Why the Cost of the Rafale Deal is Modi Govt’s Worst-Kept Secret

We know how much each jet costs, but what’s stopping the Modi government from officially confirming it?

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Explainers
8 min read
The Congress has been tailing the Defence Minister in a bid to make the price details of the Rafale deal public. 
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(This explainer on the Rafale deal has been republished from The Quint’s archives in the wake of former French president Francois Hollande claiming that the Modi government picked Anil Ambani’s Reliance Defence as the local partner, contrary to their claim that neither French nor Indian government was involved in the commercial tie-up.)

Kitna deti hai? (What’s the mileage?) – This is the ultimate question for any Indian in the market for a transport vehicle. So, why should it be any different when the Indian government goes shopping for fighter jets?

Which government got us the cheaper deal to fulfil the Indian Air Force’s desperate need for medium multi-role combat aircraft (MMRCA), the Congress-led UPA or the BJP-led NDA? The vendor, France’s Dassault Aviation was initially approached for 126 Rafale fighter jets, but in the 15 years since the demand was first raised by the Indian Air Force and four general elections later, Prime Minister Narendra Modi, in September 2016, made the big ticket announcement for the immediate purchase of 36 jets from the French jets.

But, at what cost? – the answer remains the worst kept ‘official’ secret by the Modi government.

The 'Not So' Secret Clause

On 23 September 2016, India and France signed an Inter-Governmental Agreement on the supply of 36 Rafale aircraft, initial consignment of weapons, long-term maintenance support through performance-based logistics, simulators with annual maintenance and associated equipment.

Media reports at the time stated that India had agreed to pay 7.87 billion Euro or Rs 58,000 crore for the jets, which would be delivered between September 2019 and April 2022.

Five months later, on 5 February 2017, the Indian Air Force rejected an RTI query seeking copies of the signed agreement and the price of the jets.

“The information sought is confidential in nature and public revelation of the same may lead to its subsequent availability to our adversaries. Further, the information sought is also held in fiduciary capacity ad no larger public interest is served by disclosure of such information. Hence, the same is denied,” the IAF replied.

Govt’s Flip Flop on the Secrecy Clause

Two days later, on 7 February 2017, Union Defence Minister Nirmala Sitharaman submitted a written response to the Rajya Sabha to a specific question on the cost of each Rafale aircraft. “As per ‘Article -10’ of the Inter-Governmental Agreement (IGA) between Government of India and Government of France on the purchase of Rafale aircraft, the protection of the classified information and material exchanged under IGA is governed by the provisions of the Security Agreement signed between the two nations in 2008 (During the UPA’s time).”

This much touted ‘Security Agreement’ signed in 2008 or the ‘Secrecy Clause’ has since been a ruse for the Modi government to not reveal the break up of the Rafale deal.

But on 17 November 2017, Sitharaman seemed a little more forthcoming. While addressing a press conference to counter the Opposition’s questions on the pricing of the Rafale deal, she said – “I’m not running away from giving you specific numbers. I’m fully ready to discuss the cost, the money that is being spent and so on, because that is public money.”

She promised to share the price details with the media, but no such offering was made by her ministry after the press conference.

A day later, the government, albeit unwittingly, revealed the price it paid for the jets.

Nirmala Sitharaman’s junior minister, Subhash Bhamre had, on 18 November 2018, in a written reply to a question in the Lok Sabha revealed the cost of each aircraft.

He had stated – “Inter-Governmental Agreement (IGA) with the Government of France had been signed on 23 September 2016 for the purchase of 36 Rafale aircraft along with requisite equipment, services and weapons. The cost of each Rafale aircraft is approximately Rs 670 crore and all the aircraft will be delivered by April 2022.”

So, How Much Really Does Each Rafale Cost?

While there is no definitive cost-break up offered by the Indian government, the most authoritative source of this information has been Ajai Shukla, who in November 2017 reported on an “off-the-record briefing by a senior political leader in the National Democratic Alliance for several journalists”.

The contracted price for 28 single-seater fighters and 8 twin-engine fighters averaged out to Euro 91.7 million (Rs 686 crore) per jet. The total cost of these ‘bare bone’ jets stood at Euro 3.3 billion. But ‘bare bone’ jets cannot fight a fight.

The Indian Air Force is paying an additional Euro 1.7 billion for “India-specific enhancements”, which include weaponry like Meteor and SCALP missiles, spare parts and engines, performance-based logistics to ensure at least 75 percent of the Rafale fleet remains operationally available.

They also include enhancements which are a part of the aircraft, like a “radar warning receiver” to detect enemy radar, “low band jammers” to foil it, a radio altimeter, Doppler radar, extreme weather starting-up devices for air fields like Leh and “helmet mounted display sights” that let pilots aim their weapons by merely looking at a target.

Adding the Euro 1.7 billion for “India specific enhancements”, the payment made for the aircraft goes up to Euro 5 billion, averaging out to Euro 138.9 million or Rs 1,063 crore per Rafale fighter jet.

UPA vs NDA, Who Got the Better Deal?

