Why Government rejected Air Force’s need of 126 Rafale Jets, Asks Chidambaram

P Chidambaram

New Delhi, Jan 18: Senior Congress Leader P Chidambaram on Friday accused the Narendra Modi government of compromising the national security and asked why it bought only 36 Rafale jets instead of 126 required by the Indian Air Force.

Addressing a press conference, Chidambaram also reiterated the demand for a Joint Parliamentary Committee probe in the fighter jet deal.

Taking a jibe at the BJP Government he said “If the Modi govt had hoped that it had succeeded in giving a quiet burial to the Rafale scam, then they are wrong. Today it has acquired a new dimension”.

“Ever since 10th April, 2015, when PM Modi scrapped the UPA’s deal and announced new deal, one question has loomed large- Why did govt decide to reject IAF’s need of 126 aircrafts and decide to buy only 36? It has never been answered”.

Citing a news report published by the Hindu, he stated “Price negotiated by UPA govt in 2007 was €79.3mn/bare aircraft. That price escalated to €100.85mn in 2011. In 2016, discount of 9% brought down the price after factoring escalation”.

“Airforce had asked for 13 India-specific enhancements, the negotiated price was €1.3bn that was to be paid in UPA deal and NDA deal, however, this was spread over 126 aircrafts in UPA deal, but in NDA deal it is spread over 36 aircrafts”.

The Former Union Minister further said “If 126 aircrafts had been purchased, Dassault would’ve recovered €1300mn/€1.3bn over 10 years and 6 months. With only 36 aircrafts, this will be recovered in 36 months”.

“Dassault gains in two ways- increase of price per aircraft and net present value of money. This is the gift to Dassault by NDA govt. Should the govt order for another 90 aircrafts, Dassault will again charge for India-specific enhancements”.

“The Dassault is laughing all the way to the bank. The govt has wronged the country in 2 ways- compromised national security by denying 90 aircrafts and cost the public money”, he added.

As the report, it makes the following points:

  1. The price negotiated by the UPA government in 2007 was €79.3 million per bare-bones aircraft. In 2011, that price had escalated to €100.85 million per aircraft. In 2016, the ‘discount’ of 9 per cent negotiated by the NDA government brought down the price (presumably after factoring in the escalation between 2011 and 2016) to € 91.75 million.
  2. Air Force had asked for 13 India Specific Enhancements (ISE).The negotiated price was €1300 million that would have to be paid under both the UPA-negotiated deal and the NDA-negotiated deal.
  3. The twist in the story is over the amortization or recovery by Dassault of the cost of ISE. Under the UPA-negotiated deal, it would have been spread over 126 aircraft. Under the NDA-negotiated deal it will be spread over 36 aircraft.
  4. Assuming one aircraft would be delivered every month, if 126 aircraft had been purchased, Dassault would have recovered €1300 million over 10 years and 6 months (or a little sooner). If only 36 aircraft are purchased, and delivered between 2009 and 2012 as contracted, Dassault will recover €1300 million in 36 months.
  5. Dassault gains in two ways. First, the price per aircraft, because of ISE, would have increased by €10.3 million if 126 aircraft had been ordered. Under the new agreement for only 36 aircraft, the price per aircraft, because of ISE, will increase by €36.11 million. Second, calculating net present value of money, the €1300 million that Dassault will recover (by 2022) will be much higher than the €1300 million it would have recovered (by 2029 or so). This is the gift to Dassault that the NDA government gave between April 2015 and August 2016.
  6. Dassault will gain in another way too. Should the government place an order for another 90 aircraft on Dassault, Dassault will certainly charge the ISE-loaded price at which it sold 36 aircraft, although the ISE cost would have been recovered on the sale of 36 aircraft. Perhaps for this reason the government deleted the ‘follow on’ clause to buy more aircraft (up to 50 per cent of the original order on the same terms and conditions).
  7. It seems to me that Dassault is laughing all the way to the bank. The government has wronged the country in two ways: firstly, it has compromised national security by denying to the Air Force 90 fighter aircraft that they desperately need; secondly, it has purchased two squadrons that will cost about €25 million more per aircraft. At the 2016 exchange rate, €25 million is equal to Rs 186 crore! India will pay Rs 186 crore more per aircraft!
  8. The Hindu’s story raises many other serious issues about the process of decision-making in the NDA government. The man who got away was Mr Manohar Parrikar who passed the buck to the Cabinet Committee on Security! Clever man! We will not comment on the process today. However, it is necessary to compliment the three officers of the Indian Negotiating Team who stood up to pressure and forced a vote of 4-3 on every issue.
  9. The vote of 4-3 itself tells a story. Has it ever happened before in a defence purchase? Why was it so important in this deal to take every decision by a 4-3 vote brushing aside every objection?
    There is no doubt any longer that the Rafale aircraft deal deserves to be examined thoroughly by a Joint Parliamentary Committee. The Congress reiterates its demand for the constitution of a JPC.

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