The Rafale Deal Controversy is a political controversy in India related to the purchase of 36 multirole fighter aircraft for a price estimated to be worth Rs 58,000 crore (7.8 billion euros) by the Defence Ministry of India from France's Dassault Aviation.^[1][2] Origin of the deal lies in the Indian MRCA competition.^[3][4] In 2007, the UPA government had released tenders for 126 MMRCA fighters for Indian Air Force. Dassault made the lowest bids and was selected in 2012. According to the conditions of the tender, 18 jets would be purchased in fly away conditions and the remaining 108 jets were to be manufactured in India by Hindustan Aeronautics Ltd (HAL) in association with Dassault after the transfer of technology to produce the aircraft. The Congress stated that a deal with the price of ₹ 526.1 crore per jet was negotiated. The UPA deal was never finalized.^[5]

In April 2015, Prime Minister Narendra Modi announced a decision to purchase 36 Rafale fighters in a flyaway condition during his visit to Paris. Critical operational requirements were cited as the reasons for the decision. In June 2015, the tender for 126 aircrafts was officially withdrawn. In 2016 an MoU was signed between India and France for 36 Rafale jets at a price of €7.87 billion. Dassault Aviation announced a joint venture with Indian businessman Anil Ambani's Reliance Defence for the compensation investment of 50% of the value of the deal. ^[5]

The Congress party had alleged favouritism by the Modi government in the selection of Anil Ambani's Reliance as offset partner. In 2018, former French president Francois Hollande revealed that Reliance was selected by the Indian side and France had no choice in the selection of the Indian offset partner. Government of India denied the accusation and Dassault Aviation issued stated that it was Dassault's decision to choose Reliance.^[5] The congress accused the government of inflating the price of the deal and demanded a disclosure of the negotiated pricing. The Indian government rejected the demand citing a secrecy clause in the deal. The French president Macron stated that the deal pricing can be shared with the opposition parties of India.^[6]

In 2018, four separate petitions were filed in Supreme Court, questioning the pricing, choice of Reliance as the offset partner, the process followed in Rafale deal. The details of the pricing and the process that was followed was kept secret citing national interest and shared with the court in a sealed cover. On December 14, the Supreme Court declared that there was nothing wrong in the Rafale deal and the court did not doubt the process followed.^[5] The court dismissed all four petitions that had demanded a court monitored probe in the deal, adding in its final conclusion that its views are based on its standpoint on the courts jurisdiction under 29 Article 32 of the Constitution of India.^[7] The court in its verdict had mentioned that a report by Comptroller and Auditor General (CAG) had been shared with parliament and Public Accounts Committee. It was pointed by the petitioners and the Congress that no CAG report on rafale exists and nothing had been shared yet. The government filed an application for correction in the verdict.^[8] The application will come up for hearing after the new year holidays.^[9]

Background

On 31 January 2012, Indian Ministry of Defence announced that Dassault Rafale had won the MMRCA competition to supply Indian Air Force with 126 aircraft along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology.^[10]

In 2014 a workshare agreement was signed between HAL and Dassault. Negotiations over the technology, pricing, weapons system, customisation and maintenance were carried out.^[5] The negotiations with Dassault dragged on over disagreements on warranty for aircraft produced by HAL. India wanted Dassault to ensure the quality of aircraft produced by HAL, but Dassault refused to do so.^[11][12] In January 2014, it was reported that the cost of the deal had escalated to $30 billion, with each aircraft costing $120 million.^[13] In February 2014, Defence Minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in fiscal year 2013-14 due to budgetary constraints.^[14]

After the 2014 Indian general election, the newly elected Modi government continued the negotiations. As disagreements over cost and warranty for aircraft produced by HAL continued, Defence Minister Manohar Parrikar said that Sukhoi Su-30MKI could be acquired as an alternative to Rafale.^[15][16][17] Air Chief Marshal Arup Raha disagreed, saying that Su-30MKI and Rafale had different capabilities and one could not replace the other.^[18]

On 25 March 2015, Dassault Aviation Chairman Eric Trappier had stated that the deal to purchase 126 Rafales was taking time but already the deal was "95 percent completed" and Dassault along with Indian authorities were reviewing the contract pages. The statement was made during a ceremony at Paris to hand over to the Indian Air Force, the first two Mirage 2000 fighters that were upgraded as per the modernization deal for 51 Mirage 2000 fighters.^[19][20]

