Dassault Rafale, tender | News & Discussions [Thread 2]

[Taygibay]

This was proven during the Mumbai attacks where the staff from the Taj Hotel went beyond the call of duty trying to safeguard their guests during the midst of a terrorist attack instead of running away.

No problem with or doubt about Bharatis' courage but it doesn't translate into industrial know-how.

If you go beyond the call of duty on tightening a bolt assembly, it seizes or breaks!!!
Trust me on this one, I've done both?

Good day , Tay.

 

[Stephen Cohen]

No problem or doubt with Bharatis' courage but it doesn't translate to industrial know-how.

Yes that was a bad analogy

@randomradio

The Maruti Suzuki JV and the Hero Honda JV are better examples of The Indian
private sector going far to beat both their partner's expectations as well as that
of the consumers

 

[randomradio]

No problem with or doubt about Bharatis' courage but it doesn't translate to industrial know-how.

If you go beyond the call of duty on tightening a bolt assembly, it seizes or breaks!!!
Trust me on this one, I've done both?

Good day , Tay.

My analogy was to point out the sense of ownership the employees had to their job. Courage was not the point.

The problem with the MMRCA deal was HAL was not willing to pick up Dassault's production methods. As a typical PSU, the HAL has more manpower than necessary. HAL wanted less automation, did not want to buy the same tools as what Dassault uses. This obviously created all the friction between them and all the drama that you have seen to date.

Not using the same tools would mean re-certification of the aircraft. Using less automation mean less quality. And so on.

This is where Reliance shines. They are clueless, which means they are willing to learn. Private sector employees are complete opposites of the public sector employees. And Reliance has a lot of buying power. So they can attract really good talent. And through the entire production run, Dassault will have significant executive control over the Indian partner. I'm actually pretty confident about the future of all these clueless private companies in the aerospace sector.

 

[BON PLAN]

Russia could afford to go ahead with Mistral deal without a guarantee, They have a fearsome reputation backed by more than 1,500 Nukes. They have a huge history of ship building

That huge history seems not enough to make proper Mistral class ships.
They baught ships and ToT.
At the end, and it's a french choice, they don't have the ships but the ToT. Not too bad from russian side in fact.

And 1500 nukes are useless in such a deal. even 10 are useless (but more than sufficient)

 

[Taygibay]

What a joy it must be for you to learn new things.

Indeed! ( And a rare good call on you part, I may add! )
What sadness however that I cannot always impart as much ( Joy of Learning ) on others ...
enough said!

Tay.

 

[Stephen Cohen]

@Samskara

Do you think that we can re open the IGA for re negotiation

 

[Taygibay]

It must be tough being you. All the best in peddling your wares.

It is but because of this nagging thing called a soul, not for the ludicrous kid stuff you imply!

And the only thing I peddle is truth ... which is likely why you're so antagonistic! You can't stand it!

Have fun with the inevitable last word, I'll go join my mate on his lunch break, Tay

 

[Stephen Cohen]

It is consequential because its the first time we have such transparency in a large deal. Most times its all cloak and dagger till the time we find out we have been screwed many times over.

I find this new approach quite refreshing and most people will take some time to get used to this. Expect the french to bitch and whine all the way to the bank.

Also I have encountered both performance AND Financial BG in all my international contracts. It is also true that there are exit clauses that ensure BG is not invoked and a work around solution is found. But that does not mean they are not there in a contact. Most times they form the non retractable part of the contact.

Between nations there is no safeguard against bad Faith , but BG can provide suitable Leverage to reduce probability of any such inspired tricks.

How about India taking a Loan from A French bank say BNP Paribas

Make it a Three party deal ; let the BNP finance the deal

If Dassault screws us we screw the Bank ie BNP

At the most we pay some interest

 

[PARIKRAMA]

Pls read below

An article

Rafale fighter Jet deal in trouble: Here's why French govt is shirking liability
The disagreement over liability further complicates any early conclusion of the Rafale contract
Ajai Shukla | New Delhi March 15, 2016 Last Updated at 00:32 IST



Around 2004, when the Indian Air Force (IAF) ordered some 40 additional Sukhoi-30MKI fighters from Russia, India’s cabinet exempted Moscow from providing bank guarantees to cover “performance and delivery liabilities” for the new aircraft. Russia had insisted on this exceptional waiver, given its strategic relationship with India and the Su-30MKI’s proven performance. In the years ahead, New Delhi was to regret not binding Moscow to specific liabilities, as the Su-30MKI consistently disappointed the IAF with availability rates of below 50 per cent.

