Modi’s Rafale deal not ‘cheaper,’ ‘faster’: report

Modi’s Rafale deal not ‘cheaper,’ ‘faster’: report

SAM Report,

India’s deal with France for the purchase of 36 Rafale fighter jets has become a major controversy with allegations of crony capitalism against the Narendra Modi-led government in New Delhi.

A new report in the Indian daily newspaper daily The Hindu says three senior Defense Ministry officials have concluded that the new Rafale deal was not on “better terms” than the erstwhile deal between Dassault Aviation and the previous United Progressive Alliance (UPA) government led by the Congress party. The old deal was for 126 aircraft, whereas the new deal is for 36.

The three senior Defense Ministry officials among the seven-member Indian negotiating team strongly contested the two central claims made by the present National Democratic Alliance (NDA) government. The government has repeatedly claimed that Prime Minister Modi brokered a cheaper deal and ensured faster delivery of the fighter aircraft from the French aviation major Dassault.

This development may bolster the opposition Congress party’s criticism of the Bharatiya Janata Party-led National Democratic Alliance government in the run-up to this year’s general elections. The Congress has already trained its guns on the BJP and Modi with allegations of corruption in the Rafale deal.

According to the report in The Hindu, the three Defense Ministry officials concluded that the delivery schedule of the first 18 of the 36 Rafale aircraft in the new deal was slower than the one offered for the first 18 jets in the original procurement process during the UPA regime. The Congress-era deal had set a ceiling of 48 months for the delivery of the first 18 planes but the new agreement set the ceiling at 53 months, the experts stated.

Citing a dissenting note by three domain experts, The Hindu report said, “The reasonability of price offered by the French government [the final €7.87 billion cost of the new Rafale deal] is not established. Even the final price offered by the French government cannot be considered as ‘better terms’ compared to the MMRCA offer and therefore not meeting the requirement of the Joint Statement.”

That Indo-French Joint Statement was issued on April 10, 2015, during a visit by Modi to France. It said that the new deal to acquire 36 Rafale jets in flyaway condition through an inter-governmental agreement would be on “terms that would be better than conveyed by Dassault Aviation as part of a separate process under way” and that the delivery would be in “a time frame that would be compatible with the operational requirement of the IAF” (Indian Air Force).

The eight-page dissenting note was signed by three domain experts on the Indian team – M P Singh, a joint secretary-level officer from the Indian Cost Accounts Service; A R Sule, financial manager (air); and Rajeev Verma, joint secretary and acquisitions manager (air). It was written more than a month after the team’s negotiations with the French side were completed and three months before the inter-governmental agreement was signed on September 23, 2016.

One of the notable points of the dissent note is regards the cost of the Rafale deal. The benchmark price is discovered in advance by financial experts and acts as a ceiling on the final negotiated price of the whole package. The benchmark price determined for the aircraft and weapons packages in the new deal was €5.06 billion (US$5.72 billion).

According to the negotiating-team officials, the final price offered by the French government was 55.6% above the benchmark and “5.3% higher than the aligned cost of the commercial quotes” in the UPA-era deal.

The latest report is part of a series on the Rafale deal published by The Hindu. On Monday, the newspaper reported that the €7.87-billion Rafale deal with France involved major and unprecedented concessions from the Indian government. It said critical provisions for anti-corruption penalties and making payments through an escrow account were dropped days before the signing of the inter-governmental agreement.

Congress has said that eliminating the provisions for anti-corruption penalties meant there was corruption in the deal.

Previously The Hindu reported that Modi’s new deal pushed the price of each fully fitted, combat-ready aircraft up by 41.42%. The NDA government’s acceptance of the cost of €1.3 billion claimed for the “design and development” of 13 India-specific enhancements, along with the distribution of this “non-recurring cost” over 36 aircraft, was the major reason for the big increase in price, the report said.

But the much-awaited report of the Comptroller and Auditor General (CAG), presented in the upper house of the Parliament on Wednesday, said the Rafale deal signed in 2016 was 2.86% cheaper than the UPA’s deal in 2007. It also pointed out that four of the India-specific enhancements were not needed and without them, the cost could have been lower.

Congress leader Rahul Gandhi slammed the CAG report, calling it a “Chowkidar (gatekeeper) Auditor General” report; he refers to the prime minister as “Chowkidar.” However, the CAG report does not include the controversial details of the pricing, as the Defense Ministry maintained that these details could not be revealed to the public. On Wednesday morning, after the latest Hindu report was published, Gandhi led a protest in front of the Parliament in New Delhi, accusing the Modi government of committing graft in the Rafale deal.

Mayawati, leader of the opposition Bahujan Samaj Party, also rejected the CAG report, saying it was “neither complete nor fully correct in the eyes of public.”