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Straws In The Wind
The hectic lobbying on to rewire a $22 billion deal
There are ways and there are ways of deciphering ‘deal time’ in Delhi’s beltway. But there is no more certain a way than to peep into the bars and cubbyholes of the plush hotels and clubs, where slick, shadowy figures—some Indian, many foreign, a few women, mostly men—swirl around with the easy familiarity of the capital’s power matrix when there is a killing to be made. Speed dials are pressed and nicknames called out as the birds seek out their prey with extra long cigars and unpronounceable single malts. In the third month of the ‘Modi sarkar’, on the eve of Independence Day, the August air is pregnant with possibility for such folk as the new BJP government sits in judgement on India’s single-biggest defence deal. At stake is the almost-done $22 billion deal with the French defence manufacturer Dassault for the supply of 126 fighter jets (with 80 more if need be), popularly known for its product as “the Rafale deal”.
Ever since the 1980s, Indian politicians have been haunted by the ghost of Bofors while navigating the steep and slippery path of negotiations involving major defence deals. An allegation of Rs 64 crore kickbacks in the Swedish field guns purchase had spelt doom for Rajiv Gandhi, not only reducing the moral edge of his massive mandate in the Lok Sabha but also paving the way for his ouster in the next parliamentary elections in 1989. Today, however, the issue has gone much beyond the Gandhis and the Congress as leaders of different political parties realise the implications of a defence deal that can potentially go bad.
For the BJP-led NDA government of Narendra Modi, perhaps this is the dilemma as it grapples with the Rafale deal involving 126 Medium Multi Role Combat Aircraft. Of the six leading international companies that bid for this prized contract, Rafale and Eurofighter’s Typhoon were the two that were shortlisted. But Rafale, which had a lower price than the Typhoon, was earmarked as the “lead bidder” and given the chance to complete the negotiations. The UPA government, though it identified France’s Rafale as the leader, did not complete the deal. It is now left to the Modi government to do so. If it approves and finalises the deal with Rafale, he may come under criticism for endorsing a decision taken by the Congress government. But if he scraps it, he will further delay the induction of new combat aircraft that the IAF badly needs to supplement its replenishing squadron strength. “This government will not be burdened by the decision of the previous government,” says a Rafale opponent. “They will look at the deal afresh.”
Eurofighter, a consortium of four European countries—Germany, the UK, Spain and Italy—has remained a strong contender for the lucrative contract. A change of guard in Delhi has now brought its supporters to centrestage again with blogs, commentaries and such like by them in Indian mainstream media questioning whether Rafale was the best option for the IAF anyway. A number of high-level visitors—including the French foreign minister, British foreign secretary William Hague and ending with US secretary of state John Kerry and secretary of defence Chuck Hagel—have touched down in Delhi in the past weeks. This has intensified speculation that an attempt is made on their part to allow their respective companies to re-enter the bidding for the MMRCA deal.
A government decision last Thursday to put on hold all procurement from Italian defence group Finmeccanica and its affiliate companies—for their alleged involvement in the chopper scam—also seems to have encouraged rivals that the Rafale deal may be reopened. “It’s a highly competitive area. The losers will raise the pitch for sure. The Eurofighter countries have not given up the fight,” says ex-foreign secretary Kanwal Sibal, who also had a stint as India’s ambassador to Paris.
The MMRCA deal, just for its sheer size, attracted a large number of companies, from the time it was announced by the Indian government. A commentary by Carnegie Endowment’s Ashley Tellis in the wake of India’s announcement makes it clear. “The MMRCA bid has been one of the hottest recent aviation procurements not just in India, but internationally too… the procurement bid has been incandescent because it involves geopolitics, the economic fortunes of major aerospace companies, complex transitions in combat aviation technology, and the evolving character of the IAF itself.”
