionics Integration
  • Test Benches
  • Electronic Boards
  • Aeronautical Components & Equipment
  • Ground Support Equipment
  • Engineering, Software & Services
  • Technical Publication
  • MRO

Consider some recent development. Thales one of the Tier-1 vendors has to execute approx $1 billion (Rs 6,850 crore) worth of offsets over the Rafale fighter jet deal in partnership with BEL and Reliance Defence. Thales joint venture with Reliance Defence and would now start building facilities at Nasik. Thales will be transferring core technologies for the aircraft particularly in the radars and electronic warfare domain to BEL. Thales plans to target long-range radars, sonar systems for the navy and air traffic control systems with dual use. It is confident of creating more than 3,500 high-end jobs in India over the next three years, as it executes.

Joint ventures are independent agreement between two private entities and that the government does not have any role in this. Joint venture will be beneficial for the country because it will generate jobs and impart valuable skills to Indian engineers in the field of defence manufacturing. The partnership opportunities created by Offset provision will develop major Indian programmes with high levels of technology transfer. The components manufactured JV facilities in India will form the part of Global Supply Chain for Dassault Aviation and other partner companies in other countries.

The bogey that RIL had no experience in manufacturing planes to discharge the biggest ever offset contract, as it neither had any industry experience nor any required assets. Let us face the fact who in India has HAL whose sole occupation is manufacturing defence planes? The DPSU has not been able the deliver even it yearly workload despite all the experience and infrastructure. Unless we give a chance to Private sector we should not pass the judgement. Issues raised in the press like Reliance Aerostructure Ltd (RAL) incorporation, license to manufacture fighter aircraft in 2016 and it did not own any land or building before granting IL are of no consequence as these are as per provisions of IL/ Offset guidelines. One thing is certain that the accusations are not collaborated by facts or it is deliberate attempt to ignore the reality.

The unsubstantiated slugfest over critical defence equipment is a pre election political spectacle conjured midway through the contract execution not only shames the country internationally but also is an attempt to deprives the defence forces of critically required operational capability, impacting national security and even their morale. Notwithstanding above, the Comptroller and Auditor General (CAG) is examining the deal with all the relevant supporting documents as per normal practice and will know more in time to come.

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