India, France and the Rafale: Closing In on a Deal


2015-04-10 By Air Marshal Jimmy Bhatia (Retd.) and Guishan Luthra

New Delhi. The Indian Air Force (IAF) will acquire 36 Rafale combat aircraft in flyaway condition from France, double the originally stipulated number of 18 in the 2007 tender for a total of 126 Medium Multi Role Combat Aircraft (MMRCA).

Prime Minister Narendra Modi disclosed in Paris on April 10 that he had asked the Ministry of Defence to negotiate the acquistion of the 36 aircraft at the earliest through the government to government route.

He was addressing a joint press conference after a summit meeting with host President Francois Hollande on the first day of his three-day visit to the beautiful European country.

It wasn’t immediately clear as to what would happen to the rest of the 90 aircraft.

There had been strong indications in both New Delhi and Paris that India would scrap the tender and go in for 63 Rafales produced by Dassault in France.

According to the tender, or Request for Proposals (RfP), Dassault was to supply only 18 aircraft, or one squadron, and the remaining 108 were to be made in India by HAL.

Unconfirmed French reports indicated that the 36 aircraft could be in addition to the 126 being negotiated.

This option seems unlikely though as it will also involve additional costs, and funding is difficult for the cash strapped Government.

As of now, there is no clarity no how the deal is being progressed, and in due course, the Goverment is likely to disclose the details.

There have been serious differences over responsibility for the quality of aircraft to be made by HAL and the overall pricing. Dassault, which produces the Rafale, had said it would do the Transfer of Technology and invest 50 per cent in India as part of the Offsets clause stipulated in the tender but would not be responsible for what comes out of the HAL production lines.

Although Dassault had won the tender on the basis of technical evaluation and its “lowest” bid, the costing after accounting for periodic escalations during the life of the program was also touching USD 24 billion.

The Rafale operating in Chad. Credit: French Ministry of Defense
The Rafale operating in Chad. Credit: French Ministry of Defense 

This made the Ministry of Defence (MoD) uncomfortable; negotiations with Dassault were not leading anywhere, and Defence Minister Manohar Parrikar himself observed that the deal could not go through if Dassault continued to ask for way too much. MoD sources also said it had “bitter experience” with DCNS in the past over pricing while negotiating the Scorpene submarine deal and a decision was becoming difficult.

Diplomatic sources told India Strategic that the direct acquisition of 36 aircraft seemed to be only possible way out.

“Otherwise the deal would not have happened.” It appears that there were frantic discussions between the MoD and IAF, which has been keen for the induction of new aircraft on ASAP (As Soon As Possible) basis. MoD then put up some options before the Defence Minister, for a political decision, and the option to buy 63 aircraft through the Government-to-Government route was found the most acceptable.

The financial outgo, including for the offsets, should be around one-third now, and the hard-pressed Ministry of Finance, which has to provide the funding, will literally breathe a sigh of relief. The Government will have more money at hand now for various long-pending defense acquisitions as well as for the One Rank One Pension (OROP) scheme for retired personnel from the Army, Navy and Air Force.

As per the terms of the tender, the Government has the authority to cancel the MMRCA acquisition process without assigning any reason. Nonetheless, the Government has gone for the same aircraft, Rafale, which IAF selected after due technical evaluation.

Indications are that the Rafale deal will be part of a composite agreement that includes space and nuclear cooperation, some technology sharing in security, and more bilateral investments.

France has been providing assistance to the Indian Space Research Organisation (ISRO) for about 60 years now, and most of its heavy satellites have been launched by the French Space Agency, now integrated with Airbus Defence and Space. The composite agreement provides for ISRO to launch some of smaller French satellites.

Mr. Modi will be visiting the Airbus aircraft and space facilities in Toulouse before proceeding to Germany and Canada on this three-nation tour.

India had purchased about 50 Mirage 2000 from Dassault in 1985 (and a few more later), and although they were not under any Government to Government deal, that acquisition would be a model to follow. The aircraft are now under upgrades by Dassault and Thales – the Electronic Warfare and other systems provider – and HAL.

