The Rafale Deal

The Rafale deal was supposed to be an agreement between two countries where one country was to supply fighter aircraft and the other was buy them by paying the price agreed on. Barring the colossal monetary value of the transaction, it was a transaction like any other where one party supplied the goods and the other paid for them. Quite obviously, the nature of the transaction involved fairly complex conditions on the delivery schedules and certain guarantees to the buyer in respect of performance and safeguards in the event of any malfunctioning of the very sophisticated equipment. After all, Rs 58,000 crore, the revised price of the 36 Rafale jet fighters, would probably exceed the total revenue of quite a few small countries. The Rafale deal would probably have remained a straightforward deal between France and India if the amount involved had not been so huge and if it had not involved politicians. After all, one does not see the need for an offset partner for a defence deal between two countries. And if, for some reason, having an offset partner is deemed mandatory for such a deal, the obvious choice should have been a company in the public sector such as HAL instead of a company like Reliance from the private sector. One can hardly be blamed for inferring that the provision for an offset partner from the private sector was made mainly for the colossal commissions which could be passed on to a lot of people without seeming to be a clever arrangement for distributing kickbacks.

There is not much else wrong with the Rafale deal. Nobody seems to be questioning the performance of the fighter jets or questioning why a deal made during the UPA regime for 126 Rafale jets at Rs 79,200 crore (unit cost Rs 629 crore) should have been whittled down during the NDA regime to Rs 58,000 crore for only 36 Rafale jets (unit cost Rs 1,611 crore or 2.56 times the cost of the UPA deal). These are questions that should have been raised by every major newspaper and television channel that claims to be concerned about the defence of the country and the cost of defence. But the nation has not come across too many questions. There were a batch of petitions in the Supreme Court seeking cancellation of the Rafale deal on the grounds of irregularities over the decision-making, pricing and the choice of the Indian offset partner. But last Friday, the Supreme Court deemed it proper to dismiss the entire batch of petitions. The judgement of the apex court contained a paragraph that said that the Public Accounts Committee of Parliament had examined a CAG (Comptroller and Auditor General of India) report on the aircraft deal. After it transpired that the CAG report was yet to be submitted, questions were naturally raised on whether the government had misled the court. What is even more surprising is the way the Supreme Court has dismissed petitions questioning key aspects of the Rafale deal, thereby prompting the government and the BJP to pretend that the Supreme Court’s verdict is a clean chit for the deal. Not surprisingly, the next day the Centre approached the apex court with a government note seeking a correction to the paragraph, suggesting that it had got some of the tenses mixed “perhaps on account of the misinterpretation of a couple of sentences”. The government claimed that two instances of “is” in its note, referring to the general rule that the CAG report is examined by the House committee, were changed to “has been” and “was” in the judgement implying that the House committee had examined the report.

Union Finance Minister Arun Jaitley has unfortunately tried to make light of the entire controversy as being irrelevant. In a Facebook blog titled “Rafale – Lies, Short-lived Lies and Now Further Lies” he wrote: “It must now be left to the wisdom of the court to state at which stage the CAG review is pending. The CAG review is not relevant to the final findings on procedure, pricing and offset suppliers. But bad losers never accept the truth.” He also described the demand for a joint parliamentary committee probe into the Rafale deal as “misconceived”, given the alleged “cover up” by such a joint panel probing the Bofors deal in 1988. However, comparisons between the Bofors deal and the Rafale deal may be irrelevant for more reasons than one. In financial terms, the Bofors deal was a much smaller one that bears no comparison with the Rafale deal. Besides, the Bofors deal did not have an offset supplier, and as stated earlier, many people do not see any need for an offset supplier in a defence deal between two countries. And apart from the Bofors deal, there have been several deals for defence supplies in the past that have been executed without any offset suppliers. So no one is claiming that all defence deals in the past have generally been executed only through offset suppliers.

The foregoing observations are not intended to convey the impression that all defence deals all over the world are executed only through offset suppliers. There is no denying that being an offset supplier in a defence deal is a very lucrative business. But that alone does not make an offset supplier an indispensible element of any defence deal. There have been a fair number of defence deals between governments of different countries that have been executed without any intermediary supplier. The Rafale deal merely serves to convey the notion that both the government and offset suppliers have learnt the means of executing defence deals with greater finesse so that there is the general impression of a very clean deal having taken place while leaving a tidy bit of commission for the offset suppliers. When people demand greater transparency in defence deals, they are not asking for official or technical secrets. Let them remain. What the people really expect is transparency in respect of the financial transaction. The heavens are unlikely to fall if the people of India get to know exactly how much was paid out of the exchequer for the Rafale jets and how much went as commissions. After all, it is the people’s money being handled by executives.