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The Rafale Tales

R. Balashankar is a political analyst and former editor of the Organiser
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The accuracy of the statements made by individuals may be questioned but circumstances never lie


Creative Disruptor: Narendra Modi - The Maker of New India | R Balashankar | Konark Publishers | Pages: 312 | Rs 650

I say shameless, for I know how unfashionable it is now to acknowledge in life or history any genius loftier than ourselves. Our democratic dogma has levelled not only all voters but all leaders; we delight to show that living geniuses are only mediocrities, and that dead ones are myths.
— Will Durant, The Greatest Minds and Ideas of All Time

The defence sector has been one of the focus areas for Narendra Modi. He has set a record of sorts by opening up the defence sector for private investment with the goal of making India a major defence equipment manufacturing hub. For this, the government has announced a series of incentives to attract private investment.

The guidelines approved in July 2018 are an ambitious initiative never tried earlier in India. Under this Strategic Partnership model approved by the Defence Acquisition Council (DAC), the highest decision-making body of the Defence Ministry, in every defence equipment deal with any foreign company, India will explore the possibility of roping in private firms to set up manufacturing units in India in partnership with select domestic corporate houses, in areas like submarines and fighter aircraft which will also involve technology transfer. India is one of the largest defence and military equipment buyers in the world and almost every item the military is using today is being imported, imposing huge foreign exchange outgo annually for procurement. Many defence equipment manufacturing companies abroad are hugely dependent on Indian procurement.

The Modi government amidst much criticism and political manoeuvring made the controversial policy shift to systematically reduce Indian dependence on foreign military supplies, with a target of making India a manufacturing platform for defence goods and achieve a turnover of Rs 1.70 lakh crore by 2025. This requires using all the clout India has as a major equipment buyer with deep pockets, to persuade foreign firms to enter into partnership with Indian companies and share their technology with them. Not that these foreign entities are eager or willing to dilute their monopoly in the area. This has to be seen as part of the huge national self-reliance in the defence sector envisaged by Modi as part of rebuilding the nation. The Strategic Partnership model, unveiled in May 2017, aims to create a vibrant defence manufacturing ecosystem in the country through joint ventures between Indian corporate giants and global defence majors.

Initially Indian critics like the Communists and peace activists targeted the move as an arms race trigger and one vitiating tranquility in the continent. But the amount of foreign exchange savings, possibility of big job creation and export potential which will play a major part in India’s emergence as a world power can be ignored only at unmerited loss to the future vision of India.

To streamline the SP model, the Prime Minister has set up an Empowered Project Committee to provide focused attention and ensure timely execution. The ‘amplifying guidelines’ lay emphasis on incentivisation of transfer of niche technology and ensuring higher indigenous content in military platforms to be produced in India.

The global defence majors, which are ready for collaboration with Indian partners and can help the country become a manufacturing hub for military production, will also be incentivised.

‘This will give a major fillip towards encouraging self-reliance and aligning the defence sector with the ‘Make in India’ initiative of the government,’ defence ministry officials were quoted as saying in a July 30 2018 news agency report.

The SP model aims to revitalise the defence industrial ecosystem and progressively build indigenous capabilities in the private sector to design, develop and manufacture complex weapon systems for the future needs of the Armed Forces.

In July 2018, Finance Minister Arun Jaitley held a meeting on the SP model with representatives of defence arms of leading Indian groups including Larsen and Toubro, Ashok Leyland, Mahindra and Mahindra, Reliance Infra, Tata Group, Punj Lloyd, Adani Group and Bharat Forge Ltd. At that meeting, some industry representatives favoured a level playing field and expanding the industry base by allowing entry of new players. It was learnt that some officials had also raised concerns about possible ‘judicial intervention and federal audit’ in case of award of successive orders to one ‘strategic partner’.

The SP model was proposed by the 10-member Dhirendra Singh Committee in July 2015. It had said that for the ‘Make in India’ initiative to become wider in the defence sector, the government should adopt a Strategic Partnership model, whereby a private firm is chosen for the development of a specific identified platform, PTI reported.

