Point of vulnerability

Rafale controversy reflects a systemic weakness in defence deals

Revelations of France’s judicial investigations into alleged corruption in the deal for Rafale fighter aircraft raise fresh questions about the opaque and inefficient manner in which international defence deals are negotiated in India. The Rafale controversy is the latest of a series of international defence purchases that have been questioned for lack of probity. The Bofors field gun, of course, remains an infamous example of this systemic malady, but the serial controversies that erupt over Indian defence deals urgently call for a re-evaluation of negotiating procedures and disclosures.

The Rafale deal reflects these weaknesses. The medium multi-role aircraft from Dassault had been initially shortlisted after competitive bidding against five European and US competitors in 2012 under the United Progressive Alliance. The deal for 126 aircraft instantly raised questions since the Rafale production line was all but defunct at the time. Later, differences arose between Dassault and the Indian government over the terms of the deal, as a result of which India under the successor, National Democratic Alliance, withdrew in 2015. By 2016, Prime Minister Narendra Modi negotiated a fresh deal for 36 Rafales to be bought in “flyaway condition”. The fact that the prime minister had directly negotiated the deal rather than the defence minister, as was the convention, is only one unusual aspect of this agreement. Since then, the Congress said the new deal was signed on far higher terms than the 126 aircraft deal and questioned why the offset contract was given to businessman Anil Ambani instead of the public sector Hindustan Aeronautics Ltd.

The institutional checks and balances that could have objectively probed the deal also functioned imperfectly. Public interest litigation in the Supreme Court yielded little since the details of the decision-making process for the deal were submitted in a sealed cover — ostensibly for reasons of national security. The apex court declined to reveal these details to the tax-paying public, which had financed the deal, before pronouncing that it had no reason to doubt the purchase. Even as the defence minister declared in Parliament that Mr Modi’s deal was 9 per cent cheaper, a report from the Comptroller and Auditor General stated that it was, in fact, 2.9 per cent cheaper. But this differential did not reflect the value of performance and financial guarantees, a saving for Dassault that was not passed on to India. Also, certain India-specific enhancements in the 2016 contract were not strictly needed, a fact the Indian Air Force had corroborated.

But since the report lacked all specific mention of pricing, a robust independent evaluation for the Indian people remains elusive. So far, 21 of the 36 Rafales have been delivered with the remaining due in 2022. The results of the French investigation may reveal some answers but the bigger point at issue for India remains the question marks around technical capabilities of the armed forces as a result of the faulty negotiating architecture of defence deals. For instance, the Scorpene class submarines still lack cutting-edge weaponry because the firm that was to provide these systems was an associate of AgustaWestland, which was being investigated for irregularities in a VIP helicopter deal. From submarines to helicopters, small arms and air defence systems, with each major deal attracting controversy, India remains underprepared for next-gen warfare.