What the Rafale controversy is about
Some of the key features of the Rafale controversy are listed below, based on a document released by Yashwant Sinha, Arun Shourie and Prashant Bhushan on Wednesday. The specific responses of Reliance Defence and Aerospace have been added. For the government, minister without portfolio Arun Jaitley blogged and tweeted on Wednesday night: “There is not a grain of truth in the wild allegations repeated today nor anything substantiating in the purported facts and voluminous documents marshalled to corroborate the baseless accusations.”
The UPA-negotiated price for 126 Rafale combat aircraft would have been Rs 715 crore apiece, according to a cumulative figure cited by NDA minister Manohar Parrikar to Doordarshan in 2015. A year later, junior defence minister Subhash Bhamre told the Lok Sabha that the NDA-negotiated price would be approximately Rs 670 crore. However, on February 16, 2017, a firm of Anil Ambani’s Reliance Group issued a statement that put the total value of 36 Rafale jets at Rs 60,000 crore, which works out to Rs 1,660 crore a plane. The government has not confirmed the per-plane figure. If the Rs 1,660 crore is correct, it would mean that each plane costs Rs 1,000 crore more than what has been disclosed in Parliament. “This is what is embarrassing for the government,” says the document issued by Sinha, Shourie and Bhushan.
The government has been suggesting the price could be higher because of “India-specific enhancements” but an India-French joint statement when Prime Minister Narendra Modi finalised the deal in Paris in 2015 mentions “the same configuration as had been tested and approved by the Indian Air Force”.
Originally, out of the 126 planes, 18 were supposed to have been delivered in a “fly-away” condition, fully built by the vendor, Dassault of France. The remaining 108 were to be made in India with the state-owned and experienced Hindustan Aeronautics Ltd (HAL) undertaking 70 per cent of the work and Dassault the rest. The practice of transferring technology and letting local firms build the fighters is known as “offset” obligation which countries demand from suppliers while spending huge amounts on defence products.
However, on April 10, 2015, Prime Minister Narendra Modi, on a tour of France, agreed to a new deal. It was announced that India would purchase 36 planes in a flyaway condition. There was no explanation for how the number was reached. Neither was there any mention of the rest of the 126 planes.
Initially, the state-owned and experienced Hindustan Aeronautics Ltd (HAL) was supposed to partner Dassault, the French makers of the Rafale, in making several of the planes in India. However, on February 16, 2017, the Anil Ambani group announced that Reliance Aerostructure Ltd and Dassault have formed a joint venture called Dassault Reliance Aerospace Ltd. The joint venture “will be a key player in the execution of the offset obligations”, a media release issued by Reliance Defence said. Reliance Defence and Reliance Aerostructure are part of Reliance Infrastructure.
The Reliance Defence release estimated the value of the offset obligations around Rs 30,000 crore.
(On Wednesday, Rajesh K. Dhingra, CEO of Reliance Defence and Aerospace, said on behalf of the group that the basic premise that the full offset obligations worth Rs 30,000 crore would go to Reliance “is totally unfounded”. Dassault and its other Tier I suppliers have already indicated more than 100 Indian companies which will participate in the offset contracts.)
March 28, 2015: Reliance Defence Ltd incorporated, the document said, quoting the website of the ministry of corporate affairs.
(On the incorporation, Reliance Defence and Aerospace said on Wednesday: “We incorporated three companies in December 2014. In February 2015, we publicly announced our entry in the defence segment in the presence of hundreds of mediapersons at Aero India. A formal notification was sent to Stock Exchanges in February 2015. Ten more companies were incorporated between January and April 2015….
“Part of the offsets (export obligations) from Dassault’s share of offset obligations will be discharged by Dassault Reliance Aerospace Limited. This company was incorporated in February 2017, a full two years after the public announcement by Reliance Group in February 2015, regarding its entry into the defence business.)
April 2015: Prime Minister Modi visits France. Anil Ambani is among those who were in Paris then.
(Reliance Defence and Aerospace said on Wednesday: “Mr Anil Ambani is part of the CEOs’ Forum for France and also many other countries. He was in Paris because there was a meeting of the CEOs’ Forum on the sidelines of the Prime Minister’s visit. More than 25 other CEOs from the Indian companies were also present, including the chairman of HAL.”)
April 8: Referring to the French visit of Modi, the then Indian foreign secretary S. Jaishankar said that discussions on Rafale “are ongoing” and “we do not mix up leadership level visits with deep details of ongoing defence contracts…. A leadership visit usually looks at big picture issues even in security field”.
April 10: India and France issued a joint statement after Prime Minister Modi and French President Francois Hollande met, announcing the agreement on the 36 aircraft.
April 13: Defence minister Manohar Parrikar told Doordarshan on the Modi-Hollande announcement: “Modiji took the decision; I back it up.”
Critics of the deal are citing such comments to directly target Prime Minister Modi. They say the comments make it clear few in the government had any clue before the deal was struck when Modi was in Paris.