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Impatience Seals Worst Possible Defence Deal

Published: 17th April 2015 06:00 AM  |   Last Updated: 16th April 2015 10:54 PM   |  A+A-

With the price negotiations meandering into the fourth year, an impatient Narendra Modi intervened, circumventing the elaborate Request for Proposal (RFP) system of competitive bidding under which the medium multi-role combat aircraft (MMRCA) deal was initiated. The prime minister decided to purchase the Rafales “off the shelf” without transfer of technology at the government-to-government (G2G) level.

This was portrayed as Modi’s “out of the box” solution for a problem that didn’t really exist. Plainly, he mistook the hard, extended, bargaining between the two sides as evidence of red tape, and cutting it as his unique achievement. But impatience is a liability in international relations and can cost the country plenty.

Rather than pressuring French president Francois Hollande and the French aviation major, Dassault, which is in dire straits and was in no position to resist sustained Indian pressure to deliver the Rafale and the technologies involved in toto to India, Modi eased off, promising a munificent $5billion-$8 billion for 36 Rafales off the shelf minus any reference to the L1 (lowest cost) MMRCA tender offer, possibly a buy of another 30 of them, and no onerous technology transfer obligation.

It is a turn that must have astonished Hollande and Dassault with its exceptional generosity, surpassing in its muddle-headed excess Narasimha Rao’s handout of Rs 6,000 crore in 1996 to Russia to prevent the closure of the Sukhoi design bureau and production plant in Irkutsk, in return for nothing, not even joint share of the intellectual property rights for the Su-30MKI technologies subsequently produced there, which could have kick-started the Indian aerospace sector. Then again, India is a phenomenally rich country, don’t you know?—the proverbial white knight rescuing the Russian aviation industry one day, French aerospace companies the next.

But let’s try and see if sense can be made of Modi’s Rafale deal. Much has been said about the G2G channel as a means of securing low prices. The record of acquisitions from the United States in the direct sales mode, however, shows no marked drop-off in the price for the C-17s and C-130J airlifters and the P-8I maritime reconnaissance planes. But in terms of maintenance, almost all the 20-odd ANTPQ-36/37 artillery fire-spotting radar units bought by the army from the Pentagon, for instance, are offline due to the paucity of spares. Supplier states in this situation routinely manipulate the spares supply to configure politico-military outcomes they desire. No saying what France will do with respect to the entire fleet of IAF Rafales in the years to come. Usually, the practice also is to sell the platform cheap but rake in extortionist profit selling onboard weapons and spares. In any case, it is unlikely the price of a fully loaded Rafale will be less than $200 million each or $7.2 billion for 36 Rafales, $13 billion for 66 of these aircraft, and $25.2 billion for 126 planes.

Then again, French fighter planes have proved inordinately expensive to maintain. How expensive? According to a recent report by the Comptroller and Accountant General, in 2012-2013, for example, the total cost of upkeep of all 51 Mirage 2000 aircraft in the IAF inventory was Rs 486.85 crore compared to Rs 877.84 crore for 170 Su-30MKIs—meaning, the annual unit cost of maintaining a Mirage was Rs 9.5 crore versus Rs 5.2 crore for the more capable Su-30MKI. Now ponder over this: The cost of upkeep of a Rafale is authoritatively estimated at twice the cost of the Mirage and, hence, four times that of Su-30!

The “Super Sukhoi” avatar of the air dominance-capable Su-30 entering IAF is equipped with the latest AESA (active electronically scanned array) radar permitting the switching between air-to-air and air-to-ground roles in flight, and which radar will be retrofitted on the older versions of this plane in service. In the event, in what combat profile exactly is the Rafale superior?

The defence minister Manohar Parrikar was partial to the Su-30 option, having publicly stated that it was more affordable—its procurement price half that of a Rafale, and that owing to improved spares supply condition, its serviceability rate would rise to 75 per cent by year-end, exceeding that of the Mirage, incidentally. Even so, the loyal Parrikar praised Modi’s Rafale initiative as providing “minimum oxygen” for the IAF without letting on that it will maximally oxygenate French interests and industry!

While Modi talked of a low G2G price for the Rafale, he said nothing about its servicing bill. According to a former Vice Chief of the Air Staff, the total life-cycle costs (LCC) for a fleet of 126 Rafales calculated by Air Headquarters is over $40 billion. How will the LCC be downscaled if only 36 or 66 Rafales are eventually bought? If the real acquisition price of the ordnance-loaded Rafales is added to the LCC the total outgo will be upwards of $50billion-$55 billion, a figure this analyst had mentioned many moons ago.

Indeed, the odds actually are that India will end up buying the entire MMRCA requirement from France. Why? With 36 aircraft slotted in the direct sales category, it is already cost-prohibitive for any Indian private sector company to invest in a production line valued at $5billion-$6 billion to produce the remaining 60 or even 90 aircraft. In other words, by pledging to buy enhanced numbers of Rafales from Dassault the Narendra Modi government will be constrained by economic logic to buy the rest from this source as well, a denouement the IAF had always desired. Why else was the IAF Chief Arup Raha so desperate to get the PM to commit to buying significant numbers of this aircraft outright on the pretext of “critical” need when the Rafales will come in only by 2018 at the earliest but importing Su-30s from Russia would have beefed up the force by this year-end?

Previous prime ministers have been victimised by bad advice, and paid the political price, for instance, Rajiv Gandhi with regard to the Bofors gun. Modi will have to carry the can for this Rafale transaction—a boondoggle in the making. With the opposition parties and Dr Subramaniam Swamy waking up to its potential to politically hamstring the BJP government and mar Modi’s prospects, anything can happen.



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