India, France announce deal for 36 fully-built Rafale fighters

By Ajai Shukla

Business Standard, 11th Apr 15

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”, said Mr Modi, addressing a joint press conference in Paris. He said the terms of the tender would be modified accordingly.

The announcement is silent about the plan to build the Rafale in Hindustan Aeronautics Ltd (HAL), a central part of the tender. So far, this multi-billion dollar procurement, which was conceived as a springboard for the modernization of India’s aerospace industry, 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 over 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 that its bid was the cheapest.

Since then, Dassault’s clarification of numerous grey areas in its financial bid led Indian negotiators to conclude that Dassault’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 can credibly argue that 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.

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

If India contracts for 36 Rafale fighters, Dassault will be in a commanding position to negotiate favourable terms for the remaining 90 fighters. If India does not agree to Dassault’s terms, it would be left with two squadrons of Rafales, with no indigenization.

Military analyst Bharat Karnad points out that 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?” Karnad asks.

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

It remains unclear whether the defence ministry’s “cost negotiation committee” (CNC), which has been deadlocked in negotiations with Dassault for three years now, will continue negotiations for the remaining 90 fighters. The CNC had made it clear that Dassault would have to improve its earlier bid for supply-cum-licence manufacture. Now, the government’s decision to buy 36 fully built Rafale significantly undermines the CNC.