To be clear, there was no deal under the UPA, so it’s tough to conclusively say which government got us a better deal. The fact is that under the UPA, the deal was first delayed and later stalled due to a number of reasons –

1. Lack of consensus on ‘Transfer of Technology’.
2. The French jet maker’s unwillingness to take responsibility for the quality control of the production of 108 aircraft by Hindustan Aeronautics Limited (HAL) in India.
3. Lack of agreement on the man hours for production of the aircraft in India – Dassault provided for three crore man hours, while HAL’s estimate was nearly three times higher, escalating costs.
4. The final price itself. Reports from 2011 state that the price quoted by Dassault per aircraft was Rs 740 crore, while India wanted them for at least 20 percent cheaper.
5. Finally, elections and change in government, both in France and India put the deal which after a nearly 15 year long wait, was in its final stages, in the cold storage.

The Congress today claims that it had negotiated a price of Rs 526.1 crore per jet. Whether Dassault had agreed or would have agreed to Congress’ offering price, remains a hypothetical question.

In several press conferences and releases, the principal opposition has claimed that the NDA government secured a deal at Rs 1570.8 crore, which is a 300 percent hike from what it had negotiated, leading to a loss of Rs 40,000 crore to the national exchequer.

But this again, is a “presumptive loss” – a term, the Congress party is all too familiar with, thanks to the 2G scam. The then Comptroller Auditor General (CAG) Vinod Rai had, in 2008 reasoned that IF the 2G spectrum was allocated at 2008 rates and not 2001 rates, the country could’ve gained Rs 1.76 lakh crore. At the time, senior Congress leader Kapil Sibal defended the Congress government and infamously, propounded the ‘Zero Loss’ theory, claiming no loss had been caused to the exchequer due to the 2G allocation.

In the opposition now, Mr Sibal is mounting a similar notional argument against the BJP government by saying that IF Prime Minister Modi had, like the UPA insisted on paying only Rs 629 crore per jet, then India would’ve paid only Rs 22,644 crore for 36 jets as opposed to agreeing to the current price tag of Rs 58,000 crore.

But the fact is that the variables are different from when the UPA was in government.

The number of jets to be purchased has reduced from 126 to 36, which is bound to hike up the cost per jet. That all the 36 jets are being purchased in a “flyaway” condition also needs to be factored in. And it still remains unknown whether the Congress’ cost per jet includes “India-specific enhancements” without which the jet may just as well be a museum piece for us.

Why the Cost of the Rafale Deal is Modi Govt’s Worst-Kept Secret
(Image Courtesy: INC/Team Kapil Sibal)

Why Then, Is the Govt Being Secretive?

Because of the confidentiality clause signed in the government to government deal signed in 2016 for 36 Rafale jets. The only way it can be made public, is if a court orders the French or the Indian government to do so in case of a disagreement.

After Rahul Gandhi claimed in Parliament that French President Emmanuel Macron, had, in a private conversation with him, denied the existence of any secrecy clause, the French foreign ministry responded with a statement that stated that the 2008 security arrangement signed between France and India “naturally applies to the IGA concluded on 23 September 2016 on the acquisition of 36 Rafale aircraft and their weapons.”

However, the Congress party claims that the Indo-French Confidentiality Agreement of 2008 does not even cover the Price of Procurement of any platform. As a matter of fact, the agreement does not even mention exactly what information should remain classified.

Classified information has been defined in the agreement as “information and material to which a specific level of security classification has been accorded regardless of its nature and mode of transmission, which requires protections against compromise, destruction, removal, disclosure, loss or access o any uncleared and unauthorised person, in the interest of national security in accordance with national laws and regulations of the respective parties”.

Interestingly, in an interview to India Today on 9 March 2018, French President Emmanuel Macron had said that "In India and in France, when a deal is sensitive, we can’t reveal all details because of business reasons”. But he left it to the Indian government to decide what details it chose to reveal and to whom. “There are some discussions to be organised by the Indian government and they will have to consider which details they would want to be revealed to the opposition and to the parliament,” he had said.

Regardless, the Union Defence Minister claims she is following the rule-book, which is why she did not make good on her promise to share the price details of the jets with members of the press. However, it does not explain why her junior minister, Subhash Bhamre, would a day later, reveal in Parliament the cost of each jet to be approximately Rs 670 crore.

The government can take refuge in the fact that it has not shared on-record or confirmed media reports on the cost of each jet including sensitive India-specific enhancements. But it makes for bad optics. And the constant flip-flops, gives the opposition a talking point.

On 20 July 2018, Congress president Rahul Gandhi attempted to corner Union Defence Minister Nirmala Sitharaman in the Lok Sabha on the Rafale deal, accusing her of not being transparent about how the exchequer’s money was being spent.

It also allows the Congress party the opportunity to use estimated figures to claim the Modi government cost the country a fighter jet deal that’s 300 percent more expensive than the one it negotiated.

The Modi government has consistently maintained that it secured a cheaper deal than the UPA. Recent reports quoting a “government document prepared by the Ministry of Defence and the Indian Air Force” even claim that the Modi government saved Rs 59 crore on each jet as compared to the UPA. But if it was indeed a fact, what’s stopping the government from sharing it with the Opposition and the Parliament?

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