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Rafale Scam: It was Modi who exempted the Rs 59,000 crore deal from sovereign guarantee

Modi has chosen to cause harm to the nation by exempting the French from providing a Sovereign or a Bank Guarantee, against the advice of his own government.

Although the Attorney General KK Venugopal confessed in the Supreme Court that there was no Sovereign Guarantee in the Rs 59,000 crore Rafale deal signed by Modi government in September 2016, the law officer did not tell the whole truth that the exemption from providing a Sovereign Guarantee was provided by a small committee led by Prime Minister Narendra Modi.

The exemption for a Sovereign or a Bank Guarantee from France for the biggest deal under Modi government was granted on 24 August 2016 in a meeting of the Cabinet Committee on Security (CCS), headed himself by Modi. This was just a day after the Law Ministry explicitly stated that “the guarantee which has to be requested in lieu of the contract from the French side pertains to a policy of the Government which is required as per the provisions of the DPP.”

Also Read: No Sovereign Guarantee From France: Modi Government Confesses In SC

Six days earlier, defence ministry’s Air Acquisition Wing had noted that “Bank guarantees may be insisted from French side as required under our procedure”. This came after then defence minister Manohar Parrikar had noted on 7 March 2016 that there is a “need to secure and safeguard our interests against any advance given to M/s DA (Dassault Aviation.)”

But perhaps in a hurry to sign the defence deal which was likely to benefit Anil Ambani, Modi chose to over-rule all these recommendations of his own government and exempted the French from providing a Sovereign or a Bank Guarantee. He instead agreed to a Letter of Comfort from the French Prime Minister – which is not even from the French President – and even this Letter of Comfort was referred to in the Preamble of the Inter-government Agreement signed on 23 September 2016. French Prime Minister’s Letter of Comfort was not mentioned or referred to in any of the clauses of the agreement, further ensuring that it was legally and financially worthless.


As explained by a retired senior defence ministry official who was serving during that period, “in matters of a buying a nation’s commitment based on public funds, it (Letter of Comfort) can cause harm to the nation”. In the case of Rafale deal, more than Rs 59,000 crore of public funds are involved and Modi has chosen to “cause harm to the nation” by exempting the French side from providing a Sovereign or a Bank Guarantee.

Not only did Modi exempt the French of providing a Guarantee, the CCS under him also exempted the French government of being liable for a payment, in case under a final arbitration award, the French side has to pay certain sums to India. Indian government will have to thus get into arbitration with French industrial suppliers – Dassault and MBDA – which negates the essence of any government-to-government deal.

On the one hand, Modi government claims that it signed the Rafale deal as a government-to-government deal with all possible guarantees. On the other hand, Modi personally led the small committee which gave exemptions that destroyed the core of a government-to-government deal.

Also Read: Rafale Scam: The Tale of Two CEOs. Who is lying?

Why did he do it? For anyone following the Rafale deal, with former French President Francois Hollande’s statement and Anil Ambani’s involvement, the tearing hurry of Modi to spend Indian public’s Rs 59,000 crore in this manner should not be hard to guess.

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