The Narendra Modi government’s 16-page reply on Monday to the Supreme Court on a petition seeking details of the process followed to buy 36 Rafale aircraft from France, raises more questions than it answers. It certainly sheds no light on why the country is paying a massive amount from the national exchequer for this deal.

The Modi government’s reply to the petitioners — former Union Ministers Arun Shourie and Yashwant Sinha and senior lawyer Prashant Bhushan —  seems more an attempt to cover up the role of the Prime Minister and due to his intervention, the violations to the procedures done by other Ministries as well.

What raises more doubts is the fact that the reply is undated and unsigned, and the Centre has not disclosed who the authority submitting the reply to the court is.

The controversial government-to-government procurement announcement made by PM Modi in Paris on April 10, 2015 had raised a number of questions. The details of the process followed by the government in its reply, do not answer any of those questions.

In its reply to the Supreme Court, the government has clarified that it followed the Inter Government Agreement (IGA) route mentioned in Defence Procurement Procedure, 2013 (DPP 2013) for purchase of 36 Rafale aircraft.

The acquisition process involves 11 process functions: services qualitative requirements (SQRs); acceptance of necessity (AoN);  solicitation of offers; evaluation of technical offers by the Technical Evaluation Committee (TEC); field evaluation; staff evaluation; oversight by the Technical Oversight Committee (TOC) for acquisitions above Rs 300 crore;  commercial negotiations by the Contract Negotiation Committee (CNC); .approval of the Competent Financial Authority (CFA); award of contract /supply order (SO); and contract administration and post-contract management.

Incidentally, para 8 of the reply on page 3 notes the decision-making process mentioned in para 71 of DPP 2013. Curiously, it has omitted the pre-conditions under which an IGA route is to be adopted.

When Was The SQR Re-Submitted?
In its reply, the government has said that it followed the complete procedures mentioned above because these were all done earlier in the selection process of the MMRCA (Medium Multi-Role Combat Aircraft) deal for 126 aircraft.

However, once the SQR is raised, any amendment has to be done prior to submitting it for AoN and in extreme cases (unforeseen situations), the case should be re-submitted for revalidation.

Para 17 of DPP 2013 “Waiver of SQR Parameters” elaborates this: “SQR would invariably be finalized prior to seeking AoN for the scheme. A copy of SQRs duly approved by the respective SHQ authorities would be submitted along with the ‘Statement of Case’ for seeking AoN. No amendment of SQR is permissible thereafter. In an unforeseen situation, where an amendment to SQR becomes necessary after accord of AoN, the case should be resubmitted for revalidation of AoN earlier accorded.”

This raises another interesting question. When did the Modi government re-submit the SQR for revalidation? Or, was that even done at all? The government did not mention anything about it in the submitted papers to the court.

As per norms, the Service Head Quarters (SHQ) should prepare a statement of case in a certain format to seek the AoN. The DPP elaborates the chain of approvals needed:
“The Statement of Case would be signed with date by the Head of the respective User/Plans Directorate/equivalent of the Services. Four copies of the Statement of Case would be prepared, justifying the procurement proposal. One copy each would be forwarded to DDP, DRDO, MoD (Fin) and Administrative Branch of MoD. The statement of case would include the total quantities required, the break up based on five years plans and the quantity that is required to be procured in next two years. The quantity vetting would be recommended by the Administrative Branch in consultation with MoD (Fin). The quantities duly vetted along with other comments on the proposal, would be sent back to the SHQ by DOD and MoD (Fin). DRDO and DDP will also forward their comments to Service HQ, who would then compile all the comments and give their final views. The statement of case, along with all the comments, would then be forwarded to HQ IDS which would examine aspects of interoperability and commonality of equipment for the three Services. The statement of case would then be placed for consideration of the categorisation committee” (Emphasis added).

When Did IAF Send Request For Fewer Numbers of Rafales?
The Modi government is yet to disclose when the Indian Air Force (IAF) sent the request to revise the numbers of then 95% completed negotiation with Dassault Aviation for 126 Rafales and reduced it to 36? When did the administrative branch of Ministry of Defence (MoD) decide that the number should be only 36, not 126?  

In Para 14 of the government’s reply, the timeline of the process followed by the previous Congress-led United Progressive Alliance government for the procurement of 126 MMRCA has been given. The details are mentioned right from submission of proposals from the six vendors on April 28, 2008, to the commencement of contract negotiations with Dassault in February 2012 . However, the reply has not mentioned a single word on how Modi concluded that the number of aircraft needed by IAF was only 36. And it is silent on who advised the PM on this, what was the process followed to ascertain the number of aircraft needed by IAF, and which are the committees that approved such a decision.