Now, with New Delhi and Paris having inked an inter-governmental agreement (IGA) on January 25 for the purchase of 36 Rafale fighters, France, like Russia in 2004, is resisting sovereign liabilities that would make the government of France, not just Dassault alone, responsible for delivery or performance shortfalls in the Rafale.

India’s defence ministry, like weapons buyers everywhere, insists on writing “liabilities” into contracts for defence equipment. These are usually backed by bank guarantees that New Delhi can encash if the equipment’s delivery or performance is not according to the contract. On Monday, Indian Express reported that the Ministry of Law and Justice has insisted on sovereign guarantees.

But Paris, like Moscow earlier, wants to provide just a “letter of comfort”, the disparaging term for a written (but commercially un-enforceable) government undertaking to enforce the contract provisions.

Added to the already difficult negotiations over the Rafale’s cost, which the defence ministry considers exorbitant at Euro 11-12 billion, and wants to bring down to no more than Euro 9 billion, the disagreement over liability further complicates any early conclusion of the Rafale contract.

Knowledgeable insiders speculate that New Delhi might be attempting to help reduce Dassault’s cost by shifting liability to the French government. A bank guarantee would cost Dassault 3-4 per cent of its value, while a sovereign guarantee incurs no cost.

Paris and Dassault have even earlier backed away from incorporating liabilities into the Rafale contract. In long-drawn and eventually fruitless negotiations between 2012-15 for 126 Rafales, Dassault had declined to accept liability for 108 fighters that were to be built in India by Hindustan Aeronautics Ltd (HAL). This was one of the thorniest issues that led to a breakdown in negotiations.

“Usually, a written liability that binds the vendor company would prove adequate in a defence contract. However, since the French government has taken a leading role in pushing the Rafale contract, it should not back away from taking on liability”, says Amit Cowshish, a former financial advisor for defence ministry acquisitions.

According to the defence procurement procedure (DPP), an aerospace contract should involve a signing amount of no more than 15 per cent, another 70 per cent paid out in step with delivery milestones, and about 15 per cent retained for the warranty period to cover defects, if they arise.

Yet, the defence ministry has been paying as much as 20-25 per cent while signing the contract, and even paying out the 15 per cent warranty amount, satisfying itself with a bank guarantee for that amount.

“Arms vendors and supplier countries are notoriously reluctant to accept liabilities written into contracts. However, it is essential for our defence ministry to demand these, so as to have a mechanism for enforcing multi-billion dollar contracts”, says SN Misra, a former defence ministry aerospace contracting veteran.

Interestingly, Washington follows an entirely different system for Foreign Military Sales (FMS) contracts, in which the US Department of Defense (Pentagon) concludes contracts with US arms vendors on behalf of the purchasing country. For purchases like the C-130J and C-17 Globemaster III, India has been depositing 40 per cent of the contract value into an escrow account with the US Federal Reserve. This serves as a “termination guarantee”, in case the buyer government unilaterally terminates the contract. The “liability” is negotiated separately between the Pentagon and the vendor company.

Prime Minister Narendra Modi had requested French President Francois Hollande last April for 36 Rafale fighters on a “fast track” basis. In January, the two countries had signed an “inter-governmental agreement” during Hollande’s visit to India. Almost two months later, no contract is in sight.
Rafale fighter Jet deal in trouble: Here's why French govt is shirking liability | Business Standard News
+++

Mr Shukla Article is 15th... Now look at my responses yesterday 14th.. see this

Dassault Rafale, tender | News & Discussions [Thread 2] | Page 178

Dassault Rafale, tender | News & Discussions [Thread 2] | Page 181


So strangely when i explained here everything in simple lucid terms the facts, the thread is here to see the results..

@Abingdonboy @Taygibay @Spectre @randomradio @Stephen Cohen @Picdelamirand-oil

@Stephen Cohen
Apologies i did not reply ydy night as i took a voluntary break from this thread to collect my thoughts..
An IGA or Inter Governmental Agreement will have a first Draft form which requires clearances from both government multiple departments including Legal and Justice department. This to and fro mechanism will continue till a middle ground comes into the vicinity and both sides are agreeable to it.

