RAHUL BEDI | 1 JULY, 2016
No Word on Rafale Deal, Parrikar's June 30 Deadline Lapses in Government Silence
NEW DELHI: The June 30 deadline announced recently by Defence Minister Manohar Parrikar to conclude the deal for 36 French Dassault Rafale fighters, elapsed today without murmur or comment.
“There is no reason why it (the Rafale deal) should not be concluded in June. It is in the last phase (of negotiations)” Parrikar had declared confidently on 24 May.
The negotiating team, he stated in his usual arcane and somewhat incomprehensible manner, had to submit their report to him on what had been discussed.
“After that we have to discuss it in the Cabinet. We will first sign an Inter Government Agreement (IGA). All these things take 3-4 weeks” he said.
The IGA he added under which the fighters are being acquired for the Indian Air Force (IAF), would address all ‘outstanding’ issues of price, bank guarantees and related aspects.
But IAF and industry sources said the Rafale deal is far from done.
They also revealed that over the past few days Parrikar was unwilling to meet a senior French official, involved in the fighter purchase, to further progress the contract.
Official sources, however, said the Ministry of Ministry of Defence (MoD) is believed to be ‘re-evaluating’ France’s revised fighter offer of Euro7.5 billion ($8.46billion) for the 36 fighters dispatched to it around end April.
But this price tag does not include the weapons package for the fighters that is to be negotiated and signed separately, and is worth an additional $1-1.5 billion.
The Engineering Support Package (ESP), to ensure 90% operational availability of the Rafales for the IAF for five years, instead of the forces earlier demand for twice that period, too remained under negotiation and would also be inked separately, sources said.
Inclusive of hangars and two Maintenance, Repair and Overhaul (MRO) facilities, the ESG is estimated at around USD1 billion, making the entire Rafale purchase a total of around $10.5 billion.
The deal also includes a mandatory 50% offset obligation under which manufacturers Dassault-Thales are mandated to invest the overall Rafale contract price in India’s defence, internal security, civil aviation and related services sectors.
The offset clause was one of the principal reasons for delays in the deal which Prime Minister Narendra Modi had said would be signed with ‘days’ during French President Francois Hollande’s India visit in January.
Military sources said the IAF had ‘re-worked and trimmed’ its armament demands, opting to ‘share’ some of the weaponry that it had earlier contracted for, as part of an earlier agreement signed with Dassault-Thales-MBDA to upgrade its 51 Mirage 2000H’s.
This primarily involves the solid-fuelled MICA missiles with a 50 km strike range, for dual employment in close combat and as beyond visual range (BVR) weapon systems.
In January 2012 the IAF had contracted to acquire 490 MICA missiles from MBDA for the Mirage 2000H upgrade, with each of the retrofitted platforms modified to carry two missiles each.
Consequently, a large number of the overall 490 MICA’s would be rendered surplus, notwithstanding War Wastage Reserves requirements and IAF planners reasoned could easily be ‘diverted’ for fitment onto the Rafales.
“Such measures make sense as they foster economy and help reduce spiraling costs” said Air Marshal V K ‘Jimmy’ Bhatia.
Instead of being in storage where, over time, they would degenerate, the MICA’s could be operationalised on the Rafales, he added.
Supplementary weaponry that the IAF is wanting for the Rafales includes the Scalp EG (also known as Storm Shadow) general purpose standoff cruise missiles, with a 250km strike range, against ground targets, and standoff attack systems like Meteor beyond-visual-range air-to-air missiles (BVRAAMs).
The latter two hugely expensive missile systems, however, are not part of the Mirage-2000H upgrade package, although the upgraded fighter is reportedly capable of firing the Scalp EG, making it another point of weapon systems commonality for the two French fighters.
IAF sources said additional armaments for the Rafales comprise laser-guided bombs, which the Mirage-2000H too had employed during the 1999 Kargil operations.
Earlier IAF demands requiring Dassault to customise its 36 Rafales to receive India’s under-development Astra BVRAAM with an 80km strike range, other commercial off-the-shelf (COTS) systems and Israeli ordnance, have reportedly been abandoned.
The price increase and delivery delays these modifications entailed had persuaded the IAF against them, sources said.
The Rafale deal which is being negotiated under the Defence Procurement Procedure (DPP)-2013 is also facing problems over offsets, as the MoD had rejected Thales’ offer of discharging this obligation by helping India develop three ‘smart cities’: Chandigarh, Puducherry and Nagpur.
This had been informally agreed during Hollande’s visit to India earlier this year, but the MoD recently rejected it on the grounds that the DPP-2013 had no provision for such ‘indirect’ offsets.
Meanwhile, official sources said the Rafale deal would possibly be signed in three stages, but sometime later this year, and not imminently as some BJP MP’s had gleefully tweeted.
Both sides are initially expected to ink the IGA, as a follow on to the Memorandum of Understanding (MoU) signed during Hollande’s visit.
Foreign Secretary S Jaishanakr had embarrassingly contradicted Modi’s declaration, during Hollande’s visit, that an IGA for the Rafales had been signed.
“What was signed was an MoU and when the financial part of the deal is settled, then obviously the IGA will be concluded” he categorically said.
Confirming the IGA would give both sides time to resolve the enduring impasse over outstanding issues like the Rafaels cost, offsets and the ESP, and help the Indian government save some face over continuing delays in the fighter deal.
In all likelihood this would be followed by the contract for the platforms alone, which in turn would be succeeded by the third agreement for the weaponry and the ESP, a few months later.
Industry officials said a staggered deal would help ‘fudge’ the overall costs, as the BJP administration is anxious to secure a better deal for the Rafales than what the Congress Party-Led federal coalition had been negotiating to conclude since early 2012.
It was negotiating to acquire 26 Rafales, 18 in flyaway condition and licence-building remaining 108 for an estimated $22 billion or around $170 million per aircraft.
The BJP, for its part, seems poised to acquire 36 Rafales for around $10.5 billion or a staggering $290 million per fighter.