Blaming Anthony and HAL
Para 15 of the reply says that then Defence Minister A K Antony asked the MoD for re-evaluation of the approach and methodology adopted by the CNC to determine the lowest bidder and to “ascertain that it is reasonable, appropriate and as per the laid down procedure.” 
Para 16 says: “In addition to the above the contract negotiation could not conclude mainly due to unresolved issues related to 108 aircraft to be manufactured in India. These issues pertained to lack of common understanding between HAL and Dassault Aviation on following: 1) Man-Hours that would be required to produce the aircraft  in India: HAL required 2.7 times higher Man-Hours compared to the French side for the manufacture of the Rafale aircraft in India. 2) Dassault Aviation as the seller has required to undertake necessary contractual obligation for 126 aircraft (18 direct fly-away and 108 manufactured in India) as per RFP requirements. Issues related to contractual obligation and responsibility for 108 aircraft manufactured in India could not be resolved.”

And in Para 17, the government has said that the above mentioned issues remain unresolved and that is what caused the price escalation.

Para 16’s beginning of “In addition to the above” regarding the inability to conclude negotiations with Dassault Aviation makes it appear that Antony is also being blamed for not concluding the negotiations during his tenure and asking for a re-check of the process before final approval. 

The Modi government blaming public sector Hindustan Aeronautics Ltd (HAL) for not being able to conclude the agreement is specious because of the following reasons: 
(i) In March 2014,  at the time of UPA government, it was reported that the problem between HAL and Dassault on the final product manufactured by HAL had been resolved and both the companies were signing a work share agreement in which HAL was responsible for 70% of the work and the rest was to be done by Dassault.

(ii) The then HAL chief went on record saying the same and dared the current Defence Minister to put out the file that he had submitted along with the work share agreement signed between HAL and Dassault.

(iii) Eric Trappier, Chairman and CEO of Dassault Aviation, in the second week of March 2015, confirmed that they had reached a consensus with HAL on the work share and guarantee-related issues and signed an agreement to that effect.

Regarding the price escalation claim, on February 19, 2015, on the sidelines of the Aero India Show in Bengaluru – less than two months prior to Modi’s announcement from France —  Trappier told reporters that the price Dassault quoted in the RFP never changed.

He reiterated the same claim in October this year in an interview to an Indian TV channel and a newspaper. In this interview, Trappier said due to a weak euro against the dollar, the price of Rafale was now actually lower than in 2012.

Hence, the government’s claims of cost escalation due to the delay in signing the agreement is an attempt to cover up its own misdeeds. Trappier also said Dassault was happy to work with HAL with whom it had a long- standing work relationship.Hence, the Modi government’s claim of Dassault’s unwillingness to work with HAL as one reason for the failure of the RFP negotiation, also falls flat.

The RFP Puzzle
In para 18, the government has said that because of the reasons mentioned in para 16 and 17, the negotiations reached a “stalemate”, which forced it to start the RFP withdrawal process in March 2015, before eventually withdrawing it in June the same year. 

This is another false claim, as on March 25, 2015, Trappier was almost certain to close the deal for 126 Rafale with India “very soon”, a claim he repeated on many occasions in March 2015. If Dassault was almost certain to close the deal without any problem, what went wrong from the Indian side? The government needs to explain this in detail.

Para 19 speaks of how India’s “adversaries” went ahead and added more than 400 aircraft, including fifth generation fighter jets. This further weakened India’s position. But the government still hasn’t explained how reducing the number of aircraft from 126 to 36 would help the country in facing this imbalance? Also, why did it cancel India’s joint venture with Russia in developing the fifth generation fighter jet programme after spending millions of dollars from the exchequer?

On June 3, 2014, Mail Online India – a Daily Mail (UK) publication – reported quoting MoD sources: “The contract negotiations were spearheaded by four sub-committees that dealt with off-set, transfer of technology, technical issues and costs.  Three sub-committees — on off-set, transfer of technology and technical issues like maintenance — have been wound up, meaning a major part of the negotiations are over. It will take at least three months from now for discussions on costs to be completed.” Compare this with Trappier’s claim of “negotiations 95% completed”, and the Modi government’s decision to withdraw from the 95% negotiated RFP becomes even more puzzling.

In para 26, the government has admitted that the decision to procure 36 Rafale, which in normal circumstances would have been taken after the approval from Defence Acquisition Committee (DAC), was put up in front of DAC on August 28, 2015 —  four-and-a-half months after Modi’s announcement of the government-to-government arrangement. And it further admits that the government started the negotiations with France three months prior to the submission of the case to DAC. This makes violation of the rule book even more serious.