As of now what i understand is this document contains everything from the product Rafale, to specs, to numbers to every accompanied package details to vendor names to what India wants in customization, servicing, spares to whatever we can think about.. Its basically a whole story book with schedules of delivery and other things. It also contains the offset and manufacturing line requirement and tangible technology transfer which i had tried to explain before. (It may include or delete many more things surely)

This IGA is signed between governments of India and France. After this individual contracts in legal parlance accommodating everything in IGA in legal contracts is signed between DA and India and DA and French Government. In our contract the financial liability part will be in that contract as agreed in the IGA.

Thus, if i understand and spell out clearly, the Justice and Legal department issues have to be when they got the "draft" IGA for an opinion and clearance. Of course they may have raised their opinions which would have then sent to MOD/PMO and again negotiated with French government. Ultimately the MOU to IGA was agreed bcz IGA also needs to incorporate the price part which is what S Jaishanker said here

From 26th Jan 2016
The two sides expressed optimism that cost issues will be resolved soon and an MoU signed on the inter-governnmental agreement for the purchase of the jets.
The IGA will be concluded “in its entirety” once the cost issues are agreed upon, foreign secretary S. Jaishankar said.

A joint statement said Prime Minister Modi and President Hollande “welcomed the conclusion of the Inter-Governmental Agreement (IGA) on the acquisition of 36 Rafale fighter aircraft in flyaway condition, except for some financial issues... which they agreed must be resolved as soon as possible.”

Rafale MoU with France, but price still unresolved

The 18th Feb news of DM MP said

No Rafale deal unless price is right: Parrikar | Business Standard News

Thus, if you see for signing an MOU some form of clearance has to be granted from our Legal and Justice department without which the MOU to IGA wont have been signed. Now what they have cleared is not known in public domain. But going by DM MP statement the "terms of guarantees" is resolved implying that portion was cleared by Law and Justice department.. Of course the clearance has to be prior to signing when draft was circulated.

As for exceptions or deviations, this government is fully aware of a watch dog named CAG which has ripped apart old government on Coal Gate, 3G and defense deal lacunae. So I am sure, present government will do everything to not earn the wrath of CAG and lose the next elections by earning a bad name.

The IGA will have some exit clause surely but if we are talking about a possibility of renegotiating, it has to be mutually agreed.. One side alone cannot force a negotiation.. Its a honorary commitment between governments.

This is why the news to me is Pre 25th Jan 2016 news which is leaked now to portray the deal in bad light.

 

[topgun047]

Ajay Shukla bringing up the example of Russia to make a point about need for a guarantee of sorts in Rafale deal is some sort of a joke according to PDF resident expert on jokes Mr. Spectre.

I am laughing rest assured.

 

[Ankit Kumar]

https://twitter.com/x/status/709515233438474241

A friend messaged me yesterday when we were having usual chat about aircrafts , gliders etc.

"भूत, प्रेत , Rafale और मासूम Girlfrnd मन का वहम है, ऐसा कुछ नहीं होता ........"

 

[Didact]

Pls read below

Thus, if you see for signing an MOU some form of clearance has to be granted from our Legal and Justice department without which the MOU to IGA wont have been signed. Now what they have cleared is not known in public domain. But going by DM MP statement the "terms of guarantees" is resolved implying that portion was cleared by Law and Justice department.. Of course the clearance has to be prior to signing when draft was circulated.

As for exceptions or deviations, this government is fully aware of a watch dog named CAG which has ripped apart old government on Coal Gate, 3G and defense deal lacunae. So I am sure, present government will do everything to not earn the wrath of CAG and lose the next elections by earning a bad name.

The IGA will have some exit clause surely but if we are talking about a possibility of renegotiating, it has to be mutually agreed.. One side alone cannot force a negotiation.. Its a honorary commitment between governments.

This is why the news to me is Pre 25th Jan 2016 news which is leaked now to portray the deal in bad light.

Ajay Shukla's 'news' needs to be taken with a bucket of salt. That being said, it does reveal a tussle between the MoD and the Law and Justice Dept. over this deal, a fact which is being overlooked by everyone discussing the deal. There is also another tussle that would be playing out behind the scenes, the MoD vs the Finance Ministry.

The IGA clearance by the Finance Ministry is contingent on meeting the estimated price as quoted by the MoD to these departments. The MoD is allowed a flexibility of anywhere between 5%-10% of the estimated price, meaning that the clearance would be valid for a price variation of 5-10% in the final contract.