It is the IAF’s threat perception in the face of its depleting squadron strength—down from the sanctioned 44 squadrons to about 34 squadrons at present—that led it to look for new aircraft to replace its aging combat fleet. Initially, it was thought that the Mirage 2000-5 aircraft (it had impressed during the 1999 Kargil campaign) should be upgraded. But later that idea was junked and the search began for a newer, better combat jet. Since the Indian economy was booming, the political bosses had told the IAF top brass to “go for the best and not to worry about the cost”. Accordingly, it was decided that the IAF needed 126 MMRCA and tenders were sought through a ‘multi-vendor’ process. Six leading international companies were identified (see infographic). The process started around 2001 but it was only in ’07 that the six aircraft were put to an evaluation test, involving various exercises and tests, including flying under varying temperatures, in the Rajasthan desert as well as in the icy heights of Leh. “This was one of IAF’s biggest test evaluations, and that too simultaneously for six different aircraft,” says former air vice-chief (retd) Air Marshall Pranab K. Barbora. “Our boys did a commendable job and the testing procedure was above board. It received praise from all the participants,” says Barbora. According to him, after completing this lengthy process of evaluation, the experts agreed to shortlist Rafale as No. 1 and Eurofighter as No. 2. But though this part got over in 2012 and the government officially announced Rafael to be the “lead bidder”, final negotiations were still some way off.
Right now, as part of a proposed agreement, 18 fighter aircraft will be supplied in ready ‘fly away’ conditions while the rest 108 will be built in India by HAL. While the deal is crucial for France as it ensures the running of the Dassault plant, for India it not only helps in transfer of technology, it’ll also generate employment for a large number of people.
With a new regime in power, some experts remain sceptical on whether the Rafale deal will go through though. “Rafale’s fate hangs in the balance, it’s 50-50,” says defence analyst Rahul Bedi. He says one reason for the uncertainty is because a lot of money is involved. Bedi’s estimate is that the deal could surpass $22 billion by the time it is finalised with the cost of one aircraft going to over $200 million.
However, he points out that in the event Rafale is rejected by the government, it does not ensure that it will then be replaced by Eurofighter’s Typhoon. “There is no provision which says that if the lead vendor loses, the one in second place automatically gets picked,” says Bedi. “There’ll be no other option but to reopen the entire tender process.” But there are other wider implications if that happens. “If we reopen the process, we will never make it to the squadron strength,” says Barbora.
French officials, though, continue to put up a brave front in public. “The deal is progressing well but it turned out to be more complicated than what we had expected,” confesses a foreign official. Three of the four government committees set up on issues like maintenance, offset and transfer of technology are all complete. Only the fourth, final negotiations on price and production sharing agreement, are yet to be finalised. They also point out that technology offered through Rafale would give India an edge over rivals for the next 30-40 years.
Most independent accounts suggest the government may well settle for the French product despite questions being raised about the price, its fuel consumption and also Dassault’s ability to honour its promise for transfer of technology and taking responsibility for the jet to be manufactured by HAL. It may not be without significance that Eurofighter wound up its communications office in Delhi some weeks back. Does it mean then that the tough talk we get to hear in public is actually preparation for hard-nosed bargaining by the Indian government and French officials as negotiations enter the last, crucial phase?
***
The Winner (Almost) And The Also-Flowns
How Rafale fares vis-a-vis its five other international competitors for the MMRCA deal
The 15-Year Search For A Combat Aircraft
Three governments, two of NDA and one of UPA, have now presided over a tortuous process
2001 Vajpayee regime asks IAF to go for MMRCA to supplement the depleting squadrons
2002 Defence Procurement Procedure, involving a multi-vendor process, begins
2004 Request for Proposal (RFP) issued to some of the aircraft manufacturing firms
2007 RFP was extended to bring in Rafale, Eurofighter and others
2008 Simultaneous test evaluation and trials of all six aircraft done by IAF experts
2010 Rafale, Eurofighter shortlisted from six bidders by Manmohan regime
2011 Rafale selected as ‘lead bidder’ and negotiations begin to secure the best price
2014 With Modi regime in power, fresh bid to scrap deal and reopen negotiations
That Bird In The Sky | Pranay Sharma
“The Rafale Deal Should Be Scrapped And Renegotiated” : SWAMY
The BJP’s stormy petrel Subramanian Swamy has for long been publicly opposed to the $22 billion Rafale deal, to the point of even suggesting that there was more to the UPA government’s choice than met the eye. In February 2012,The Sunday Times of London quoted Swamy as saying he had initially been told the Eurofighter had won the deal to supply 126 fighter jets but that it all changed after the entry of a veteran French consultant, Bernard Baiocco, an ex-employee of the defence firm Thales, which contributes radar and electronic systems to Rafale. “Baiocco was here (in Delhi) and he went around, and everything changed after that,” Swamy had said, explaining the UPA’s sudden change of heart. With the Modi government poised to indicate its choice, Swamy spoke to Pranay Sharma
What do you think of the Rafale deal?
