The Indian Air Force always boasted of a good fighting force as evident by performances at various war theatres and multinational exercises. But the IAF has been demanding for quite some time some fancy new aircrafts as the workhorse of the IAF have been the Russian fighters which are aging, to say the least. The Govt. of India has been largely apathetic to the calls for modernization as repeatedly we have shown a chutzpah for scams when it came to defense procurements.
But come 2008 and after many false starts the whole process started and it took another 4 years before Rafale from France won the contract satisfying the IAF and being the lowest bidder. But there was a catch. Once the Govt. started negotiating it was found the initial bid of ₹42 thousand crores also had a mention of some miscellaneous items for which extra money was supposed to be paid. Given the experience of the Govt. with the Scorpene submarine deal again with the French, the Govt. did become wary because in the former case the French put some critical components in that head which led to cost escalation to the tune of ₹2000 crores.
So, upon further digging the Govt. was quoted a price of approximately ₹90 thousand crores which is roughly double the initial quoted price. Though this final value can't be verified because the information is hazy and different values have been thrown about (15-20 billion USD). But for the sake of argument lets take a median value of 18 billion USD which would peg the cost of each aircraft at approximately 143 million USD. To put things in perspective the Sukhoi-30MK1 has a list price of 47 million USD each, the nearest competitor the Eurofighter typhoon is listed at 70 million USD each and the most expensive aircraft the F-35B is pegged at 135.6 million USD each. Mind you all these prices are minus the fancy armaments and radar and just accounts for the no-frills fighter aircraft. So it does feel like the French did pull a fast one on the Indian authorities and must have exploited a loophole in the tender document to get the lowest bid in to win the contract. Do I smell corruption? Yes, maybe? I really don't have access to the information to conclusively say so.
Then there was news about how the French were playing hardball about manufacturing the fighters in India with the state-run Hindustan Aeronautics Limited (HAL). The initial plan was to buy 18 aircrafts directly from France and the rest 108 would be manufactured in India but news started emerging that the French didn't want to guarantee the planes manufactured in India which further delayed the negotiations further. Then came the NDA govt. and with Manohar Parikkar as the Defense Minister. It was hoped that a highly educated Defense minister would do wonders for the procurement process and make it faster in general. The minister turned out to be a loose cannon and kept dropping figures in the public domain as if they were hot potatoes. But then on a visit to France the PM made an announcement of a Govt. to Govt. deal which cut through the red tape and made the process fast. The announced deal was for 36 Rafale jets at a price of 9.294 billion USD which pegs the cost of each aircraft at 258 million USD.
The Govt. parrotted the line that the price has been brought down from 18 billion USD to around 8 billion USD( I am quoting the median cost I had assumed rather than the cost quoted by the Govt. which is 12 billion USD.). In the meanwhile, Egypt had placed an order for 24 jets at a price of 5.9 billion USD (245 million USD per jet) which works out to be more expensive than the Indian deal ( Keeping in account the more technology transfer costs and inflation over the years). The govt. did put out statements regarding the higher per unit cost of the aircraft and attributed the increase due to better customization of the aircraft, better weapon systems and more technologies being transferred as opposed to the earlier deal.
Now that I have kind-off summarized the whole deal I will pen down my thoughts. Even if I assumed that the price of the deal to acquire 126 jets would have been 20 billion USD wouldn't it have a better deal? Because the majority of the order would have been manufactured in India which would have led to employment generation and tax generation for the Govt. which in this case has been lost entirely. In the end not only we ended up paying more for fewer aircrafts but also lost on a substantial revenue. Also now the components for maintenance have to be sourced either from France or from the newly minted J-V between Dassault Aviation and Reliance Defence which does which may point towards some sort of lobbying (nay bribes). The sad part is the people suffering is the armed forces with the politicians' well-playing politics over silly gains. When the defense minister of the country says he can't get something for the armed forces because it is too expensive doesn't really inspire any confidence. Secondly I really never understood why the Govts. are so secretive about making the details of such deals public. I don't think that there is too much-classified info in there. The NDA govt would like us to believe that ordering 36 jets saved us tonnes of money but what about the 90 odd aircrafts we are short off and endangering our pilots by making them fly the vintage MiG's which were bought in the 80's?
Oh here are some of the articles I used while writing this.:
1: https://timesofindia.indiatimes.com/india/How-Narendra-Modi-reworked-Rafale-deal-and-why-its-a-winner/articleshow/46892688.cms
2: http://www.rediff.com/news/report/the-miscellaneous-blunder-in-indias-rafale-deal/20140916.htm
3: http://www.thehindu.com/specials/in-depth/All-you-need-to-know-about-the-Rafale-deal/article14243993.ece
4: https://www.newslaundry.com/2016/05/02/scams-are-an-indian-tradition
5: http://www.opindia.com/2016/09/rafale-deal-is-it-really-an-exorbitant-deal-as-claimed-by-experts/
6: http://www.thehindu.com/news/national/India-France-ink-%E2%82%AC7.87-billion-agreement-for-36-Rafales/article14995775.ece
7: http://www.firstpost.com/world/rafale-deal-confirmed-an-overview-of-its-history-and-what-this-means-for-india-3014872.html
But come 2008 and after many false starts the whole process started and it took another 4 years before Rafale from France won the contract satisfying the IAF and being the lowest bidder. But there was a catch. Once the Govt. started negotiating it was found the initial bid of ₹42 thousand crores also had a mention of some miscellaneous items for which extra money was supposed to be paid. Given the experience of the Govt. with the Scorpene submarine deal again with the French, the Govt. did become wary because in the former case the French put some critical components in that head which led to cost escalation to the tune of ₹2000 crores.
