Abhijit Iyer-Mitra
The arbitrary purchase of 36 Rafale fighter jets during Prime Minister Narendra Modi’s visit to France, is now being rapidly followed up with the French Defence Minister’s second visit to India within the year. When the Rafale won the competition for medium multi-role combat aircraft over other US competitors, noted US academic Ashley Tellis said that India had chosen “a plane over a relationship”. Possibly as a result of this, the Rafale purchase has been variously labelled ‘strategic’ or a precursor to a ‘strategic deal’, or rather more pointedly as the ‘investment in a relationship, not in a plane’.
The problem with all these explanations is they fall flat when examined in detail and indicate a significant intellectual and diplomatic failure on India’s part.These compounded failures have very little to do with the Rafale jet, which is a competent plane, but rather the way in which the whole of Government – from the Prime Minister’s Office to the Ministry of Defence to the Ministry of External Affairs – has bungled every step of the way.
The ‘strategic’ part of the deal has three explanations. First is the promise of an incredibly good ‘friendship’ price that comes with a 25 per cent discount; second, is that the Rafale will plug the numbers gap in the Indian Air Force; and third is that this was a sweetener to the sale of French nuclear submarines (the Barracuda class SSN)
A cursory glance at figures presented by the French Ministry of Defence to its Senate in 2009 shows that the per unit cost is $232 million. This means a 126plane contract would have been worth $29 billion – not $10 billion, as the Defence Ministry has been telling us, having failed miserably to do its due diligence in analysing the bids.
Also, look at Rafale’s other export success. Egypt signed a deal for 24 of these fighters at $5.5 billion or $230 million apiece. Exactly a month later, Qatar also signed a deal for 24 of these jets for seven billion dollars or $291 million per plane. But Indian sources have been insisting that we have got 36 planes for $5.3 billion. Clearly, once again, the MoD is being taken for a ride, as even simple accounting would show that any price under $8.3 billion for 36 planes will impose significant losses on France – unless, of course, one chooses to believe the Rafale sale is an act of charity and President François Hollande is the new Mother Teresa.
As this writer had pointed out the price had to be $232 million at the very least. The bureaucrats then, under the UPA regime, had not exercised due diligence to calculate costs. Clearly even the NDA regime, despite promises of good governance, seems to be running an equally incompetent bureaucracy that is incapable of simple mathematics, economics or just plain professionalism that dictates babus simply do some homework and research.
Far from being the ’25 per cent discount’ story that is now being touted around, this deal is a 300 per cent cost escalation from what was initially promised. Notice how the same price escalation that dogged the MMRCA contract – taking it from $10 billion to $12 billion to $18 billion to $20 billion to $24 billion to finally $32 billion dollars over three years – has been mirrored within one month for the new Rafale deal. First, it was pegged at $5.3 billion, then seven billion dollars and finally, now, at eight billion dollars.
Another canard being spread was that this deal was to compensate France for the ‘high penalties’ India would have had to bear for the cancellation of the MMRCA. This is patently false simply because no contract was signed. Nominating the winning bid does not constitute a deal. But it raises the question: Do the MEA, the PMO and the MoD actually bother to read the procurement procedures they write?
The second argument made for this deal is that it solves the numbers crunch that the Air Force is facing. Again, when the details are examined, the argument falls apart. It would make better economic sense to leverage existing capacity and build more Sukhois – except that, by all emerging accounts, the dirty secret of the Air Force is that the Sukhoi is an unmitigated disaster.
Instead of focussing its efforts on solving the problems of the Sukhoi, the Air Force expects the Indian taxpayer to subsidise a whole new aircraft, adding onerous training and logistics requirements to an already dysfunctional Service whose leadership has lost the plot. The taxpayer, therefore, is expected to believe that where India failed to completely indigenise or operationalise the relatively crude Sukhoi, it will succeed with the ultra-modern Rafale – to use a household analogy, this means that a child who failed to learn cycling, now wants to race in the 1,000cc superbike category.
Lastly, we must deal with the ‘strategic’ precursor argument which runs that the French will reciprocate by selling us their latest nuclear submarine, the Barracuda, hull and reactor. If this were indeed the case, then this is $8.3 billion very well spent and every Indian should support it. The issue is Brazil managed to get the Barracuda (minus the reactor) without buying a single Rafale jet.
The French negotiating position on this is clever – when it comes to civil reactors, they do not ask for a modification of Indian law and accept the liability clause. However, the problem is that while the sale of nuclear submarines is perfectly legal under the nuclear non-proliferation treaty, it is barred under French law. So the Indian case is that France must change its law to accommodate India. However, India will not change its own law to accommodate France, but then again, France isn’t asking for a change of law in the first place.
This means that the Government of India has been misled into believing that an $8.3 billion deal will somehow change the political reality in France and get Paris to change its domestic laws. This is an extraordinarily naïve assumption based on bad research.
In other words, this was a trap – one where India pays billions of dollars simply to get assurances of a modification of French law, but still not get what it wants till it itself agrees to reciprocally modify Indian civil nuclear law. Note that when Modi committed to the purchase, President Hollande committed to no reciprocal sale of nuclear submarines. Clearly the negotiators didn’t understand the linkages at play here and blundered. As that great Frenchman Charles Maurice de Talleyrand once said, in the diplomatic world, “a blunder is worse than a crime”.
