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Straws In The Wind
The hectic lobbying on to rewire a $22 billion deal
There are ways and there are ways of deciphering ‘deal time’ in Delhi’s beltway. But there is no more certain a way than to peep into the bars and cubbyholes of the plush hotels and clubs, where slick, shadowy figures—some Indian, many foreign, a few women, mostly men—swirl around with the easy familiarity of the capital’s power matrix when there is a killing to be made. Speed dials are pressed and nicknames called out as the birds seek out their prey with extra long cigars and unpronounceable single malts. In the third month of the ‘Modi sarkar’, on the eve of Independence Day, the August air is pregnant with possibility for such folk as the new BJP government sits in judgement on India’s single-biggest defence deal. At stake is the almost-done $22 billion deal with the French defence manufacturer Dassault for the supply of 126 fighter jets (with 80 more if need be), popularly known for its product as “the Rafale deal”.
Ever since the 1980s, Indian politicians have been haunted by the ghost of Bofors while navigating the steep and slippery path of negotiations involving major defence deals. An allegation of Rs 64 crore kickbacks in the Swedish field guns purchase had spelt doom for Rajiv Gandhi, not only reducing the moral edge of his massive mandate in the Lok Sabha but also paving the way for his ouster in the next parliamentary elections in 1989. Today, however, the issue has gone much beyond the Gandhis and the Congress as leaders of different political parties realise the implications of a defence deal that can potentially go bad.
For the BJP-led NDA government of Narendra Modi, perhaps this is the dilemma as it grapples with the Rafale deal involving 126 Medium Multi Role Combat Aircraft. Of the six leading international companies that bid for this prized contract, Rafale and Eurofighter’s Typhoon were the two that were shortlisted. But Rafale, which had a lower price than the Typhoon, was earmarked as the “lead bidder” and given the chance to complete the negotiations. The UPA government, though it identified France’s Rafale as the leader, did not complete the deal. It is now left to the Modi government to do so. If it approves and finalises the deal with Rafale, he may come under criticism for endorsing a decision taken by the Congress government. But if he scraps it, he will further delay the induction of new combat aircraft that the IAF badly needs to supplement its replenishing squadron strength. “This government will not be burdened by the decision of the previous government,” says a Rafale opponent. “They will look at the deal afresh.”
“It’s a highly competitive area. The losers will raise the pitch, for sure. The Eurofighter countries have not given up the fight.”
Eurofighter, a consortium of four European countries—Germany, the UK, Spain and Italy—has remained a strong contender for the lucrative contract. A change of guard in Delhi has now brought its supporters to centrestage again with blogs, commentaries and such like by them in Indian mainstream media questioning whether Rafale was the best option for the IAF anyway. A number of high-level visitors—including the French foreign minister, British foreign secretary William Hague and ending with US secretary of state John Kerry and secretary of defence Chuck Hagel—have touched down in Delhi in the past weeks. This has intensified speculation that an attempt is made on their part to allow their respective companies to re-enter the bidding for the MMRCA deal.
A government decision last Thursday to put on hold all procurement from Italian defence group Finmeccanica and its affiliate companies—for their alleged involvement in the chopper scam—also seems to have encouraged rivals that the Rafale deal may be reopened. “It’s a highly competitive area. The losers will raise the pitch for sure. The Eurofighter countries have not given up the fight,” says ex-foreign secretary Kanwal Sibal, who also had a stint as India’s ambassador to Paris.
The MMRCA deal, just for its sheer size, attracted a large number of companies, from the time it was announced by the Indian government. A commentary by Carnegie Endowment’s Ashley Tellis in the wake of India’s announcement makes it clear. “The MMRCA bid has been one of the hottest recent aviation procurements not just in India, but internationally too... the procurement bid has been incandescent because it involves geopolitics, the economic fortunes of major aerospace companies, complex transitions in combat aviation technology, and the evolving character of the IAF itself.”
It is the IAF’s threat perception in the face of its depleting squadron strength—down from the sanctioned 44 squadrons to about 34 squadrons at present—that led it to look for new aircraft to replace its aging combat fleet. Initially, it was thought that the Mirage 2000-5 aircraft (it had impressed during the 1999 Kargil campaign) should be upgraded. But later that idea was junked and the search began for a newer, better combat jet. Since the Indian economy was booming, the political bosses had told the IAF top brass to “go for the best and not to worry about the cost”. Accordingly, it was decided that the IAF needed 126 MMRCA and tenders were sought through a ‘multi-vendor’ process. Six leading international companies were identified (see infographic). The process started around 2001 but it was only in ’07 that the six aircraft were put to an evaluation test, involving various exercises and tests, including flying under varying temperatures, in the Rajasthan desert as well as in the icy heights of Leh. “This was one of IAF’s biggest test evaluations, and that too simultaneously for six different aircraft,” says former air vice-chief (retd) Air Marshall Pranab K. Barbora. “Our boys did a commendable job and the testing procedure was above board. It received praise from all the participants,” says Barbora. According to him, after completing this lengthy process of evaluation, the experts agreed to shortlist Rafale as No. 1 and Eurofighter as No. 2. But though this part got over in 2012 and the government officially announced Rafael to be the “lead bidder”, final negotiations were still some way off.
“This was one of the IAF’s biggest test evaluations, the procedure was praised by all participants...if we reopen the bidding process, we’ll never get to squadron strength.”
Right now, as part of a proposed agreement, 18 fighter aircraft will be supplied in ready ‘fly away’ conditions while the rest 108 will be built in India by HAL. While the deal is crucial for France as it ensures the running of the Dassault plant, for India it not only helps in transfer of technology, it’ll also generate employment for a large number of people.
With a new regime in power, some experts remain sceptical on whether the Rafale deal will go through though. “Rafale’s fate hangs in the balance, it’s 50-50,” says defence analyst Rahul Bedi. He says one reason for the uncertainty is because a lot of money is involved. Bedi’s estimate is that the deal could surpass $22 billion by the time it is finalised with the cost of one aircraft going to over $200 million.
However, he points out that in the event Rafale is rejected by the government, it does not ensure that it will then be replaced by Eurofighter’s Typhoon. “There is no provision which says that if the lead vendor loses, the one in second place automatically gets picked,” says Bedi. “There’ll be no other option but to reopen the entire tender process.” But there are other wider implications if that happens. “If we reopen the process, we will never make it to the squadron strength,” says Barbora.
French officials, though, continue to put up a brave front in public. “The deal is progressing well but it turned out to be more complicated than what we had expected,” confesses a foreign official. Three of the four government committees set up on issues like maintenance, offset and transfer of technology are all complete. Only the fourth, final negotiations on price and production sharing agreement, are yet to be finalised. They also point out that technology offered through Rafale would give India an edge over rivals for the next 30-40 years.
Most independent accounts suggest the government may well settle for the French product despite questions being raised about the price, its fuel consumption and also Dassault’s ability to honour its promise for transfer of technology and taking responsibility for the jet to be manufactured by HAL. It may not be without significance that Eurofighter wound up its communications office in Delhi some weeks back. Does it mean then that the tough talk we get to hear in public is actually preparation for hard-nosed bargaining by the Indian government and French officials as negotiations enter the last, crucial phase?
The Winner (Almost) And The Also-Flowns
How Rafale fares vis-a-vis its five other international competitors for the MMRCA deal
The 15-Year Search For A Combat Aircraft
Three governments, two of NDA and one of UPA, have now presided over a tortuous process