In the same para, the Modi government has claimed that in August 2016, the negotiations were completed with better terms on pricing, maintenance and delivery compared with the aborted RFP negotiations. But, Business Standard, which accessed the original RFP submitted by Dassault, pointed out that Modi’s 36 Rafale deal was actually 40% costlier in comparison, without any change in the maintenance, weaponry, training, availability of spare parts and serviceability, performance enhancements and India-specific changes wanted by IAF. So, when the Modi government says they got a better deal in terms of pricing, it must asked – better pricing for whom? Certainly, not for the country!

Who Authorised Modi to Take a Decision?
In para 27, the reply has admitted that the government put up the case for the Cabinet Committee on Security’s (CCS) approval only on August 24,  2016 – which was 16 months after Modi’s announcement from France. The deal was put up to the Ministry of Finance for the first time only then.

These claims make it more obvious that the PM took a unilateral call by announcing a deal in which spending of tens of thousands of crores of rupees from the exchequer is involved. The government is yet to answer who authorised Modi to take such a decision?
A report published in The Indian Express, based on a note accessed from the Law Ministry on March 14, 2016, deepens the mystery behind Modi’s decision. It pointed out that, unlike the set norms, the Modi government agreed to pay huge amounts of public money as advance without getting any actual delivery. And, in violation of the guidelines, it agreed on France submitting a comfort letter signed by the French PM against the advance instead of a sovereign guarantee by France. The report quoted a senior Law Ministry official on this: “…liability of Paris in case of any shortfall in implementation of the deal, being heavily loaded in favour of the French. While many senior government functionaries, including those in the Ministry of Defence, have favoured out-of-box thinking to take the deal forward, when we examined the draft Inter-Governmental Agreement (IGA) and the draft Supply Protocols, we were left wondering as to how India could agree to all the stipulations suggested by the French side. In our opinion, the two documents were not drafted with the interest of the Government of India in mind. Many suggestions have been forwarded. But it is for the Prime Minister’s Office and the Defence Ministry to take a final view.”

Even though it is an Inter Government Agreement (IGA), the report pointed out, “in case of material breach by French companies of their obligations under the Supply Protocols, the Indian side would first take recourse to legal route against the companies without involving the French government.”

Another clause is the seat of arbitration, which is Geneva in the IGA. This again is in violation of the DPP 2013, Appendix H to schedule 1, para 2.5, which states: “The Arbitration Tribunal shall have its seat in New Delhi or such other place in India as may be decided by the arbitrator”. Further, para 2.6 says “The Arbitration Proceedings shall be conducted in India under the Indian Arbitration and Conciliation Act, 1996 and the award of such Arbitration Tribunal shall be enforceable in Indian Courts only.”

Another report updated by The Economic Times as late as July 14 this year, confirms that the government overlooked serious red-flags from the Law Ministry. Why did a government, led by a party which evokes nationalism and love for the Armed Forces on a daily basis, violate such norms? This needs to be explained.

In para 29, the government has said that it did not violate any protocol on offset. That falsehood was exposed by Newsclick in a two part series last month. (Part 1 & Part 2). A more detailed version of the policy violations done by government can be read here.
While detailing the procedures followed by the government on the Offset Obligations, para 6 of the reply has said: “However as per the extent provisions of the DPP, if the vendor is unable to provide the details of IOP (Indian Offset Partner) at the time of submission of offset proposal prior to offset contract he is permitted to provide the details of their IOPs either at the time of seeking offset credits, or one year prior to discharge of offset obligation.”

Interestingly, this clause was not there in DPP 2013 and was added only on August 5, 2015 – four months after Modi’s announcement of the deal from France. Further, it is childish to state that Dassault was not able to identify its IOP by that time. A Dassault press release said they formed a JV with Reliance Aerostructure Ltd – an Anil Ambani group company – in April 2015 itself. And The Caravan magazine published that a RTI reply from government said that the JV agreement between Dassault and Reliance Aerostructure Limited was signed on the same day of the signing of the IGA between India and France!

Hiding Behind the ‘Secrecy Clause’
The government’s argument for non-disclosure of commercial details citing the secrecy agreement signed between India and France in 2008 sounds similarly childish. A copy of the agreement accessed by Newsclick clearly says that secrecy must be kept only on issues which have implications for national security. Revealing the commercial aspect of a defence deal won’t affect national security in any way.

