It took equally grueling time to negotiate price and nuances related to transfer of technology with Dassault. In the end, however, the result was surprisingly swift. The decision to buy 36 jets has led to strong division of opinion. Some claim the “make in India” belief has been tossed aside whereas there has been a strong opinion about how this deal is good for the country. This article attempts to explore as to what happened, right from the initial stages to the latest decision by government to buy them off the shelf.
Indian Air Force
The Indian Air Force (IAF) is the armed air division of the Armed forces of India responsible for defending air space, providing Ariel support to troops and Ariel warfare. It is the world’s fourth largest air force consisting of more than 1500 airplanes. According to government, the minimum sanctioned squadron strength that India needs is around 39.5 and optimum being around 44. India achieved this in mid 80s itself by acquiring Jaguars, MiGs and Mirage aircrafts. These had become obsolete in terms of their functionalities by late 90s and by 2010 they had to be replaced. However frequent delays because of budgetary constraints, fall of Soviet, lack of spare parts availability resulted in crashes and malfunctions and serious questions were being raised about the effectiveness of air force. However, due to timely upgrades, the aircrafts aged gracefully and currently IAF stands with 30 squadrons – well below the safe mark of 44.
MMRCA
In 2001, India envisioned the requirement of 126 fighter jets, right in between the slot of LCAs (Light combat aircraft) and 5th Generation Russian-Indian Sukhoi/HAL (Hindustan Aeronautics Limited) FGFA(Fifth Generation Fighter Aircraft). These planes are scheduled to be inducted by 2022 and 2025 respectively. To fulfill the immediate requirement, India floated a tender for acquiring 126 jets and this came to be known as MMRCA (Medium Multi Role Combat Aircraft). The plan was to acquire 18 aircrafts in fly-away condition and the rest to be built in India by HAL under transfer of technology.
The Selection Process
The RFI (Request for Information) was sent to four vendors initially – Saab for JAS 39 Gripen, Mikoyan for MiG 29 OVT, Dassault for Mirage 2000, and Lockheed Martin for F-16. Later Dassault replaced Mirage with Rafale jet, Mig 35 was brought in instead of prototype 29 OVT and two new bidders – Euro fighter Typhoon and Boeing F/A-18E/F Super Hornet also jumped into the competition. For the next few years after the RFIs were issued, numerous tests were conducted in India among each competitor to check their performances in Indian conditions. The competition was believed to be neck to neck and finally the government shortlisted two fighters – Euro Fighter Typhoon and Dassault Rafale. The US ambassador that time, Timothy Roemer, maintained that though they were disappointed in not getting the deal, they were “respectful of the procurement process”. One of the documents leaked by “WikiLeaks” stated that owing to favorable US-Pakistan partnership, this deal would have anyways been under the scrutiny of Indian government. SAAB also expressed disappointment but stated that it was committed to India.
Final Selection
It was announced on 31st January 2012 that Rafale was deemed to be the best fit and would be chosen for exclusive and complete negotiations. Few of the reasons that were given were lower unit cost, overall lowest life cycle cost, lower fuel consumption and simple to maintain systems.However more critical reasons included Rafale’s performance in Afghanistan and Libyan bombings, the already acquaintance of the IAF to french aircrafts in the form of Mirage 2000 and compatibility of Israel and Russian sub systems. Also one of the major political reasons was perhaps, France was the only country not to impose any sanctions on India after India conducted nuclear tests in 1998. The final contract had to be submitted after the letter of Intent (LOI) had been issued by March 2012. As mentioned earlier, 18 of these jets were set to be procured in Fly-away condition and the rest were to be manufactured in India by HAL through transfer of technology.
