April 29, 2015

Rafale deal: Build rest 108 in India

If, despite all the obvious advantages, some voices of dissent are audible, the nation can live with them.
Predictably, reactions to the Prime Minister Narendra Modi’s decision to purchase 36 Rafale fighter aircraft directly from France oscillated between one extreme view declaring the decision to be a political and personal triumph for him, and the other extremity terming it an unmitigated disaster for national defence.
Needless to say, these views were founded on the viewers’ political predilections, economic preferences and comprehension of the urgency and expediency of the immediate need of the Indian Air Force for the Medium Multi-Role Combat Aircraft (MMRCA) fighters to meet designated roles and tasks.

In the final analysis, however, Modi’s decisiveness needs to be lauded, especially as the ‘MMRCA deal’ had become a torpid issue while the IAF fretted in desperation. Even if the deal is not large enough to meet IAF’s needs comprehensively nor inclusive enough to bring in transfer of technology rewards, it is a purposeful act of commission that wipes out three years of omissive inactivity.The decision, in 2012, of going in for 126 Rafales was the culminating point of a long, diligent and professional process of comparative analysis by the IAF followed by a commercial evaluation. The deal was then billed at US $12 billion.

The first 18 aircraft were to be directly acquired from France and the rest 108 were
to be built in India by HAL – thus bringing in the transfer of technology so desperately needed by India’s aerospace industry. However, after all the diligence was over, the final signature on the deal floundered in the bureaucratic ocean that engulfs our governmental decision making.

The ostensible grounds for delay in finalisation were a substantial increase in the quoted price (which nearly doubled in the three year period following the initial commercial assessment) and the question of responsibility for quality and delay in the 108 aircraft to be produced in India. In the weeks that preceded Modi’s visit to France, the chasm of disagreement over the responsibility for guarantee in respect of HAL-produced aircraft appeared to have narrowed down to a bare crevice.

Indeed, Dassault CEO was quoted as saying the deal was 95 per cent completed. Thus, a general air of expectancy attended the PM’s trip despite a denial by the French president that an announcement on the Rafale deal before Modi’s visit was not on the cards. The direct buy decision thus took many by surprise.Defence Minister Manohar Parrikar, had at one time, made some noises about the possibility of ordering more Sukhoi 30s and doing away with the Rafale deal due to the inordinate delay in coming to an agreement with Dassault. However, with the benefit of hindsight, it appears possible that those statements were part of a game plan that sidestepped the cumbersome
126 aircraft contract and aimed at a quick gobble of just 36 ready to fly aircraft.
The promptness with which the French acceded to the new proposal is partly attributable to the Rafale’s poor international sales profile so far (only 24 copies sold to Egypt, besides insignificant domestic commitment).French intransigence
However, the major reason for French intransigence was supposedly their reluctance to
partner with HAL and that is food for thought for the PM and his government. It is possible that, had India been willing to tweak the original request for proposal to accommodate Dassault’s plea bring in Reliance as the manufacturing partner for the 108 Rafales to be built in India, there would have been no need to sign up for 36 aircraft as the original deal (for 126) would have gone through.

As an extension of this argument, it is possible that, should the 36 ready-to-fly aircraft
deal be enlarged as a result of future negotiations to 126 aircraft, the renegotiation process could bring in a private player. While such an arrangement may bring cheer to Dassault, it would inherently contain delays as there is no big private player in India with an infrastructure for aircraft production as extensive as HAL’s.

Although 36 Rafales would not serve the same strategic purpose that 126 would have, and India would miss out on the technology transfer, the deal is perhaps the best way out of a sticky situation. It meets immediate requirements of the IAF by giving it two squadrons of one of the world’s best MMRCA and cuts down the already inordinate delay in the original deal being signed.

Also, it commits less funds to the aircraft account, bring in the 36 aircraft faster than in the original deal (as all would be produced on an existing assembly line), and it leaves open future options including renegotiating the Rafale deal with Dassault. Hopefully, the new arrangement would include the building of 108 aircraft in India – with the attendant advantages of transfer of technology. If despite all these obvious advantages, some voices of dissent are audible regarding the wisdom of the PM’s sudden decision, the nation can live with them.


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