Rafale deal controversy

The Rafale Deal Controversy is a political controversy in India related to the purchase of 36 multirole fighter aircraft for a price estimated to be worth Rs 58,000 crore (7.8 billion euros) by the Defence Ministry of India from France's Dassault Aviation. Origin of the deal lies in the Indian MRCA competition..

Background

Further information: Indian MRCA competition

On 31 January 2012, Indian Ministry of Defence announced that Dassault Rafale had won the MMRCA competition to supply Indian Air Force with 126 aircraft along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology. The negotiations with Dassault dragged on over disagreements on warranty for aircraft produced by HAL. India wanted Dassault to ensure the quality of aircraft produced by HAL, but Dassault refused to do so. In January 2014, it was reported that the cost of the deal had escalated to $30 billion, with each aircraft costing $120 million. In February 2014, defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in fiscal year 2013-14 due to budgetary constraints.

The disagreements over cost and warranty for aircraft produced by HAL continued, Defence minister Manohar Parrikar said that Sukhoi Su-30MKI could be acquired as an alternative to Rafale. Air Chief Marshal Arup Raha disagreed, saying that Su-30MKI and Rafale had different capabilities and one could not replace the other. During an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity". In July 2015, defence minister Manohar Parrikar informed the Rajya Sabha that the tender for 126 aircraft had been withdrawn and negotiations for 36 aircraft had begun. In January 2016, India and France signed a memorandum of understanding for acquisition of 36 aircraft. In September 2016, India and France signed an inter-governmental agreement (IGA) for the acquisition of 36 aircraft at a cost of €7.87 billion. It was reported that India would acquire 28 single-seat aircraft at a cost of €91.1 million each and 8 dual-seat aircraft at a cost of €94 million each. The deal also included enhancements specific to Indian Air Force at a cost of €1.8 billion, establishment of two aircraft maintenance and overhaul facilities at a cost of €1.8 billion, a weapons package costing €710 million and a performance-based logistics agreement at a cost of €353 million.

The agreement included a 50% "offset clause", which requires the companies involved in the agreement to invest 50% of the contract value back into India. Of this 50%, 74% or €2.9 billion would have to come from purchase of goods and services from India. In October 2016, Reliance Group and Dassault announced the creation of a 51:49 joint venture named Dassault Reliance Aerospace Pvt. Ltd. The joint venture planned to manufacture components for Legacy Falcon 2000 series of jets to fulfil Dassault's offset obligation.

Allegations

The day after the signing of IGA between France and India, Indian National Congress spokesperson Manish Tewari asked for details of the agreement to be made public and questioned if there was an escalation of per-aircraft cost from ₹715 crore to ₹1,600 crore. In November 2017, Congress alleged that procurement procedures were bypassed in acquisition of Rafale and questioned the presence of Anil Ambani in France during Modi's announcement to acquire 36 fully built aircraft. Congress leader Randeep Surjewala also alleged that HAL was bypassed in Rafale contract and questioned if there was an escalation of per-aircraft cost from ₹526.1 crore to ₹1,570 crore. Anil Ambani's Reliance Defence Limited denied the allegations and released a statement that he was present as a member of Indo-French CEO forum. Defence minister Nirmala Sitharaman denied the allegations of procedural wrongdoing and said that approval from Cabinet Committee on Security had been obtained before signing of IGA. She said that the prices could not be compared as the tender for 126 aircraft and the agreement for 36 aircraft had different requirements. She also said that transfer of technology to HAL would not be economically feasible in a smaller contract for 36 aircraft. Air Chief Marshal Birender Singh Dhanoa also denied the allegations and said that the agreement for 36 aircraft was signed with better terms than the one that was being negotiated under MMRCA tender.

Former chief of air staff Arup Raha said in an interview that Defence Procurement Procedure allows for government-to-government procurement and there was no procedural bypass in signing of the IGA. He added that the agreement for 36 aircraft was cheaper than the previous proposal and had a better maintenance and weapons package. He said that most of the confusion over cost was due to comparison of prices from different base years and comparison of different deliverables. Elaborating on the differences between the IGA and the proposed acquisition under MMRCA tender, he said that the new agreement had provisions for training, a better performance-based logistics package and two aircraft maintenance and overhaul facilities that were not present in the original proposal.