As I understand it, the MoD estimated Rs 60,000 crore as the contract price, implying a clearance of Rs 54,000-66,000 crore for the final contract from the other ministries. If the contract price exceeds this limit, the Finance Ministry is automatically compelled to review it's clearance, a process that would under best circumstances take 2-3 months after a final contract price is arrived at. We are also talking about the CAG & the CVC getting involved, due to the difference between estimation and actual contract value exceeding 50%.

The issue could have been avoided had the MoD put forward a practical estimate. The MoD will deserve it's share of the blame as far as this issue is concerned.

Now as far as the Rs 90,000 crore being put forward as the tentative cost is concerned, it is most definitely coming from the bureaucrats in the MoD, so this figure will deserve a degree of respect, even though it is almost definitely the Anti-Rafale clique spreading this number. If that really is the actual price of the contract , there will be intense renegotiation between the MoD and the Finance Ministry.

There is also the very real possibility that there may be a parliamentary committee, given the scale and nature of the difference between government estimate and the final contract; meaning a hold on the deal. People opposed to this deal have plenty of options to stall this contract. It's been a monumental blunder, the negotiation.

The Government is quickly reaching a position where it will have to weigh in the negative political fallout of signing a deal at 50% escalation vs the advantages it hopes to gather from signing this deal.

 

[ZedZeeshan]

I wonder for how long India will keep on lingering this deal. Its been like 10 years. As far as my understanding more delay will give opportunity to the french gov to increase price and resulting more negotiations and will eventually go to next year.. this is what is happening till now..

 

[randomradio]

In the years ahead, New Delhi was to regret not binding Moscow to specific liabilities, as the Su-30MKI consistently disappointed the IAF with availability rates of below 50 per cent.

What an amazing spin doctor.

 

[PARIKRAMA]

What people dont understand is what are the conditions under which a Sovereign Guarantee is given by a government. This point alone actually debunks the whole theory of "binding a government" statement.

If it was so easy that a Sovereign Guarantee is provided for a weapons deal supply then the basic purpose and motto behind this SG falls flat across the governments of this whole planet..

When i assess in my own personal capacity the risk rating of country specifically, the aspects are looked at much more details.. In general it is for economic purpose and foremost for the welfare of the country's citizen. A SG given for banks, public utilities and in emergency cases any deal which benefits the citizen is the paramount agenda behind this State binding need of SG.

TBH SG is the actual unlisted burden to every individual citizen of the country. A fact which is so dangerous and overlooked that anything going wrong in State Owned Enterprises, Public Utilities or Important Projects is generally accepted with the notion that Government will bail it out yet its quality aspect and non performance/deliquency directly effects the Country Rating and attached risk price in the whole financial/economical system of the country and abroad based investments.

Most economies today get SG for energy projects or basic utilities project like Water Services, Some benefits are given to SOEs for their business which is vitally important for the country. A weapons deal backed by SG for supply is not only against the spirit of SG it in facts dilute the very basis of SG which forms the pillar of support for all SOEs

My good friend @Spectre here knows how we have discussed on the quality aspect of China's investment abroad particular via its SOEs. Those SOE's are backed by SGs and yet we have discussed that quality aspect of those investments makes us suspicious of the actual Chinese economy's condition and steps taken to ensure these dont get crystallized and become bigger liabilities.

Thus, this case also is a similar aspect for understanding how difficult it is to furnish an SG..

Imagine our own situation.. Lets suppose tomo we sell a squadron of LCA Tejas to Sri Lanka and SL government states we need a SG from GOI to ensure HAL(even though its a PSU) delivers all the LCA on time and do not create any supply issues. Do you think its easy for GOI to give a SG which is to be first recommended for approval by Ministry of Finance and then needs an approval from our Parliament. Even GOI would give a LOI and Comfort Letter at best. The rule books which i posted before for GOI does not allow SGs for supporting a weapons deal even for SOEs. Its that explicit and that complex.

Yes we must bind the weapon makers and arms dealer.. But thats via PBG/FBG mode... Expecting SG is like fishing in a local pond and saying i will today catch a Salmon come what may..

We must be pragmatic and a realist.. We have to bind them but under other rules and regulations which are generally acceptable across the Industry and is truly a proven industry practice