It is in this background that Congress chief Rahul Gandhi’s bribe allegations against Prime Minister Narendra Modi look immature, imbecile and outlandish. True to form, Modi has refused to react. Every time in the past when wild and baseless allegations were hurled at Modi, he characteristically preferred to remain quiet never giving the opponent a chance to get the honour of a response. On the face of it, Rahul seems to believe that his Bofors moment has come. He very well knows what Uncle Ottavio Quattrocchi had done—the ghost of which still haunts the family. Now is the chance to take revenge on the parties which exposed his father Rajiv Gandhi and his mother Sonia Gandhi in the Bofors scandal. This, he hopes, will revive his sagging political career. But sadly for Rahul here he has literally jumped the gun and acted in haste.

There is no question of bribe in the NDA deal. Finance Minister Jaitley has called it part of a conspiracy to torpedo the deal.

It is understandable that the government is not very comfortable revealing the details of additions and improvements attached with the deal going by the irresponsible behaviour of Rahul Gandhi in the past. On many occasions, he has echoed Pakistan’s statements when India is fighting a proxy war with that country. On surgical strikes, for instance, he asked the Indian Army for proof and pooh-poohed the Indian claim. He was merciless in his attack on the Indian Army, downplayed the Modi government’s successful implementation of the two decade-old demand by ex-servicemen for One Rank One Pension, though his UPA prevaricated on the issue for 10 years. On Rafale, for about a year, Rahul was making unsubstantiated allegations. In the end, he used the most despicable epithet in accusing the Prime Minister—unbecoming of a civilised practitioner of politics in India. But Modi is used to such unprintable abuses from the Congress often in the past 16 years.

The Rafale deal is a project of the UPA. Between 2012 and 2014, there was a 100 per cent escalation in its price. Then, in the new deal, the government has asked for technology upgradation, additional features and transfer of technology. If the Modi government wanted, it could have scrapped the deal and gone for a new global tender. Rafale was selected in January 2012 when Dr Manmohan Singh was Prime Minister. Reliance came into the picture the same year, under UPA. In February 2012, Reliance Industries and France’s Dassault Aviation signed a pact for partnering in the defence and homeland security sector in India. ‘The accord comes less than two weeks after Dassault’s Rafale warplanes emerged as the preferred bidder in a $15 billioncontest to supply India with 126 fighter jets,’ says a Reuters report.

The partnership provided Dassault with a substantial opportunity to fulfil its offset responsibilities under the contract. Dassault wanted RIL to be the main partner. Under the offset clause, a foreign supplier must award contracts worth a chunk of the deal value to Indian companies in return. The Opposition furore over Rafale seems to be an attempt to starve the Indian Air Force of a combat aircraft of world standard. Because now comes a demand for a Joint Parliamentary Committee which will put the entire procurement and ‘Make in India’ programme in cold storage for years. As for Reliance not having past experience, it was again the French company which found it useful.

As we have seen, if Mukesh Ambani’s Reliance Industries was okay in February 2012, then how does getting Anil Ambani’s Reliance Defence on board become cronyism and scam in 2016?— Is it only because it happened under Modi? About the price, Rahul Gandhi is quoting the price of 2008 in 2018. Can he get even a blade for the same price today as it was in 2008? In a joint venture, the partner has to invest money and Rafale will only be transferring technology. How can Reliance make money here? Rather they have to put in money. The French government has said that choosing the Indian partner was the job of Dassault Aviation. The French company has said they chose the Indian partner. How can Rahul blame Modi for this? He is either being vicious or ill-informed or has, as usual, got only half-baked information.

In between, France has had three Presidents. Their political rivalry could be one reason for former President Francois Hollande’s remark that the ‘Indian government proposed this group’. The RIL’s cosy relations with Sonia Gandhi during the UPA period are no secret. It is only that the MoU signed by RIL in 2012 got lapsed and in the new agreement it is the younger brother Anil Ambani’s firm—Reliance Defence—that has signed the deal with Dassault.

As for Rahul’s claim that the Indian partner has no experience, he has to blame his party which never encouraged innovation.