It stinks right through. The deal should be frozen or scrapped and negotiations for the MMRCA should begin afresh.
Why do you say this?
There are a number of reasons but foremost Rafale was finalised not through commercial negotiation; it was done by private conversations between Sonia Gandhi, her sisters and Carla Bruni, wife of then French president Nicolas Sarkozy.
Your other objections…
No country outside France has so far bought the Rafale. Some countries had shortlisted it, but rejected it later. We must find out why they did so. We must also know why it is so much more expensive than the other competitors. With the kind of money India has pledged to buy the planes, it can actually buy over the entire company that makes them. Moreover, there are also reports that it is trying to win the contract by giving a subcontract to an influential Indian industrialist. In addition, its performance in terms of fuel consumption etc was much higher and unimpressive during the recent Libyan campaign.
So what should be done about the Rafale deal?
I had written to the UPA defence minister A.K. Antony citing reports and the information on the Sonia Gandhi family’s link with Carla Bruni. Being an honorable man sensitive about his image and reputation, Antony had frozen negotiations with Rafale. I am not sure why Arun Jaitley decided to defreeze it.
The BJP’s in power. Will you ask for Rafale deal to be scrapped?
We have a party meeting coming up in a few days. I will raise the issue not only with defence minister Jaitley but also with PM Narendra Modi. I’ll definitely bring it to their notice.
“The Rafale Deal Should Be Scrapped And Renegotiated” | Pranay Sharma
The hectic lobbying on to rewire a $22 billion deal
- Foreign ministers and other senior politicians from France, Britain and the United States are descending on Delhi, ostensibly to engage with the new regime but also to talk about the Medium Multi-Role Combat Aircraft (MMRCA) deal
- Political noises emerging within BJP of Congress overhang on Rafale. Commentaries in mainstream media, and whisper campaigns raising questions on Rafale also doing the rounds.
- Front-page advertisements have started appearing in major Indian newspapers to create “public awareness” on the cost-effectiveness, other virtues of jets that lost out to Rafale
- Attempts are being made by various countries—especially those who lost out in the MMRCA negotiations—to come up with more attractive offers for their products
There are ways and there are ways of deciphering ‘deal time’ in Delhi’s beltway. But there is no more certain a way than to peep into the bars and cubbyholes of the plush hotels and clubs, where slick, shadowy figures—some Indian, many foreign, a few women, mostly men—swirl around with the easy familiarity of the capital’s power matrix when there is a killing to be made. Speed dials are pressed and nicknames called out as the birds seek out their prey with extra long cigars and unpronounceable single malts. In the third month of the ‘Modi sarkar’, on the eve of Independence Day, the August air is pregnant with possibility for such folk as the new BJP government sits in judgement on India’s single-biggest defence deal. At stake is the almost-done $22 billion deal with the French defence manufacturer Dassault for the supply of 126 fighter jets (with 80 more if need be), popularly known for its product as “the Rafale deal”.
Ever since the 1980s, Indian politicians have been haunted by the ghost of Bofors while navigating the steep and slippery path of negotiations involving major defence deals. An allegation of Rs 64 crore kickbacks in the Swedish field guns purchase had spelt doom for Rajiv Gandhi, not only reducing the moral edge of his massive mandate in the Lok Sabha but also paving the way for his ouster in the next parliamentary elections in 1989. Today, however, the issue has gone much beyond the Gandhis and the Congress as leaders of different political parties realise the implications of a defence deal that can potentially go bad.
For the BJP-led NDA government of Narendra Modi, perhaps this is the dilemma as it grapples with the Rafale deal involving 126 Medium Multi Role Combat Aircraft. Of the six leading international companies that bid for this prized contract, Rafale and Eurofighter’s Typhoon were the two that were shortlisted. But Rafale, which had a lower price than the Typhoon, was earmarked as the “lead bidder” and given the chance to complete the negotiations. The UPA government, though it identified France’s Rafale as the leader, did not complete the deal. It is now left to the Modi government to do so. If it approves and finalises the deal with Rafale, he may come under criticism for endorsing a decision taken by the Congress government. But if he scraps it, he will further delay the induction of new combat aircraft that the IAF badly needs to supplement its replenishing squadron strength. “This government will not be burdened by the decision of the previous government,” says a Rafale opponent. “They will look at the deal afresh.”