Deal

During an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity".^[21] In July 2015, Defence Minister Manohar Parrikar informed the Rajya Sabha that the tender for 126 aircraft had been withdrawn and negotiations for 36 aircraft had begun.^[22] In January 2016, India and France signed a memorandum of understanding for acquisition of 36 aircraft.^[23] In September 2016, India and France signed an inter-governmental agreement (IGA) for the acquisition of 36 aircraft at a cost of €7.87 billion.^[24] It was reported that India would acquire 28 single-seat aircraft at a cost of €91.1 million each and 8 dual-seat aircraft at a cost of €94 million each. The deal also included enhancements specific to Indian Air Force at a cost of €1.8 billion, establishment of two aircraft maintenance and overhaul facilities at a cost of €1.8 billion, a weapons package costing €710 million and a performance-based logistics agreement at a cost of €353 million.^[25]

The agreement included a 50% "offset clause", which requires the companies involved in the agreement to invest 50% of the contract value back into India. Of this 50%, 74% or €2.9 billion would have to come from purchase of goods and services from India.^[24] In October 2016, Reliance Group and Dassault announced the creation of a 51:49 joint venture named Dassault Reliance Aerospace Pvt. Ltd. The joint venture planned to manufacture components for Legacy Falcon 2000 series of jets to fulfil Dassault's offset obligation.^[26][27]

Allegations

The day after the signing of IGA between France and India, Indian National Congress spokesperson Manish Tewari asked for details of the agreement to be made public and questioned if there was an escalation of per-aircraft cost from ₹715 crore to ₹1,600 crore.^[28] In November 2017, Congress alleged that procurement procedures were bypassed in acquisition of Rafale and questioned the presence of Anil Ambani in France during Modi's announcement to acquire 36 fully built aircraft. Congress leader Randeep Surjewala also alleged that HAL was bypassed in Rafale contract and questioned if there was an escalation of per-aircraft cost from ₹526.1 crore to ₹1,570 crore. Anil Ambani's Reliance Defence Limited denied the allegations and released a statement that he was present as a member of Indo-French CEO forum.^[29] Defence Minister Nirmala Sitharaman denied the allegations of procedural wrongdoing and said that approval from Cabinet Committee on Security had been obtained before signing of IGA. She said that the prices could not be compared as the tender for 126 aircraft and the agreement for 36 aircraft had different requirements. She also said that transfer of technology to HAL would not be economically feasible in a smaller contract for 36 aircraft.^[30] Air Chief Marshal Birender Singh Dhanoa also denied the allegations and said that the agreement for 36 aircraft was signed with better terms than the one that was being negotiated under MMRCA tender.^[31]

In a controversy that has been ongoing for sometime, allegations in the controversy have resulted in a public incident in the Parliament of India during a no-confidence motion debate on 21 July 2018. Rahul Gandhi, president of the main opposition party, Indian National Congress, made what has been described as bold and direct accusations toward the Prime Minister of India, Narendra Modi.^[32] According to the Congress this is a case of crony capitalism by benefiting companies closer to the ruling party BJP.^[33] The prime minister dismissed the allegations as the program's interactions are between the governments of India and France, without any middlemen. Both governments have then officially refuted the charges.^[34][35]

Indian National Congress directly blames the Indian Government led by Narendra Modi for overlooking the capabilities of government-owned Hindustan Aeronautics Limited (HAL) in favour of Reliance Defence for the offset deal with Dassault.^[36] Indian defence minister Nirmala Sitharaman rejected these charges by saying that " Hindustan Aeronautics Limited (HAL) was dropped from the jet deal by the previous UPA regime after French manufacturer Dassault Aviation and the state-owned entity failed to agree on production terms.^[37]

French Government response

Former French President Francois Hollande has been quoted by an article on a French Mediapart, an online investigative and opinion journal as stating that the Indian government had asked the French government to nominate Anil Ambani's Reliance Defence Ltd. as its India partner in the Rafale deal.^[38][39]but later Hollande clarified that "it on the sidelines of a meeting in Canada on Friday that France “did not choose Reliance in any way.” When asked whether India had put pressure on Reliance and Dassault to work together, Mr. Hollande said he was unaware and “only Dassault can comment on this.”as reported by AFP^[40]