No Indian corporate has experience in defence production. That is why after opening up, the Modi government shortlisted about a dozen Indian corporate houses which can develop as world players in future. As for DRDO (Defence Research and Development Organisation) and HAL (Hindustan Aeronautics Ltd), so far they have not shown any innovative skill or import substitution model despite substantial public money getting invested over the last many decades. The reason for Modi opening up defence production for the private sector was also because of the unenviable record of the public sector companies. In the initial stages, like all major nations—the US, China, Russia or Britain— have done, the Indian government too has to hand-hold select Indian companies if India wants to become a global player in the defence production sector. Rahul has so far not shown any vision for India; hence his eagerness to spoil the Indian game is understandable.

With each passing day Rahul Gandhi’s allegations on Rafale are getting hilarious and absurd. It is obvious that he has no knowledge of the subject. When asked to react on Rahul’s accusations, Union Finance Minister Arun Jaitley made an interesting observation. He said, ‘Many young lawyers practising criminal law used to get an advice early in their career from veterans in the field. They were told “if you are strong on facts, bang the facts. If you are strong on law, bang the law. If you are weak on both, then bang the desk”. Those who advise Rahul Gandhi appear to have persuaded him that he is cut out only for the third option. Since beating the desk itself would not suffice, it has to be accompanied with a new narrative. If the factual narrative does not suit him then concoct an alternative. Repeat the false narrative a dozen times and convince yourself that falsehood is in fact is the truth. Thereafter, you can comfortably live in self-delusion. Or is it a case of mendacity?

‘The onus now lies on me to substantiate what I have said. Rahul Gandhi’s speeches and tweets display repeated examples of this. I can give examples,’ he said.

Rahul has been saying in press meets, tweets and election rallies that the UPA had signed a deal for the Rafale at a cheaper rate, that the Indian partner then for Rafale was HAL, but the NDA has signed a deal for substantially higher price, it favoured Reliance instead of HAL and that in this Reliance got heavy profit. But each time Rahul was giving different figures as the Reliance gain and the price at which the deal was signed by the UPA and the NDA. The fact is the entire story of Rahul is a fiction. In the first place, the UPA never signed any deal with Dassault (Aviation). It was only negotiating, and different prices were quoted. The price finally agreed by the UPA was Rs 737 crore per aircraft, and with additional fittings and capabilities the price agreed was Rs 2,000 crore per piece. The deal was, however, never signed. The deal signed by the NDA is for Rs 670 crore per aircraft, and with additional capacity it comes to Rs 1,600 crore per aircraft. The NDA has ordered for 36 aircraft whereas UPA was planning to buy 126.

The Indian Air Force in 2001 projected a desperate need for 126 Medium Multi Role Combat Aircraft (MMRCA) and the process of selecting the same concluded in 2007 under the UPA. The two aircrafts shortlisted were Rafale and Eurofighter, which was number two. When the Modi government came, Eurofighter was hopeful of getting the deal as it felt the one selected by the UPA could be replaced. They lobbied hard with support from the British government. Similarly, the French government was mighty pleased when it was selected earlier by the UPA. The French President made a statement in parliament expressing happiness and said that it will boost French manufacturing potential. In both Europe and the US their respective governments solidly stand behind, promote and finance their private companies to get big deals abroad.

The UPA had selected a middleman who was to get a 10 per cent cut. The deal finally was not signed also perhaps because of this. Though the IAF was desperate, then Defence Minister A.K. Antony refused to sign any paper.

Then it was said that the UPA had no money, so it was decided to postpone the purchase till the next government came. The NDA has entered into a government- to-government deal, so there is neither any middleman nor commission agent. The Indian government cannot support any Indian company. The UPA had done several defence deals with the US, making it the number one arms supplier for India during its tenure, and it would know that in a government-to-government deal there is no middleman. Yet Rahul is repeating the lie, which now has become a media joke, Jaitley said. Let’s see how Jaitley has exposed Rahul. Firstly, he says, Rahul repeatedly claims that a private business house in India (Reliance) has got an advantage ranging from Rs 38,000 crore to Rs 1,30,000 crore. He further argues that what was to be manufactured by HAL is now being manufactured by a private business house with no experience.

The truth Jaitley said is this: The Rafale aircraft and its weaponry are not being manufactured in India at all, neither by Dassault or by any other private company. All 36 aircraft and their weapons in a fully flyaway and usable form will arrive in India. After the supplies begin, Dassault has to make purchases in India for 50 per cent of the contract value. This is as per the NDA’s policy to promote Make in India. If the total deal is for Rs 58,000 crore, 50 per cent of that amounts to Rs 29,000 crore. These supplies to Dassault are to be made by over 120 offset suppliers, and the business house named is one of them. Dassault has said that only 3 per cent of offset may come to that business house, which is less than Rs 1,000 crore.