Eurofighter, a consortium of four European countries—Germany, the UK, Spain and Italy—has remained a strong contender for the lucrative contract. A change of guard in Delhi has now brought its supporters to centrestage again with blogs, commentaries and such like by them in Indian mainstream media questioning whether Rafale was the best option for the IAF anyway. A number of high-level visitors—including the French foreign minister, British foreign secretary William Hague and ending with US secretary of state John Kerry and secretary of defence Chuck Hagel—have touched down in Delhi in the past weeks. This has intensified speculation that an attempt is made on their part to allow their respective companies to re-enter the bidding for the MMRCA deal.
A government decision last Thursday to put on hold all procurement from Italian defence group Finmeccanica and its affiliate companies—for their alleged involvement in the chopper scam—also seems to have encouraged rivals that the Rafale deal may be reopened. “It’s a highly competitive area. The losers will raise the pitch for sure. The Eurofighter countries have not given up the fight,” says ex-foreign secretary Kanwal Sibal, who also had a stint as India’s ambassador to Paris.
The MMRCA deal, just for its sheer size, attracted a large number of companies, from the time it was announced by the Indian government. A commentary by Carnegie Endowment’s Ashley Tellis in the wake of India’s announcement makes it clear. “The MMRCA bid has been one of the hottest recent aviation procurements not just in India, but internationally too… the procurement bid has been incandescent because it involves geopolitics, the economic fortunes of major aerospace companies, complex transitions in combat aviation technology, and the evolving character of the IAF itself.”
It is the IAF’s threat perception in the face of its depleting squadron strength—down from the sanctioned 44 squadrons to about 34 squadrons at present—that led it to look for new aircraft to replace its aging combat fleet. Initially, it was thought that the Mirage 2000-5 aircraft (it had impressed during the 1999 Kargil campaign) should be upgraded. But later that idea was junked and the search began for a newer, better combat jet. Since the Indian economy was booming, the political bosses had told the IAF top brass to “go for the best and not to worry about the cost”. Accordingly, it was decided that the IAF needed 126 MMRCA and tenders were sought through a ‘multi-vendor’ process. Six leading international companies were identified (see infographic). The process started around 2001 but it was only in ’07 that the six aircraft were put to an evaluation test, involving various exercises and tests, including flying under varying temperatures, in the Rajasthan desert as well as in the icy heights of Leh. “This was one of IAF’s biggest test evaluations, and that too simultaneously for six different aircraft,” says former air vice-chief (retd) Air Marshall Pranab K. Barbora. “Our boys did a commendable job and the testing procedure was above board. It received praise from all the participants,” says Barbora. According to him, after completing this lengthy process of evaluation, the experts agreed to shortlist Rafale as No. 1 and Eurofighter as No. 2. But though this part got over in 2012 and the government officially announced Rafael to be the “lead bidder”, final negotiations were still some way off.
Right now, as part of a proposed agreement, 18 fighter aircraft will be supplied in ready ‘fly away’ conditions while the rest 108 will be built in India by HAL. While the deal is crucial for France as it ensures the running of the Dassault plant, for India it not only helps in transfer of technology, it’ll also generate employment for a large number of people.
With a new regime in power, some experts remain sceptical on whether the Rafale deal will go through though. “Rafale’s fate hangs in the balance, it’s 50-50,” says defence analyst Rahul Bedi. He says one reason for the uncertainty is because a lot of money is involved. Bedi’s estimate is that the deal could surpass $22 billion by the time it is finalised with the cost of one aircraft going to over $200 million.
However, he points out that in the event Rafale is rejected by the government, it does not ensure that it will then be replaced by Eurofighter’s Typhoon. “There is no provision which says that if the lead vendor loses, the one in second place automatically gets picked,” says Bedi. “There’ll be no other option but to reopen the entire tender process.” But there are other wider implications if that happens. “If we reopen the process, we will never make it to the squadron strength,” says Barbora.
French officials, though, continue to put up a brave front in public. “The deal is progressing well but it turned out to be more complicated than what we had expected,” confesses a foreign official. Three of the four government committees set up on issues like maintenance, offset and transfer of technology are all complete. Only the fourth, final negotiations on price and production sharing agreement, are yet to be finalised. They also point out that technology offered through Rafale would give India an edge over rivals for the next 30-40 years.