Contradicting Hollande's claim, French government issued a statement mentioning that French companies have the full freedom to select Indian firms for the Rafale contract.^[41] Dassault also clarified that Anil Ambani was Dassault Aviation’s choice^[42]

Indian Government response

Finance minister Arun Jaitley later dissmised the charges as factually false.^[43]

Indian government's Defence Ministry reiterated its earlier stand while responding to later claims of former French President Francois Hollande about involvement of a particular private firm's Rafale offset contract by saying "Neither government of India nor French government had any say in the commercial decision".^[44]

Former chief of air staff Arup Raha said in an interview that Defence Procurement Procedure allows for government-to-government procurement and there was no procedural bypass in signing of the IGA. He added that the agreement for 36 aircraft was cheaper than the previous proposal and had a better maintenance and weapons package. He said that most of the confusion over cost was due to comparison of prices from different base years and comparison of different deliverables. Elaborating on the differences between the IGA and the proposed acquisition under MMRCA tender, he said that the new agreement had provisions for training, a better performance-based logistics package and two aircraft maintenance and overhaul facilities that were not present in the original proposal.^[45]

Allegations against Anil Ambani and Reliance Defence Ltd

Indian National Congress accused Indian business magnate Anil Ambani's Reliance Defence Ltd of getting the part of the contract by unfair means.^[46] The offsets contracts in the deal is alleged as the biggest example of crony capitalism ^[47]

In response, Anil Ambani threatened to sue Congress Party for defamation.^[48]

Reliance also sued NDTV regarding its reporting on the matter which was noted by New York based Committee to Protect Journalists^[49].

Supreme court ruling

In September 2018, The Supreme Court of India agreed to hear the PIL petitions related to the controversy.^[50][51] while Congress said they would wait for getting the necessary documents before moving court on the matter.^[52] On October 10 The Supreme Court asked the Central government to provide details of the decision making process in the Rafale deal with France in a sealed cover by October 29.^[53]

On 14 December 2018, the court dismissed all the petitions seeking a probe into the alleged irregularities in the deal adding in its final conclusion that its views are based on its standpoint on jurisdiction under 29 Article 32 of the Constitution of India.^[7][54] In its ruling, the court said it had carefully studied the material placed before it and stated that "there is no occasion to really doubt the process, and even if minor deviations have occurred, that would not result in either setting aside the contract or requiring a detailed scrutiny by the Court."^[7] On the pricing the court stated that it had examined the price details presented in sealed covers and added that "It is certainly not the job of this Court to carry out a comparison of the pricing details in matters like the present. We say no more as the material has to be kept in a confidential domain".^[7][55] On the aspect of Indian Offset Partner (IOP), the court noted that "it is neither appropriate nor within the experience of this Court to step into this arena of what is technically feasible or not. The point remains that DPP 2013 28 envisages that the vendor/OEM will choose its own IOPs. In this process, the role of the Government is not envisaged and, thus, mere press interviews or suggestions cannot form the basis for judicial review by this Court, especially when there is categorical denial of the statements made in the Press, by both the sides. We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian Government, as the option to choose the IOP does not rest with the Indian Government."^[7]

The court in its concluding statement said "we find no reason for any intervention by this court on the sensitive issue of purchase of 36 defence aircrafts [sic] by the Indian government," adding that "perception of individuals cannot be the basis of a fishing and roving enquiry by this court, especially in such matters. We, thus, dismiss all the writ petitions, leaving it to the parties to bear their own costs. We, however, make it clear that our views as above are primarily from the standpoint of the exercise of the jurisdiction under 29 Article 32 of the Constitution of India which has been invoked in the present group of cases."^[7]

Response

On 14 December, Dassault Aviation issued a statement to the press welcoming the Indian Supreme Court's verdict.^[56] The ruling party BJP welcomed the judgement and accused the Congress party of plotting conspiracy.^[57] PM Modi attacked Congress and accused it of lying.^[58]