In a controversy that has been ongoing for sometime, allegations in the controversy have resulted in a public incident in the Parliament of India during a no-confidence motion debate on 21 July 2018. Rahul Gandhi, president of the main opposition party, Indian National Congress, made what has been described as bold and direct accusations toward the Prime Minister of India, Narendra Modi. The prime minister dismissed the allegations as the program's interactions are between the governments of India and France, without any middlemen. Both governments have then officially refuted the charges.

Indian National Congress directly blames the Indian Government led by Narendra Modi for overlooking the capabilities of government-owned Hindustan Aeronautics Limited (HAL) in favour of Reliance Defence for the offset deal with Dassault. Indian defence minister Nirmala Sitharaman rejected these charges by saying that " Hindustan Aeronautics Limited (HAL) was dropped from the jet deal by the previous UPA regime after French manufacturer Dassault Aviation and the state-owned entity failed to agree on production terms.

French Government response

Former French President Francois Hollande has been quoted by an article on a French Mediapart, an online investigative and opinion journal as stating that the Indian government had asked the French government to nominate Anil Ambani's Reliance Defence Ltd. as its India partner in the Rafale deal.but later Hollande clarified that "it on the sidelines of a meeting in Canada on Friday that France “did not choose Reliance in any way.” When asked whether India had put pressure on Reliance and Dassault to work together, Mr. Hollande said he was unaware and “only Dassault can comment on this.”as reported by AFP

Contradicting Hollande's claim, French government issued a statement mentioning that French companies have the full freedom to select Indian firms for the Rafale contract. Dassault also clarified that Anil Ambani was Dassault Aviation’s choice

Indian Government response

Finance minister Arun Jaitley later dissmised the charges as factually false.

Indian government's Defence Ministry reiterated its earlier stand while responding to later claims of former French President Francois Hollande about involvement of a particular private firm's Rafale offset contract by saying "Neither government of India nor French government had any say in the commercial decision".

Allegations against Anil Ambani and Reliance Defence Ltd

Indian National Congress accused Indian business magnate Anil Ambani's Reliance Defence Ltd of getting the part of the contract by unfair means. The offsets contracts in the deal is alleged as the biggest example of crony capitalism

In response, Anil Ambani threatened to sue Congress Party for defamation.

Reliance also sued NDTV regarding its reporting on the matter which was noted by New York based Committee to Protect Journalists.

Judiciary's stand

In September 2018, The Supreme Court of India agreed to hear the PIL petitions related to the controversy. while Congress said they would wait for getting the necessary documents before moving court on the matter. On October 10 The Supreme Court asked the Central government to provide details of the decision making process in the Rafale deal with France in a sealed cover by October 29.

On 14 December 2018, the court dismissed all the petitions seeking a probe into the alleged irregularities in the deal, and gave a clean chit to the Union government on all the three aspects, viz., the decision making, pricing and selection of Indian offset partner. In its ruling, the court said it has "studied the material carefully" and is satisfied with the decision making process, and that it found no evidence of wrongdoing. It expressed its satisfaction on the pricing aspect, after investigating the details, which were provided to it by the government in a sealed envelope. "It is certainly not the job of this court to carry out a comparison of the pricing details in matters like the present. We say no more as the material has to be kept in a confidential domain," the court said. On the aspect of offset partner, the court rejected allegations of commercial favoritism, citing the lack of any substantive material. "We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian government, as the option to choose the IOP (Indian offset partners) does not rest with (it)," the court said. The court, having heard the matter in detail, said "we find no reason for any intervention by this court on the sensitive issue of purchase of 36 defence aircrafts [sic] by the Indian government," adding that "perception of individuals cannot be the basis of a fishing and roving enquiry by this court, especially in such matters."

Chief Justice of India Rajan Gogoi while writing judgment for three members bench ruled that, "Adequate military strength and capability to discourage and withstand external aggression and to protect the sovereignty and integrity of India, undoubtedly, is a matter of utmost concern for the nation. The empowerment of defence forces with adequate technology and material support is, therefore, a matter of vital importance.”