The Problems
However even till December 2012, the contracts were not yet signed. The delay was because of the contract delays and cost escalations (Defense Industry Daily staff, 2015). By Jan 2014, the cost of the aircraft had escalated by 100% and the cost of the program, which was pegged at US $ 12 Billion in 2007, had escalated to US $ 18 Billion in 2012. In June 2014, India had its general elections and there was a change in the government. It was reported that the contract negotiations would be stalled since neither side (HAL nor Dassault) was willing to take the responsibility of committing a delivery schedule or written guarantees. However, this was a critical condition that the ministry of Defense had specified at the beginning. During this time it was also reported that MOD was considering reducing the number of aircrafts from 126 to 80 because of the escalating cost. During this dilemma, SAAB and Eurofighter pitched in to reconsider the negotiations. US officials also reported that they were reevaluating the situation considering that Indian Prime Minister Mr Modi was set to visit US. Despite continuous efforts, the negotiations stalled time and again. According to certain reports, Dassalut was uncomfortable and not willing to be held liable for the quality of 108 jets that would be manufactured by HAL. They also expressed their discomfort over HAL handling sensitive technologies. Dassault CEO Eric Trappier, on November 5th 2014 stated that he expected the contract to be wrapped up by March 2015.
Turbulences
The escalating cost had already impacted the pace of the negotiations with Dassault. The Russian ambassador to India, Alexander Kadakin claimed that Rafale jets were no match for the Chinese Sukhois. He claimed that Chinese flankers could swat Rafale jets like mosquitos. What was moretempting is each Sukhoi-30 cost US $ 75 million and the 126 of them would cost around $10 Billion – which was the original cost of the programme. With $20 Billion saved through this deal, India could procure more advanced technologies from US, Russia, France or Israel to better its arsenal. India’s defense minister, Mr. Parrikar, on Jan 31st 2014, stated that India could do with Sukhoi-30s incase Rafale deal failed. He said that the planes were already being produced by HAL and hence it would further reduce the cost and time to induct them into the force. Further twist happened during the India Aero Show held in Bangaluru in Feb 2015. The Indian Air Chief Marshal Arup Saha added that there was no plan B if the talks with Dassault failed as Rafale and Sukhoi complemented each other
Current Situation
On April 10, 2015, Prime Minister Narendra Modi visited France and among many things, Rafale Jets were on top for discussions. A deal was cut out and India decided to buy 36 Rafale jets off the shelf in a Government-to-Government transaction worth $7.5 Billion. The criticism to this deal has been immense; many believing that Modi compromised his own policy of Make in India. There has also been strong criticism from Forbes which has questioned the wisdom of the deal considering the socio-economic condition of the country. However support has poured from all quarters about this deal too. India’s Defense Minister Manohar Parrikar has supported the deal saying that it is essential for immediate requirement. He also clarified that both governments have agreed for 36 jets as of now and further number of planes would be decided based on discussions between them. It is also being noted that Indian government may ask Dassault to invest at least 30 per cent of the deal value in India. This would help mature the Indian defense industries. This would also be a lifesaving deal for Dassault as it would help the French company in profit. "The deal addresses the IAF's immediate requirements," says Air Marshal M.Matheswaran, who retired in March last year as Deputy Chief of Integrated Defense Staff. According to Rahul Gangal, Partner, Roland Berger Strategy Consultants, the deal will create offset opportunities for Indian companies. Under this clause, the foreign supplier has to procure a major portion of deal from local suppliers. It will be a great opportunity for 'Make in India'," says Gangal. "You will get global aerospace and defense supply chains to set up supply bases and capability in India. While this one is a 'fly-away' deal, for Dassault, India is now a primary entity in the portfolio. It will develop the local industrial base in the hope of negotiating the next big deal. Irrespective of it being a bad deal or good deal, what is important to understand is that it satisfies the immediate requirement for countermeasures in case India faces uncomfortable situation with its friendly neighbors. Only the future of the deal and as to the capability of both French and Indian Government can decide how effective the IAF would be in coming years.
The authors, Jyoti Kainth, is Assistant Professor, IMT Ghaziabad and Srinath Guhan, PGDM student of IMT Ghaziabad
Guest Author
The authors, Jyoti Kainth, is Assistant Professor, IMT Ghaziabad and Srinath Guhan, PGDM student of IMT Ghaziabad