The Rafale and the A400M participating in joint experimentation for tactical forces insertion. Credit Photo: French Air Force
The Rafale and the A400M participating in joint experimentation for tactical forces insertion. Credit Photo: French Air Force 

Defence analyst Amity Cow shish, a former top MoD officer directly responsible for military acquisitions, observed that if the decision to go in for a direct purchase of 63 aircraft has indeed been taken, “then this shows great out of the box thinking” on the part of the Ministry.

“It should make everyone happy, particularly the IAF which needs the aircraft urgently, and Dassault and its associates for the way out,” adding that it also opens more options for IAF to catch up with its requirements.

It may be recalled that the tender (Request for Proposals, or RfP) for the 126 MMRCA was floated in 2007, and Rafale was declared the winner in 2012. Others in the competition were European Eurofighter Typhoon, Swedish Saab Gripen, US Boeing’s F/A-18 Super Hornet and Lockheed Martin F-16 and, the Russian MiG-35.

Notably, the Government-to-Government route has been found to be the best while buying aircraft and systems from the US under the latter’s well-established Foreign Military Sales (FMS) route but for the French, while political leaders and diplomats help in military equipment sales, any deals are done directly with the manufacturers.

India also has an unfortunate negative culture of dubious elements raising allegations over any and every thing. Also, deviating from the established process of selection through technical evaluation and commercial tenders would have a political cost for the leaders in power.

In a Government-to-Government deal, the impact of political challenges would be minimal, if any. This route was described as the most acceptable even by the previous Defence Minister, Mr. AK Antony, who had to postpone crucial decisions occasionally due to periodic allegations played up in the media; it didn’t matter most of them were blatantly wrong and inspired by vested interests.

Officers of the Civil Services, who manage the Government and ministries, are generally keen NOT to take any decisions lest they are held responsible, thanks to the curse that former Prime Minister VP Singh cast on the system by prosecuting top officers for acquiring the Bofors gun from Sweden in the 1980s. He had alleged that the gun was of “poor quality” and that there was bribe in the deal. Modernization of defense forces and security agencies has suffered ever since.

Under the acquisition procedures, deals over Rs 1,000 crore (USD 160 million at the current exchange rate), have to be cleared by the Cabinet Committee on Security (CCS). But they have to be first approved by the Defence Minister and Finance Minister, both of whom are obliged to ‘see and sign them’ before forwarding any proposal to the CCS, headed by the Prime Minister.

Notably, most of the existing IAF combat squadrons have Soviet-vintage MiG-21 and MiG-27 aircraft.

Their specified ‘Total Technical Life’ is either over or is nearing that, and IAF has reduced their flying to maintain them till new aircraft are inducted.

The Indian HAL-made Light Combat Aircraft (LCA) program has also been delayed considerably, and induction of French-made Rafales is now keenly awaited.

Notably, the number of IAF combat squadrons is much less than the sanctioned 42, hovering around 32 or 34. Mirage 2000, and MiG-29s, both acquired in the 1980s, are under upgrades to extend their lives by another 10 to 15 years.

Dassault is mandated by the French Government to keep its Rafale assembly lines open by producing at least 11 aircraft per year.

But the French air force (Armee de l’air Francaise) is buying only a limited number; so foreign sales are required to keep the company going.

Recently, the French Government negotiated an agreement with Egypt to supply 24 Rafales, and with the Indian order coming in; the French aerospace factories would be celebrating with champagne all over.

The Indian order will benefit Dassault, which integrates the aircraft, Thales which makes avionics and warfare systems, Safran which provides the engines and several onboard systems, and MBDA, which will supply its latest Meteor (Beyond Visual Range) and other missiles.

Some of the systems will be common to those being fitted now on 1980s-vintage Mirage 2000 aircraft, which are being upgraded now by HAL.

Rafale is also being considered by the UAE air force, which at present has Mirage 2000-9 and F 16 Desert Falcon aircraft.

Reprinted with permission of our strategic partner, India Strategic.