Business

India, France agree on deal for 36 Rafale jets

Setting aside the norms of New Delhi’s procurement rulebooks, India and France marked Prime Minister Narendra Modi’s visit to Paris on Friday with an announcement that the Indian Air Force (IAF) would buy 36 Rafale fighters in fly-away condition. These will equip two IAF squadrons with 18 aircraft each.

“I have spoken to President Hollande about buying 36 Rafale jets in fly-away condition,” Modi said, addressing a joint press conference in Paris. He added the terms of the tender would be modified accordingly.

The announcement is silent about the plan to build the Rafale at Hindustan Aeronautics Ltd (HAL), a central part of the tender. So far, this multi-billion dollar procurement, conceived as a springboard for the modernisation of India’s aerospace sector, will only benefit that of France.

Friday’s announcement underlines the continuing failure by India and France to take to a logical conclusion the IAF’s August 2007 tender for 126 medium multi-role combat aircraft (MMRCA), of which 18 were to be supplied fully built and 108 built in India by HAL. After touting its handling of the tender as an example of probity and professional skill, New Delhi has inexplicably altered the terms of the tender, switching to a single-vendor, government-to-government negotiation.

Since 2007, the IAF has evaluated and test-flown Boeing’s F/A-18E/F Super Hornet; Lockheed Martin’s F-16IN Super Viper; Saab’s Gripen NG; RAC-MiG’s MiG-35; Eurofighter GmbH’s Typhoon and Dassault’s Rafale. In April 2011, the first four vendors were told their aircraft had not met IAF requirements. On January 31, 2012, Dassault was informed its bid was the cheapest.

Since then, Dassault’s clarification of numerous grey areas in its financial bid led Indian negotiators to conclude the company’s bid was significantly costlier than it had first appeared.

With Dassault now awarded an order for 36 Rafale fighters under arbitrarily altered rules, rival vendors could legitimately object, particularly Eurofighter GmbH, which could credibly argue it would supply 36 fully-built fighters cheaper than Dassault.

Dassault has only 180 Rafales on order from the French military, with Egypt expressing interest in buying another 24. By contrast, six nations have ordered 571 Typhoons, allowing Eurofighter to amortise development and infrastructure costs over thrice as many aircraft.

The government has stayed with the Rafale, though IAF chief, Air Chief Marshal Arup Raha, clarified in Bengaluru in February that any fighter would do. “It is important we have an MMRCA. I would not say Rafale, but we need to have it (MMRCA) in the quickest possible time,” Raha said.

Air Vice-Marshal (retired) Nirdosh Tyagi, who oversaw the MMRCA contest, says it is hard to justify buying only a small number of Rafales. It makes little sense to have an air force that already has seven different fighters – Sukhoi-30MKI, MiG-29, MiG-27, MiG-21, Mirage 2000, Jaguar and Tejas LCA – create spare part stocks, depots and maintenance infrastructure for just two squadrons of yet another fighter type.

“36 fighters are neither here nor there. From the beginning, the MMRCA was processed as a 126-fighter contract, with an option for 63 more. Indigenous manufacture through technology transfer is crucial,” Tyagi says.

If India signs a contract for 36 Rafale fighters, Dassault will be in a commanding position to negotiate favourable terms for the remaining 90 fighters. If India doesn’t agree to Dassault’s terms, it would be left with two squadrons of Rafales, with no indigenisation.

Military analyst Bharat Karnad points out India’s Rafale purchase is essential for Dassault, whose lack of orders has raised questions about its very existence. “What is India getting in return, as the French laugh their way to the bank? HAL’s production plans are in limbo; ‘Make in India’ is uncertain; and we are buying the most expensive plane on offer. Why?” he asks.

Karnad estimates with missiles and payload included, each Rafale would cost $ 150-200 million. India, therefore, would end up paying $ 5.4-7.2 billion for 36 Rafales, about twice the cost of the indigenised Sukhoi-30MKI.

It remains unclear whether the defence ministry’s ‘cost negotiation committee’ (CNC), deadlocked in negotiations with Dassault for three years, will continue negotiations for the remaining 90 fighters. The CNC had clarified Dassault would have to improve its earlier bid for supply-cum-licence manufacture. Now, the government’s decision to buy 36 fully-built Rafales significantly undermines the CNC.