So, upon further digging the Govt. was quoted a price of approximately ₹90 thousand crores which is roughly double the initial quoted price. Though this final value can't be verified because the information is hazy and different values have been thrown about (15-20 billion USD). But for the sake of argument lets take a median value of 18 billion USD which would peg the cost of each aircraft at approximately 143 million USD. To put things in perspective the Sukhoi-30MK1 has a list price of 47 million USD each, the nearest competitor the Eurofighter typhoon is listed at 70 million USD each and the most expensive aircraft the F-35B is pegged at 135.6 million USD each. Mind you all these prices are minus the fancy armaments and radar and just accounts for the no-frills fighter aircraft. So it does feel like the French did pull a fast one on the Indian authorities and must have exploited a loophole in the tender document to get the lowest bid in to win the contract. Do I smell corruption? Yes, maybe? I really don't have access to the information to conclusively say so.
Then there was news about how the French were playing hardball about manufacturing the fighters in India with the state-run Hindustan Aeronautics Limited (HAL). The initial plan was to buy 18 aircrafts directly from France and the rest 108 would be manufactured in India but news started emerging that the French didn't want to guarantee the planes manufactured in India which further delayed the negotiations further. Then came the NDA govt. and with Manohar Parikkar as the Defense Minister. It was hoped that a highly educated Defense minister would do wonders for the procurement process and make it faster in general. The minister turned out to be a loose cannon and kept dropping figures in the public domain as if they were hot potatoes. But then on a visit to France the PM made an announcement of a Govt. to Govt. deal which cut through the red tape and made the process fast. The announced deal was for 36 Rafale jets at a price of 9.294 billion USD which pegs the cost of each aircraft at 258 million USD.
The Govt. parrotted the line that the price has been brought down from 18 billion USD to around 8 billion USD( I am quoting the median cost I had assumed rather than the cost quoted by the Govt. which is 12 billion USD.). In the meanwhile, Egypt had placed an order for 24 jets at a price of 5.9 billion USD (245 million USD per jet) which works out to be more expensive than the Indian deal ( Keeping in account the more technology transfer costs and inflation over the years). The govt. did put out statements regarding the higher per unit cost of the aircraft and attributed the increase due to better customization of the aircraft, better weapon systems and more technologies being transferred as opposed to the earlier deal.
Now that I have kind-off summarized the whole deal I will pen down my thoughts. Even if I assumed that the price of the deal to acquire 126 jets would have been 20 billion USD wouldn't it have a better deal? Because the majority of the order would have been manufactured in India which would have led to employment generation and tax generation for the Govt. which in this case has been lost entirely. In the end not only we ended up paying more for fewer aircrafts but also lost on a substantial revenue. Also now the components for maintenance have to be sourced either from France or from the newly minted J-V between Dassault Aviation and Reliance Defence which does which may point towards some sort of lobbying (nay bribes). The sad part is the people suffering is the armed forces with the politicians' well-playing politics over silly gains. When the defense minister of the country says he can't get something for the armed forces because it is too expensive doesn't really inspire any confidence. Secondly I really never understood why the Govts. are so secretive about making the details of such deals public. I don't think that there is too much-classified info in there. The NDA govt would like us to believe that ordering 36 jets saved us tonnes of money but what about the 90 odd aircrafts we are short off and endangering our pilots by making them fly the vintage MiG's which were bought in the 80's?
Oh here are some of the articles I used while writing this.:
1: https://timesofindia.indiatimes.com/india/How-Narendra-Modi-reworked-Rafale-deal-and-why-its-a-winner/articleshow/46892688.cms
2: http://www.rediff.com/news/report/the-miscellaneous-blunder-in-indias-rafale-deal/20140916.htm
3: http://www.thehindu.com/specials/in-depth/All-you-need-to-know-about-the-Rafale-deal/article14243993.ece
4: https://www.newslaundry.com/2016/05/02/scams-are-an-indian-tradition
5: http://www.opindia.com/2016/09/rafale-deal-is-it-really-an-exorbitant-deal-as-claimed-by-experts/
6: http://www.thehindu.com/news/national/India-France-ink-%E2%82%AC7.87-billion-agreement-for-36-Rafales/article14995775.ece
7: http://www.firstpost.com/world/rafale-deal-confirmed-an-overview-of-its-history-and-what-this-means-for-india-3014872.html