As Jaitley said, ‘Why is Rahul not taking the names of the other 119 offset manufacturers who also have no previous expertise? And as a responsible politician how can he talk so irresponsibly on the quantum of money?’ Ever since 23 September 2018 when former French President Francois Hollande made a statement, which was disputed both by the French government and Dassault, Rahul started screaming ‘scam’.

In a point-by-point rebuttal, Arun Jaitley establishes the truth. He said the allegation that the Reliance Defence ‘partnership’ with Dassault Aviation was entered into on the suggestion of the Indian Government was a big lie. He said, in a subsequent statement the former French President has sought to suggest that Reliance Defence emerged on the scene after the agreement with the Indian government was entered into. Hollande has, in a subsequent statement, said that he was ‘not aware’ if the government ever lobbied for Reliance Defence and that ‘the partners chose themselves’. Truth cannot have two versions, Jaitley pointed out.

The French government and M/s Dassault Aviation have categorically denied the correctness of the former President’s first statement. The French government has stated that the decision with regard to the offset contracts of Dassault is taken by the company and not the government. Dassault Aviation itself has suggested that they have entered into multiple contracts with several public sector and private sector companies with regard to the offset contracts and the decision is entirely theirs.

Without commenting on the correctness or otherwise of a controversy in the French media, it may be mentioned that the former French President, Hollande, is countering statements made against him with regard to a conflict of interest in his dealing with Reliance Defence.

The accuracy of the statements made by individuals may be questioned but circumstances never lie. This is evident from the following facts: • There is no ‘partnership’, as suggested by the former President, with regard to the 36 Rafale aircraft to be supplied by Dassault Aviation to the Government of India. It was a government-togovernment agreement under which the complete weaponised aircraft are to come to the Indian Air Force. No manufacturing is to be done in India. It is, therefore, erroneous for anybody to suggest that there is a ‘partnership’ in the supply of the 36 Rafale aircraft.

• M/s. Reliance Industries Ltd., in February 2012, had entered into an MoU with Dassault Aviation. This was at a stage when the contract relating to 126 Rafale aircraft, of which 18 were to be manufactured in France and 108 in India, was at an advance stage of consideration by the UPA government. Rahul Gandhi’s misplaced criticism could equally apply to the 2012 MoU.

• The offset contract ensures investment by the original equipment supplier i.e. Dassault Aviation, in India, in as much as they make purchases from Indian companies to the extent of 50 per cent (in this case). The choice of the offset partner under the 2005 offset policy lies with M/s Dassault Aviation, and they have selected several public and private sector companies to make the supplies.

• The offset partner is selected entirely by Dassault Aviation, the original equipment manufacturer, and neither the French nor Indian governments have any say in the matter.

• It is no coincidence that on 30 August 2018 Rahul Gandhi had tweeted that ‘Globalised corruption. This #Rafale aircraft really does fly far and fast! It’s also going to drop some big bunker buster bombs in the next couple of weeks.’

• The former French President’s first statement rhymes with Rahul Gandhi’s prediction.

• The Congress party’s official handle on 31 August 2018 had carried the tweet of one of its leaders, ‘It is evident that Anil Ambani bribed President Hollande through his actorpartner to get the Dassault partnership.’ For the Congress party to allege that a former President had been bribed by an Indian business group and then use him as a primary witness, particularly when he is facing criticism for an alleged conflict of interest within his own country (is wrong).

• The former French President’s first statement that the Indian business group’s name was proposed by Government of India has now been substituted by him to the effect that he is ‘not aware’ if the Government of India ever lobbied for Reliance Defence. He further said that the ‘partners’ chose themselves.

• Rahul Gandhi has made an absurd suggestion that the interest of Indian soldiers has been compromised with. By whom— the UPA which delayed the acquisition that could have added to the military’s combat ability or the NDA which expedited the same at a lower cost?

(This is an excerpt from R Balashankar's book Creative Disruptor: Narendra Modi - The Maker of New India )

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