In a nutshell, the Modi government’s reply to the petitioners looks more like an amateurish attempt to cover up the PM’s role in violations of procedures for defence procurement.

At the end of the day, it is public money and India is still a democracy. The government is, therefore,  answerable to the people.

Courtesy: Newsclick.in
 

 
 

BJP and its cohorts have been firing in all directions for long, whenever Rafale deal has been mentioned. The season for blaming others reached its crescendo when the union minister of defence and the Indian Air Force chief blamed Hindustan Aeronautics Ltd, a premier defence public sector unit, for being the cause behind the decision to settle for outright purchase of 36 Rafale jets from Dassault. They thrashed HAL, damned Tejas, abused opponents and condemned critics. Even former IAF chiefs, who had expressed concern over reduced number of fighter jets being bought and had publicly asked for more, stood damned by this barrage.

Well-reasoned arguments and concerns were cast aside. This concerted media blast by the BJP appeared to be working in tandem with Anil Ambani group which was dishing out ‘cease and desist’ notices to those who even mentioned their name in connection with the lucrative offset deal they landed when PM Modi arbitrarily changed the deal to purchase of 36 jet fighters outright from Dassault. Every trick in the trade to confuse the public was used. Their strongest defence – the Indian government or its top echelons had nothing to do with offset partner chosen by Dassault – fell apart with former French President Francois Hollande’s disclosure to French investigative journal Mediaport, that it was the Indian government which had “recommended” Anil Ambani-led Reliance group as offset partner for Dassault – as a part of offset servicing.

Hollande reiterated the same a few days later. Rohan Venkatramakrishnan of Scroll.in reported on September 22, by citing Le Monde as a source: “Asked by AFP on Friday Hollande said that the name of Reliance Group had appeared as part of a ‘new formula’ in negotiation over the Rafale deal, decided by the Modi government after it came to power”. Next he was “[a]sked if he knew whether India put pressure for the Reliance Group to work with Dassault, Hollande said that he was ‘unaware’ and “Dassault alone is capable of answering”.

The French Government as well as Dassault Company scrupulously stayed away from damning Hollande, or repudiating what he said. They dare not, as it would amount to saying that former head of French Republic is lying about how Anil Ambani-led company landed the lucrative offset deal worth Rs 21,000 crore out of Rs 30,000 cr. So, the troubling nature of this entire deal cannot be brushed away.

That a company with no track record was touted as a “key partner” by the company Dassault was astonishing, but the fact that it stands to be the main beneficiary of as much as 70 per cent of the total offset value, makes it more intriguing. In other words, the fig-leaf of 70-100 offset partners, cited by the BJP and cohorts, cannot cover up the fact that Anil Ambani group stands to corner 70 per cent of the offset deal.

It is worth recalling that Josy Joseph of The Hindu had written on September 30, 2015 that French company Dassault had many concerns. One amongst them was “about a major Indian private conglomerate whose services are being recommended by some sections of the Indian government”. A due diligence on the “recommended” company has “thrown up questions over its financial capabilities”. These questions/leads were not followed up by India’s corporate media, wedded as they are to the dogma of privatisation – unmindful of the consequences for the country privatising the military sector.

Next, we hear Eric Trapper, the CEO of Dassault, telling Manu Pubby of The Economic Times, on July 6, 2017 that “we were told that HAL was fully booked. We talked to Reliance, and they were keen to create such capabilities in India. They have a track record and the financial capabilities as well”. Both remarks leave too many things unanswered, which we now know. Who told Dassault that HAL was “fully booked”? And from where did the Reliance Group enter the scene? Yet again, the corporate media kept silent.

Former Chairperson of HAL, T Suvarna Raju, who demitted office on September 1, 2018, told Hindustan Times on September 20, “I was the leader of the technical team for five years, and everything had been sorted out (between HAL and Dassault).” He added, “Dassault and HAL signed the mutual work-share contract and it was given it to the government. Why don’t you ask the government (of India) to put the files in public? Files will tell you everything.” The corporate media played this down again. May be because they, owned by corporate houses, cannot be seen as championing a defence public sector unit when they are ideologically tuned to only damn them, and praise the private sector.

Dassault’s CEO Eric Trapper is, of course, being miserly with – if not suppressing – the facts regarding the work-share deal reached between Dassault and HAL, and the real story of why they ditched HAL and settled for a novice company.

Against this background, Indian government’s own explanation is unconvincing. According to IAF, India needed 126 fighter jets. If Narendra Modi government indeed negotiated a better deal with Dassault, then why is it that they stopped short at 36 jets when they were procuring them for a lower price than negotiated by the UPA? .

