Modi Govt Lied About The New Rafale Deal Being Better Than The UPA’s
The latest report in The Hindu has dismantled the government's false claims about price and a faster delivery schedule.
On several occasions, representatives of the the Narendra Modi-led Bharatiya Janata Party (BJP) government including Union Minister Arun Jaitley, Defence Minister Nirmala Sitharaman and the Prime Minister himself have defended the 36-jet Rafale deal by arguing that it is a better deal for India than the 126-jet deal that was being negotiated by the UPA government. However, a latest revelation by The Hindu has thoroughly dismantled the Modi government’s claims.
Three domain experts –M. P. Singh, Adviser (Cost), a Joint Secretary-level officer from the Indian Cost Accounts Service; A.R. Sule, Financial Manager (Air); and Rajeev Verma, Joint Secretary & Acquisitions Manager (Air)–who were part of the seven-member Indian Negotiating Team (INT), submitted a dissent note dated June 1 , 2016 to Deputy Chief of Air Staff (DCAS) who was the Chairman of the INT. This strongly worded note note, submitted after the negotiations had concluded, says that the terms of the new deal were not “better”, reported The Hindu.
Here are the key findings of the The Hindu report:
Time Frame and Delivery Schedule
- The Modi government has claimed that under their deal, the delivery schedule for the jets was considerably shorter than that of the UPA’s deal. However, the note says that “as per the DAC (Defence Acquisition Council) meeting held on 28-08-2015 and 01-09-2015 the delivery schedule incorporated in draft IGA is T0+37 months to T0+60 months,” but “the delivery schedule finally offered by the French side is T0+36 months to T0+67 months.”
- It becomes even more clear comparing the delivery schedule of the first 18 flyaway aircraft in both deals. The note says, “in the MMRCA process (under the UPA), the first 18 flyaway aircraft were delivered between T0+36 months to T0+48 months whereas in the delivery schedule offered by the French side, the first 18 aircraft will be delivered between T0+36 months and T0+53 months,” reported The Hindu.
- “The benchmark price prepared by INT was for firm and fixed price and not adjusted to price based on escalation formula. The final price offered by the French Government (which is escalation based) is 55.6% above the benchmark (which is for firm and fixed price). Considering the future escalations till the time of delivery, the gap in the benchmark and the final price would further increase. Minor adjustments towards costs of Technical Publications, Advance Training of IAF Pilots and Technicians and Role Equipment would not make much dent to this huge gap,” the note reportedly said.
Final Price and Bank Guarantee
- The cost in the UPA deal, including the bank guarantee, was €8.059 billion, which came down to €7.48 when the 7.28 per cent impact of bank guarantees was deducted, reported The Hindu. However, under the NDA-negotiated deal, the final cost was €7.87 billion excluding bank guarantee, which was still “5.3% higher than the Aligned Cost of the commercial quotes submitted by M/s Dassault Aviation and M/s MBDA in MMRCA procurement process,” the dissent note reportedly observes.
Exorbitant Design and Development Cost
- A previous report in The Hindu had shown that NDA government’s decision to buy 36 jets instead of 126 escalated the price of each jet by 41.1 per cent. This was due to “the distribution of the exorbitant cost for the “design and development” of 13 India Specific Enhancements over 36 instead of 126 aircraft.”
- The Hindu reports adds that the dissent note specifically highlights the exorbitant design and development cost. “it was particularly noted by the INT that the Additional Commercial Proposal of 1400 million Euros towards NRC for Design and Development of ISE was exorbitant and unrealistic. The price has been further escalated in the final offer and then reduced factoring in global discounts given by the French side and also the financial impact due to alignment of advance/stage payments schedule with the MMRCA offer,” adding that ““The Mirage MLU Contract of July 2011 (supplied by Dassault) wherein price for D&D was only 348 million Euros; therefore, the price quoted for ISE in the final offer is exorbitantly high.”