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Rafale Mystery, Still No Answer to Many Questions?

The Supreme Court’s verdict dismissing several petitions seeking an inquiry into the deal to acquire 36 Rafale fighter jets from France was expected to answer several questions about the government’s rather confusing positions on the case. Instead, it has only added to the mystery, by making reference to a Comptroller and Auditor General report that does not seem to exist. The ruling says the Comptroller and Auditor General report on Rafale has been examined by a parliamentary committee. But the report doesn’t seem to exist yet.


One of the main questions around the Rafale deal is the price of the aircraft. The overall deal seems to include a per-aircraft cost that is much higher than one that was offered to the previous government, despite Prime Minister Narendra Modi’s government insisting that it got a better deal. Defense Minister Nirmala Sitharaman said in 2017 that she would offer up all details about the Rafale’s pricing to prove this, but the government later refused to do so and insisted that this information was classified. Defense Minister Nirmala Sitharaman again tried to justify Government stand in Parliament on 4th January 2019.  But, several questions raised by Rahul Gandhi are still not answered!


In its judgment, which dismisses demands for an inquiry into Prime Minister Narendra Modi’s decision making around the Rafale deal, the court says that the pricing question has already been examined by the Comptroller and Auditor General and even made its way to Parliament’s Public Accounts Committee.


“The material placed before us shows that the Government has not disclosed pricing details, other than the basic price of the aircraft, even to the Parliament, on the ground that sensitivity of pricing details could affect national security, apart from breaching the agreement between the two countries. The pricing details have, however, been shared with the Comptroller and Auditor General (hereinafter referred to as ‘CAG’), and the report of the CAG has been examined by the Public Accounts Committee (hereafter referred to as ‘PAC’). Only a redacted portion of the report was placed before the Parliament, and is in public domain.”


Except a portion of this statement seems to be untrue. The CAG is indeed working on a report looking into the Rafale deal, and so it is likely that the government has shared pricing details with it. But its report is not final, since it has to be tabled in Parliament for that to happen. Moreover, the verdict says that this report of the CAG “has been examined” by the Public Accounts Committee, the Parliamentary panel that oversees government expenditure.


PAC Chairman Mallikarjun Kharge said that the committee has not been given any report by the CAG, and so there was no question of it having discussed the report. “Where is this report of the CAG?” he asked. “Show it to us if it exists.” Kharge said he even spoke to the office of the CAG, which confirmed the fact that its report on the Rafale deal is not yet ready.  Indeed, in November there were reports about the CAG preparing its audit report on the deal, not long after 60 former bureaucrats wrote to the auditor calling for it to not delay the report. The question that follows is, how did the Supreme Court come to learn of this CAG report that is not yet complete, and who told it that this had been submitted to the PAC?


The Supreme Court verdict in the case does throw up a number of questions, even though the Bharatiya Janata Party has immediately taken it as a clean chit. But this one is most confounding.   Did the government tell the Supreme Court that there was indeed a CAG report, and that it had been submitted to the PAC? What makes this harder to ascertain is that the government’s submissions to the Supreme Court were made in a sealed cover handed over to the bench, and not through an affidavit under oath. That means that the public cannot see whether this is indeed how the Supreme Court was given this information and judge for itself.  But that still leads to the question: Did the court gather this information from elsewhere, or was it misled by the government? And knowing that this information, as far as is apparent, is false, what does that mean for the reasoning the court uses to conclude that the pricing question has been adequately examined?


The plans to buy Rafales for the Air Force were first set upon by the government of Dr Manmohan Singh; originally, HAL, the state-run company, was to play a large role in the manufacturing of 108 planes. Former Defense Minister Mr. A.K. Antony came out with a vociferous statement against Modi’s ‘revised’ Rafael deal and pointed out the ‘unusual’ ways of Modi and the pricing and sidelining of HAL, when it was announced in 2015.


Former French President Francois Hollande tossed a stun grenade into an ongoing controversy over India’s 2016 purchase of 36 Rafale fighter aircraft. On September 21, Hollande told French news portal Mediapart that the Indian government had proposed the name of the Anil Ambani group as an industrial partner. His statements contradicted what the Narendra Modi government has maintained since the controversy broke last November.


The opposition received a huge shot in the arm with former French president Francois Hollande, who negotiated the Rafale deal with PM Modi, declaring that it was the Indian government who proposed Reliance — “we had no choice”, he said. But a day later, he said that it was for Dassault to comment on whether it had been pressured to choose Mr Ambani’s firm as an offset partner — as part of the contract, Dassault has to invest 50 per cent of the overall value of the deal or Rs. 30,000 crore in partnering with defense manufacturers in India.