Most independent accounts suggest the government may well settle for the French product despite questions being raised about the price, its fuel consumption and also Dassault’s ability to honour its promise for transfer of technology and taking responsibility for the jet to be manufactured by HAL. It may not be without significance that Eurofighter wound up its communications office in Delhi some weeks back. Does it mean then that the tough talk we get to hear in public is actually preparation for hard-nosed bargaining by the Indian government and French officials as negotiations enter the last, crucial phase?
***
The Winner (Almost) And The Also-Flowns
How Rafale fares vis-a-vis its five other international competitors for the MMRCA deal
- Rafale built and designed by France’s Dassault Aviation Twin engine, canard Delta-wing multi-role fighter, capable of N-deterrent missions
- Typhoon built and designed by Eurofighter, a European consortium Swing-role combat aircraft with dual air-to-air, air-to-surface capability
- F/A-18E/F Super Hornet built and designed by United States’ Boeing Strike fighter with
ability to switch from one mission type to another with ease - F-16IN Super Viper of United States’ Lockheed-Martin Only fighter sharing properties with 5th Gen fighter—F35 and the F22 Raptor.
- Mikoyan MiG-35 of Russia, latest version of MiG-29 Fourth Gen fighter with weapon systems and AESA radar suitable for multi-role missions
- JAS 39 The Gripen designed jet is built by Sweden’s Saab Light single-engine multi-role with Delta wing and canard config, fly-by-wire flight control
The 15-Year Search For A Combat Aircraft
Three governments, two of NDA and one of UPA, have now presided over a tortuous process
2001 Vajpayee regime asks IAF to go for MMRCA to supplement the depleting squadrons
2002 Defence Procurement Procedure, involving a multi-vendor process, begins
2004 Request for Proposal (RFP) issued to some of the aircraft manufacturing firms
2007 RFP was extended to bring in Rafale, Eurofighter and others
2008 Simultaneous test evaluation and trials of all six aircraft done by IAF experts
2010 Rafale, Eurofighter shortlisted from six bidders by Manmohan regime
2011 Rafale selected as ‘lead bidder’ and negotiations begin to secure the best price
2014 With Modi regime in power, fresh bid to scrap deal and reopen negotiations
That Bird In The Sky | Pranay Sharma
“The Rafale Deal Should Be Scrapped And Renegotiated” : SWAMY
The BJP’s stormy petrel Subramanian Swamy has for long been publicly opposed to the $22 billion Rafale deal, to the point of even suggesting that there was more to the UPA government’s choice than met the eye. In February 2012,The Sunday Times of London quoted Swamy as saying he had initially been told the Eurofighter had won the deal to supply 126 fighter jets but that it all changed after the entry of a veteran French consultant, Bernard Baiocco, an ex-employee of the defence firm Thales, which contributes radar and electronic systems to Rafale. “Baiocco was here (in Delhi) and he went around, and everything changed after that,” Swamy had said, explaining the UPA’s sudden change of heart. With the Modi government poised to indicate its choice, Swamy spoke to Pranay Sharma
What do you think of the Rafale deal?
It stinks right through. The deal should be frozen or scrapped and negotiations for the MMRCA should begin afresh.
Why do you say this?
There are a number of reasons but foremost Rafale was finalised not through commercial negotiation; it was done by private conversations between Sonia Gandhi, her sisters and Carla Bruni, wife of then French president Nicolas Sarkozy.
Your other objections…
No country outside France has so far bought the Rafale. Some countries had shortlisted it, but rejected it later. We must find out why they did so. We must also know why it is so much more expensive than the other competitors. With the kind of money India has pledged to buy the planes, it can actually buy over the entire company that makes them. Moreover, there are also reports that it is trying to win the contract by giving a subcontract to an influential Indian industrialist. In addition, its performance in terms of fuel consumption etc was much higher and unimpressive during the recent Libyan campaign.
So what should be done about the Rafale deal?
I had written to the UPA defence minister A.K. Antony citing reports and the information on the Sonia Gandhi family’s link with Carla Bruni. Being an honorable man sensitive about his image and reputation, Antony had frozen negotiations with Rafale. I am not sure why Arun Jaitley decided to defreeze it.
The BJP’s in power. Will you ask for Rafale deal to be scrapped?
We have a party meeting coming up in a few days. I will raise the issue not only with defence minister Jaitley but also with PM Narendra Modi. I’ll definitely bring it to their notice.
“The Rafale Deal Should Be Scrapped And Renegotiated” | Pranay Sharma
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