On the same day of the verdict, Rahul Gandhi, Congress president speaking at a press conference stated that CAG report on Rafale was never shared with Public Accounts Committee,^[59] Mallikarjun Kharge, a senior Congress leader and the chairman of the PAC stated at the same press conference, that the deputy CAG had confirmed that no such CAG report had existed.^[60] Gandhi repeated his allegations of corruption against the Modi government and stated that his party will continue demanding a Joint parliamentary committee (JPC) to probe the Rafale deal.^[61] The Congress spokesperson stated that "This is a validation of what the Congress party said months ago that the Supreme Court was not the forum to decide the issue of such a sensitive defence contract. The only forum is a joint parliamentary committee, which will probe the entire corruption in the Rafale deal and find out and decide who are the accused people and then set in motion the process of law"^[62] Communist Party of India (Marxist) also supported the calls for a JPC.^[63] Samajwadi Party Chief Akhilesh Yadav any future issues on the case, should be raised in the Supreme court. He had earlier demanded a JPC probe before the Supreme court's verdict which he said has deliberated on all angles.^[64] Finance Minister Arun Jaitley in his blogged expressed his opposition for a Joint Parliamentary Committee (JPC) probe.^[63][65]

The petitioners in the case former minister Yashwant Sinha, former journalist Arun Shourie and lawyer Prashant Bhushan issued a press statement pointing the factual inaccuracies in the judgement.^[66] The statement termed the judgement as 'shocking' and 'disappointing' since the court had taken a "conservative view of judicial review in cases of defence deal corruption involving high functionaries". The verdict had "neither addressed the documented facts nor dealt with their main prayer seeking an investigation into the deal to purchase the French fighter jets,"^[67] adding that "some of the facts mentioned in the court judgment are not only not on record but are patently incorrect".^[67] Their petition had sought a court-monitored investigation by CBI or SIT but the verdict did not address the documented facts or the prayer for investigation. The verdict had proceeded on the basis that the petition was challenging the contract itself. The verdict had used as facts, the statements by the government through affidavits and the sealed covers handed only to the court and not with the petitioners.^[66] The para 25 of the verdict stated that, "The pricing details have, however, been shared with the Comptroller and Auditor General (hereinafter referred to as 'CAG'), and the report of the CAG has been examined by the Public Accounts Committee (hereafter referred to as 'PAC'). Only a redacted portion of the report was placed before the Parliament, and is in public domain". The petitioners claimed that the facts in the para 25 are not on record, and are factually incorrect. The CAG report has not been submitted to the Public Accounts Committee till now. No portion of the CAG report has been placed before Parliament or released in the public domain. The petitioners claimed that these factually incorrect statements were based on the statements made by the government to the court in sealed covers and the factual inaccuracies show how dangers associated in verdict based on unverified statements. The petitioners asked for a "full public disclosure of all the facts" along with "a comprehensive and independent investigation into the deal".^[66]

Plea for corrections in verdict

On 15 December, the Union Defence Ministry in a press conference suggested that the Supreme court may have misinterpreted the government’s statements on the Rafale deal and requested corrections.^[68] The ministry during the press conference had pointed to the mixing of the tenses, "perhaps on account of misinterpretation of a couple of sentences in a note handed over to this Hon'ble Court in a sealed cover." The government filed an eight-page application for corrections in the verdict by the Supreme Court stating "observations in the judgment have also resulted in a controversy in the public domain."^[8][9] By proposing these correction, the government tried to rectify that the CAG report had not yet submitted its report and the PAC has not examined it. No redacted portion, has been placed either in the Parliament or in the public domain.^[8] The ministry claimed that the note simply mentioned the procedures followed on CAG reports and the note was not specific to the Rafale deal CAG report.^[8] The verdict had mentioned four steps related to the CAG report out of which 3 were incorrect. The court has not responded to the governments application as it is closed for Christmas.^[8][69]

On 16 December, the Congress asked the Supreme Court, not to entertain the Governments application of rectification of judgement. Congress also urged the court to recall the Rafale judgment as being "self-contradictory"^[70] and to issue notices to the government for "perjury and contempt of court as it provided false information to the top court."^[71][69] The Chairman of the PAC Mallikarjun Kharge and the Congress had stated that "no portion of the CAG report has been placed before Parliament or was in the public domain".^[69]

The Government's correction application may have an open court hearing in January,^[9] along with a review petition from the petitioners.^[9]

See also

• Bofors scandal
• Corruption in India
• Corruption in France
• List of scandals in India
• Jan Lokpal Bill
• Corruption Perceptions Index
• Karachi affair

References