IAF steers clear of Rafale offset controversy, calls the fighter a “game changer”

By Ajai Shukla

Business Standard, 4th Oct 18

Indian Air Force (IAF) chief, Air Chief Marshal BS Dhanoa, on Wednesday steered clear of the Rafale offset controversy and said he would not comment “on which company was told… nudged, to give offsets.” 

Dhanoa was addressing the media in New Delhi in the run up to Air Force Day.

He was asked whether there was any pressure to select Anil Ambani’s Reliance Defence as a key offset partner in the purchase of 36 Rafale fighters.

He denied that the IAF or the government influenced the selection of Dassault Reliance Aerospace Ltd (DRAL) as an offset partner. DRAL is a 51:49 joint venture between Reliance Defence and Dassault.

On September 22, former French President Francois Hollande, whom Prime Minister Narendra Modi had requested for 36 Rafale fighters in Paris in April 2015, made the allegation that New Delhi had insisted on Anil Ambani on Dassault’s offset partner. Hollande told a French web newsmagazine:“We did not have a choice, we took the interlocutor who was given to us.”

Based on Hollande’s statement, the Opposition has charged the Bharatiya Janata Party (BJP) led government with “crony capitalism” to favour Ambani.

Dassault, Reliance and India’s defence ministry have denied pressure from New Delhi in selecting DRAL as an offset partner. 

India’s defence offsets policy binds foreign arms vendors to direct at least 30 per cent – and in the Rafale purchase, 50 per cent – of the contract value back into Indian defence industry. The Euro 7.8 billion contract for 36 Rafales carries offset liabilities work Euro 3.9 billion for four French vendors: Dassault, Thales, Safran and MBDA. Of that, Ambani says DRAL has benefited from less than a billion Euros in offsets.

Dhanoa waded further into political controversy in praising the government for its “bold decision” to buy 36 Rafales and scrap an earlier tender for 126 Rafales, of which 18 were to be supplied in flyaway condition and the remaining 108 built in India by Hindustan Aeronautics Ltd (HAL).

He called the Rafale a “game changer” and claimed the contract was a “very good package” that included “best weapons, India specific enhancement, longer industrial support commitment.”

Dhanoa indirectly referred to the Eurofighter Typhoon, an aircraft the IAF had flight-tested and cleared for procurement in 2011 along with the Rafale. In 2012, the latter was selected over the Typhoon on price. The Opposition has asked why, when initiating a fresh buy of 36 fighters, Eurofighter – whose Typhoon had met the IAF’s performance requirements – had not been asked to bid against Dassault, bringing competition into the bidding.

“The IAF had listed its options – this [Rafale] was one of them,” said Dhanoa, referring directly to the Rafale and indirectly to the Typhoon.

Dhanoa echoed the government line in blaming the cancellation of the 126-Rafale tender on a deadlock in negotiations. “We could have kept negotiating and waiting for something to happen, or withdraw the request for proposals, or go in for emergency purchase of 36 planes. The government took a bold step and bought 36 jets,” he said.

This contradicts Dassault chief Eric Trappier’s statement in New Delhi on March 25, 2015, when he stated that negotiations with HAL were on track and a deal would be signed shortly.Instead,17 days later in Paris, Modi and Hollande jointly announced the agreement for 36 Rafales.

Dhanoa’s claim of deadlocked negotiations is also contradicted by recently retied HAL chief and key Rafale negotiator, T Suvarna Raju, who told a national daily on September 20 that the 126-Rafale tender was very much on track at the time it was cancelled.

MoD sources say the so-called negotiation “deadlock” involved a single resolvable issue: Dassault’s reluctance to stand guarantee for 108 Rafales that HAL was to build.

The defence ministry unwittingly corroborated this in its rebuttal of Raju on September 20. “In July 2014, HAL in its letter to MoD has also highlighted one major unresolved issue regarding responsibility sharing between M/s DA (Dassault Aviation) and HAL for licence manufacture of aircraft,” stated the MoD.

Sources involved in negotiations with Dassault say there were ways of assuaging concerns. In the final balance, Dassault’s feet could have been held to the fire because the 126-fighter tender required it to accept responsibility for HAL-built fighters.