Modi’s Rafale “Deal” has raised a number of questions. How is it that the need for 126 Medium Multi-Role Combat Aircraft (MMRCA) for the Indian Air force, suddenly dropped to only 36 in three years? How is it that the price per aircraft rose from $81 million per aircraft in 2012 to $243 million in 2015? Or by three times per aircraft? Even taking inflation into account. What changed in the intervening three years between the two deals – the UPA’s in 2012 and Modi’s in 2015? And even more curious, who took these decisions and how? Why is there so much secrecy attached to this particular deal, when we know that most of the corruption in mega arms deals flows from secrecy and ad hoc decision making?


While all of this is a matter of controversy, what has been missing in this “debate”, is the question that who benefits? And suddenly, we find that it is Anil Ambani’s firm, one of the major “beneficiaries” of the 2G licensing scam, who is also the beneficiary of the Rafale deal. In scrapping the original contract for 126 aircraft, the HAL agreement to share technology and produce the Rafale aircraft has also been scrapped. Instead, Anil Ambani’s Reliance, which has numerous “red marked” loans from the banks, has emerged as Dassault’s new partner in the new Modi Rafale “Deal”.


All defense deals have a mandatory 50% offset clause meaning that 50% of the final sales price will have to be spent in India. As a part of the new Modi Rafale “Deal”, Anil Ambani’s Reliance is set to walk away with Rs. 21,000 crore – or nearly 70% – of the total of Rs. 30,000 crore offset pie. The rest 30% is being shared by Bharat Electronics, Bharat Dynamics, and other defense contractors.


How did Anil Ambani’s company, Reliance Aero structure, formed as a joint venture between Dassault and Reliance Group (Anil Ambani’s Reliance Group), get the lion’s share of the Rafale offset? What happened to Hindustan Aeronautics Ltd (HAL), the agreed collaboration partner in the original deal? Even two days before the deal was being signed by Modi in Paris, Jaishankar, the Foreign Secretary, “debunked” reports that HAL was being ditched as Dassault’s partner in the Rafale deal. Apparently, even the top echelons of India’s bureaucracy, were unaware that India’s premier aerospace company HAL, was being discarded in favour of Anil Ambani’s Reliance? If this is not a freely gifted government largesse, what is it? And lest we forget, the amount involved is a staggering Rs. 21,000 crore, fully two-thirds of what CBI, in the 2G case charge sheet, computed as the extent of the fraud. And these are not “presumptive loss” figures of the CAG, which can be questioned. These are actual figures that Reliance stands to gain as offset contracts from Dassault, and its other partners.


The question we have to ask is that if the spectrum is public property, what are the offsets in the defense deals? In the original 2012 Rafale deal, the offsets were treated as a part of the deal. That is why HAL was chosen as the defense contractor, who would indigenise the production of the Rafale aircraft. In the Modi “Deal” of 2015, the defense partner was left “open”, till suddenly, Anil Ambani appeared on the scene and is now walking away with the lion’s share of the deal.


Offsets are created out of government defense contracts and are very much of the economic largesse that the government can bestow on its favoured parties. In the original Rafale agreement, it was HAL. Under the Modi dispensation, it is Anil Ambani. Clearly, we are back to secretive negotiations, behind the scene deal makings, and favouring private parties in claiming a major part of defense contracts.

We could have understood if Anil Ambani had strong financial credentials in running his companies successfully. He has managed to run RCom, his telecom company down to the ground, and is now facing difficult times.  His loans to banks have been red lined, meaning that he is unable to pay back his loans in time. He has not yet been declared a defaulter, but sources in the banking sector tell us that he is perilously close to it. How come such a conglomerate, with such a dismal record in running his companies, is the favoured partner for Dassault and its offsets?  If we raise such issues, we will be immediately accused of being anti-national and hamstringing Indian defense efforts. How getting less number of aircraft and sabotaging HAL becomes nationalist, may be difficult to figure out for most people; except for the Modi Bhakts.


The questions still unanswered are:- Why the  number of aircrafts reduced ? Who decided to reduce the number of aircrafts?  Who changed Rafael pricing? Why Ambani’s firm was given contract instead of HAL? Who picked up Ambani’s firm? Why Mr. Manohar Parikar, the then Defense Minister kept away when the deal was announced in France?  Finally, why the govt. scared of a JPC enquiry?

Dr. Charles Dias is a Former Member of Parliament (LS)

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