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CENTRE for POLICY ANALYSIS

 

ARTICLE
D. RAGHUNANDAN | 19 FEBRUARY, 2016

STRANGE RAFALE DEAL AND OTHER MURKY ACQUISITIONS

Decision making in India as regards military equipment acquisitions has always been opaque, murky and somewhat enigmatic. The apparent arbitrariness of decisions and technology choices, not to mention actual skulduggery, has long opened the doors to suspicion and all manners of conspiracy. In an effort to make the process more transparent and hopefully less open to doubts about corruption, a Defence Procurement Policy with set procedures has been in place now for several years, having gone through multiple revisions supposedly to improve the policy framework and keep pace with changing technological and arms trade scenarios in India and around the world.

However, given the bureaucratic tangle that is the dominant characteristic of governance in India, not excluding in military matters, and notwithstanding the supposed supremacy of the political leadership, the successive avatars of the Defence Procurement Policy have only added more complexity and haziness, making decision-making even more tardy and opaque.

RAF

Image Courtesy: commons.wikimedia.org

The deal to acquire Rafale fighters from France is the most recent example of the notoriously labyrinthine, expensive and ultimately ineffective defence acquisition process in India. The long-pending deal for outright purchase of 36 fighters from France through a government-to-government agreement, the muddled final outcome of an even longer and more tortured process to acquire 126 Medium Multi-Role Combat Aircraft (MMRCA), was expected to be clinched during French President Francois Hollande’s recent visit to India as chief guest at the Republic Day Parade, but was not, due to still pending financial negotiations.

Confusion prevailed in New Delhi even while president Hollande was still in India, as Government spokespersons first said an Inter-government Agreement (IGA) had been signed, but later recanted and said only an MoU had been signed, and tried to explain away the embarrassment by claiming the MoU nevertheless marked an important step. An MoU towards an Agreement towards a Deal! Both governments clearly want to garner whatever headlines and brownie points can be garnered by making repeated announcements, first by India declaring it had selected the Rafale, then by Hollande and PM Modi in Paris during the latter’s visit, and then by both during the former’s visit to India. Yet the deal still seems far away and getting mired in uncertainty by the day.

There may even be more to this than simple confusion, going by other recent moves and announcements by the Modi government, especially by the increasingly headstrong Defence Minister Manohar Parrikar. These suggest that some new thinking about military hardware procurement may be underway and unfolding gradually. And the portents are from happy.

Whimsical decision

The abrupt decision mid-2015 by the Modi Government to drastically scale down the MMRCA acquisition from 126 to a mere 36 Rafale aircraft came as a total surprise. More so the reason Manohar Parrikar advanced, stating that the financial burden was way too much and would hamper other Indian military modernization plans, and that the earlier decision to acquire 126 aircraft was “unviable” and “not necessary,” further suggesting that it had been taken by the previous UPA government without adequate consideration of all the factors. “I also feel like having a BMW and Mercedes. But I don’t because I can’t afford it. First I can’t afford it and second I don’t need it. So, 126 Rafales was economically unviable. It was not required.” (Interview to Indian Express, May 31, 2015). The Defence Minister, with all the authority that position carries, stated that the new decision to acquire only 36 Rafales in fly-away condition was taken to meet “the urgent requirement” of the Indian Air Force and the fighters would be used only for “strategic purposes” since they were not, in any case, a replacement for the retiring MiG-21, the gap left by which would be filled by the indigenous LCA. To sum up, Mr.Parrikar’s contention was that the earlier decision was completely wrong, that the Rafales were not really required, but that the 36 Rafales were purely a stop-gap arrangement, only to help the IAF overcome immediate aircraft shortages.

The Minister perhaps felt that his remarks would help clear the air, bring in more transparency, and bolster his image and that of his government as being bold, unafraid, decisive and unhesitant about taking tough decisions. In fact the explanation, if taken as a true reflection of the government’s considered opinion, is an astonishing indictment of the entire institutional mechanism of defence procurement and, after years of periodically revised and structured defence procurement policies, moves in the retrograde direction of re-establishing arbitrariness and whimsy as key decision-making parameters in defence acquisition.

Are we to now understand that all those years the IAF took to analyze its current status and future requirements, framed its General Staff Qualitative Requirements (GSQR) based on which it issued the global tender or Request for Proposals (RfP) were all not thought through and a waste of time? Earlier the IAF had framed its requirements for a multi-role combat aircraft (MRCA), then revised this to a “medium” or MMRCA based on its requirement for a multi-role aircraft (Dassault calls Rafale an “omni-role” fighter) with a stress on its deep-penetration strike function in a slot between the lighter MiG 21 or Tejas primarily playing an interceptor role and the heavier SU30-MKI for air superiority. Did the IAF really err in this assessment of its requirement? By what process did Raksha Mantri (RM) revise this requirement and decide that it was “not necessary”? Was the IAF fully on board, did the Defence Acquisition Council get to hear different opinions? Or was it purely a financial decision, in which case RM’s remarks quoted above were incorrect? In fact, even after the RM’s announcement of curtailing Rafale purchase to 36 or 2 squadrons’ worth, the IAF Chief reiterated the requirement for at least 6 squadrons or 108 MMRCA fighters!