Reaction from both sides of the political spectrum, the petitioners and Dassault Aviation=

Notwithstanding the Supreme Court's verdict, the main opposition party, Congress, repeated its allegations of corruption against the government and continued to demand a Joint Parliamentary Committee (JPC) to probe the deal, saying that the supreme court was "not the forum to decide the issue of such a sensitive defence contract." The Indian government promptly rejected the demand. The congress even went so far as to doubt the court's 'justification' of selection of Anil Ambani's Reliance Defence as offsets partner in the deal. Rahul Gandhi, Congress president speaking at a press conference, while reiterating the demand for a JPC probe, alleged that the government misled the court on the issue, stating that the Comptroller and Auditor General (CAG) report was not shared with the Public Accounts Committee (PAC) as yet, and in fact no such report is in the public domain, contrary to the court's order. Mallikarjun Kharge, a senior Congress leader and the chairman of the PAC, who was present along with Gandhi at the press conference, citing personal communication with the deputy CAG, said that neither the PAC, nor the CAG, was in possession of the said report.

The ruling party BJP, on the other hand, welcomed the verdict, while saying that the falsehood on the issue was exposed. BJP's Tamil Nadu unit president Tamilisai Soundararajan, while lashing out at the Congress, demanded an apology from the Congress leaders "to the nation" in view of the SC findings. Union Home Minister Rajnath Singh, too, said: "The Congress President tried to mislead public for political benefit and maligned India’s image globally. He should apologize to the House and to the people of the country. He thought ‘Hum to doobe hain sanam tum ko bhi le doobenge’ (I have drowned so I will take you and drown),"

Dassault Aviation, on the same day of the verdict, issued a statement to the press welcoming the Indian Supreme Court's verdict. "Dassault Aviation welcomes the decision of the Supreme Court of India rendered today dismissing all petitions filed on the Rafale Contract signed on 23rd September 2016 in the frame of an Inter-Governmental Agreement between India and France," the statement read. It also reiterated its commitment to ensure "successful production in India through Dassault Reliance Joint Venture in Nagpur as well as through a full-fledged supply chain network".

The petitioners in the case former minister Yashwant Sinha, former journalist Arun Shourie and lawyer Prashant Bhushan, issued a press statement expressing 'shock' and 'disappointment' over the court's decision to dismiss their petitions and said that the verdict "neither addressed the documented facts nor dealt with their main prayer seeking an investigation into the deal to purchase the French fighter jets," adding that "some of the facts mentioned in the court judgment are not only not on record but are patently incorrect". While claiming that "no portion of the CAG report has been placed before Parliament or placed in the public domain," the trio accused the court of taking a "conservative view of judicial review in cases of defence deal corruption involving high functionaries." The trio claimed that the verdict had used as facts, the statements by the government through affidavits and the sealed covers handed only to the court and not with the petitioners, and that these factually incorrect statements were based on the statements made by the government to the court in sealed covers and the factual inaccuracies show how dangers associated in verdict based on unverified statements. They demanded a "full public disclosure of all the facts" along with "a comprehensive and independent investigation into the deal".

On 16 December 2018, the Indian Prime Minister Narendra Modi launched a "sharp attack" on Congress for its refusal to accept the Supreme Court's decision to reject the petitioners' demands of probes, and accusing it of lying, saying: "The country's defence ministry is also a liar. The country's defence minister is also false. Officers of Indian Air Force are also liars. The French government is also false. Now they have started to call the highest court of the country a liar too". While quoting Ramcharitmanas, Modi said, "lies are what they eat and lies are what they give to other people, as they accept these lies themselves," adding that while the government is committed to increase the strength of the Indian military, the Congress is standing with the forces that do not want to see it to be strong. The BJP, on the same day, announced that it will held as many as 70 press conferences across different areas of India to "expose" the Congress for what it said was plotting conspiracy against the Modi government on the issue of Rafale deal.

Samajwadi Party Chief Akhilesh Yadav, who had previously demanded a JPC probe, took a stance contrary to that of the Congress following the court's verdict, saying that the decision on the issue has been given by the Supreme court, which "is supreme in the eyes of people", and hence doubts, if any, should be raised in that court. Upon being asked about the change in his party's stance, Yadav said that his party had demanded a JPC probe before the Supreme court's verdict. "I had said JPC should be set up as there can be many things in it. But now the verdict has come and the Supreme Court has deliberated on all angles," he said. Communist Party of India (Marxist) supported the calls for a JPC. Finance Minister Arun Jaitley in his blogged expressed his opposition for a Joint Parliamentary Committee (JPC) probe.

See also

• Bofors scandal
• Corruption in India
• List of scandals in India
• Jan Lokpal Bill
• Corruption Perceptions Index
• Karachi affair