If the decision was to go for a reduced number, from 126 to 36, and this was a new deal which replaced the MMRCA deal of 2012, then why did the Indian government not invite Eurofighter? Would this not have helped India strike even better bargain from them or Dassault? After all, it was the fact that Rafale offered lower price than Eurofighter in the MMRCA tender that landed them the contract. A rational approach would have been to invite both Rafale and Eurofighter to drive down the price. Why are they even here falling on the half-truth of abiding by CVC’s 2005 guidelines when the Government of India tom-toms that purchasing 36 jets was a new deal, a fresh negotiation?

Was the decision to lower the number of fighter jets from 126 to 36 in accordance with the shift in national security assessment? Was this authorised by Defence Acquisition Council chaired by the union minister of defence, and which includes the three service chiefs, as per the Defence Procurement Procedure, prior to April 2015, when the Indian prime minister visited Paris, and announced this new deal?

Was any discussion or consultation held with the stakeholders of this deal? If so, how come HAL was left out from this consultation or conversation?

And finally, if the government has no role to play in selection of offset partners by the OEMs, and the OEMs are free to partner with any Indian entity, does it mean that Indian government has willy-nilly sub-contracted vital parts of national interest to OEMs? It certainly flies in the face of facts because recently, Russia’s plan to forge partnership with Adani group, considered close to the top echelons of BJP, was shot down by the government. It was most likely a measure to avoid a recurrence of Rafale-like storm. However, why did the same authority not invoke to refuse the deal between a novice and financially debilitated ADAG?

The French Government, like the advocates of BJP, keep chanting that government has no role to play in which company the OEM chooses to partner for offset servicing. With Hollande disclosing that Government of India itself recommended ADAG group as offset partner for Dassault, and if this is read together with other evidence available in public domain by now, the government is faced with a smoking gun, and it is not going away any time soon. Because, there are far too many gaping holes in the government’s version of the story.

The larger lesson is that the lure of privatisation blinds many from realising that an arbitrary decision can jeopardise national security. To change military requirement of 126 jets to 36, and to leave gaping holes in the “dissuasive military posture” approach vis a vis China indeed weakens the ‘two front war’ preparation scenario. It was on the basis of which 42 squadrons were visualised. If the scenario itself has been discarded, then it is another matter. I for one would welcome that because to treat China as an enemy is an oxymoron. It is a neighbour who is an adversary, but one with whom differences cannot be allowed to turn into conflict. Point is that the scenario of two-front war has not been discarded, as India’s military proximity to the US displays quite prominently.

One gets curiouser when it is noted that having dumped manufacturing by the HAL, and settling for outright purchase of 36 jets valued at Rs 59,000 crore (which will rise by 20 per cent in rupee terms, as the rupee is 74 or so,), government has decided to restart the tender process all over again to acquire 100 plus fighter jets? Does this cancelling of a done deal, replacing it with outright purchase, offset servicing benefitting a crony, and then restarting the process again not bring down and compromise country’s military preparedness?

Above all, what should concern all of us, even when we the critics feel vindicated, is that the privatisation of the military sector poses a threat to country’s indigenous capability building in military sector. It enables international merchants of war to control and dominate India’s military sector, and hollows out Indian’s strategic autonomy and independent foreign policy. It is worth noting that the military sector, especially in a country like ours which is still grappling with stark poverty and inequality, should not be privatised because private sector is guided by profit motives. If at all private sector is to be involved, they must play second fiddle to the public sector. Private manufacturers, particularly foreign OEMs, want firm contracts from the government to purchase their military hardware produced in the country because “idle capacity” is anathema for them. In other words, this will tie India down to big ticket acquisitions, and to guaranteeing financial returns to their “Strategic Private Partners,” even when the country’s strategic perspective and threat scenario changes, or acquisitions no longer require this. This makes the entry of the private sector, particularly foreign OEMs, problematic. It will make us more dependent on foreign suppliers, and the powers that control them, apart from tying-up our relatively scarce resources for decades.

It is in the very nature of the military that marks out its difference from other economic activity. The government is its main, if not only, buyer, and sovereign states or corporations enjoying sovereign guarantees, its potential trade partners. Strategic perspective can, and do, alter with changes both domestic and international, which have a significant bearing on defence procurement.

In other words, Rafale deal offers us insight into how dangerous this dogmatic faith in privatisation can become and how widespread this practice of gratifying corporate houses can become the norm which can compromise country’s already beleaguered strategic autonomy and independent foreign policy.

Courtesy: Newsclick.in