IAF in trouble again

This decision leaves the IAF once again in a bad position. LCA Tejas, even the avowedly underpowered Mark1, is still several years away from induction and serious work on Mark-2 has barely begun. The redoubtable Mig 21s are virtually finished, and the few remaining aircraft are on their last legs and will certainly take the lives of a few more young pilots before that chapter is finally closed. The medium strike aircraft, whether Jaguars or Mig 27s, and the earlier MCRA such as the Mirage 2000 are also on the way out — they are ageing, have already been upgraded to prolong their usefulness and life, are too few in number and facing numerous problems of their own.

The IAF once again has (or soon will have, if the Rafale deal finally comes through) a couple of squadrons of one type of aircraft, along with a few squadrons of so many different aircraft types. As repeatedly underlined in these columns, this is putting a great strain on IAF ground personnel who have to service and maintain so many different aircraft types, and carry a mind-bogglingly diverse inventory of spares. With just 2 squadrons of Rafales, therefore, the Indian Air Force will continue to be, not a well-organized and efficient force with a few types of aircraft for well-defined roles, but like a zoo with a few animals of each type for onlookers to look at and admire!

And even this is still shrouded in uncertainty. Last year, RM said only the financial aspects needed to be ironed out, and this would be done in 2-3 months. Many months have gone by, and it was announced during President Hollande’s visit that the “final negotiations” would take a further few months!

This is indeed a strange way to conduct a procurement process. When “L1,” i.e. the lowest bidder among technically suitable candidates is selected, this is normally supposed to include full consideration of the cost aspect as well. Or it should! But the way India conducts tender evaluations and contract finalization, “final price negotiations” are conducted after L1 has been selected and thereafter, prolonged negotiations take place over base price, life-cycle costs, spares and maintenance, offsets etc. Surely, all of these should have been part of the tender documents and should have been factored-in when comparing the bids. In India, this adds yet another enormously frustrating, time-consuming process to an already stretched-out procedure, adds further cost to the final deal, not to mention the additional burden heaped on the IAF and the added risk to national security. More bureaucracy, more confounding procedures, more delays, more cost! When the MMRCA deal was first spoken about, the total cost for 126 aircraft, the “mother of all defence deals” was estimated to be around $10-12 billion. Today India is buying 36 Rafales for around the same amount!

Dassault is pushing for higher price obviously because India has already declared its choice in favour of the Rafale. With no serious domestic manufacture in India possible since only 36 aircraft are being bought, offsets too become difficult and spares too will have to be bought outright, all pushing costs up further.

To add to all the confusion, RM Parrikar recently said that a few more squadrons worth of MMRCA may be added to the IAF, which may or may not be Rafales but some other aircraft!

When the MMRCA acquisition was in the process of being delineated, 6 aircraft had been short-listed, of which 4 had been rejected as not meeting the essential requirements. The Eurofighter Typhoon and the Rafale were both subjected to rigorous field tests under different conditions under which the IAF operated, after which Rafale was selected. So if additional Rafales are not being contemplated, which other aircraft will match the requirements? If just any other aircraft will do, then why was such a strict short-listing done earlier? More questions, no satisfactory answers.

Fake in India?

With the MMRCA tender having been scrapped, all the earlier aspirants for what was expected to be a humongous deal are hovering in the Indian skies once again. Since the Modi government seems keen to push its ‘Make in India’ campaign, and there is no scope for manufacture of Rafales in India with just 36 aircraft being bought, international aviation majors are sensing an opportunity. Boeing is running full-page ads in newspapers once again, asking why any country should be interested in a partnership with a $5 billion firm (Saab) when a $75 billion firm (Boeing) is offering its services? Readers may remember that Boeing had earlier offered its capable but 30 year-old F/A18 and is now pushing this for co-production under the Modi Government’s much touted ‘Make in India’ banner.

Saab continues to push its Gripen, the Eurofighter is ever present, and many other aircraft majors are sure to soon start circling the skies.

Nor are they alone. Indian engineering majors such as Tatas, L&T and johny-come-lately Reliance are racing to form partnerships with foreign aviation companies to ‘Make in India.’ And just last week, the indefatigable RM Manohar Parrikar declared that soon India will start making fighter aircraft in India through the private sector, obviously with international partners. As everybody knows, and as many commentators including retired senior Air Force officers have pointed out, none of these Indian firms have the necessary capabilities to contribute to development of aircraft systems and they can and will remain only assemblers or sub-contractors. As argued earlier in these columns, India needs a well thought-out strategic programme to acquire independent design-development capability which will not come through co-production alone. India has had a long history of licensed production but, in the absence of a concerted plan, has failed to build such capability. ‘Make in India’ is just an offer to provide cheap labour, and does not even realize that there is a shortage of skilled workforce for an advanced aviation industry. At present, only defence PSUs can provide even such facilities and effort can, and should, then be made to convert manufacturing know-how to design-development capacity.

Unfortunately, the powers that be have not learned this lesson even the hard way. When PM Modi visited Russia recently, he was accompanied by a bevy of these Indian private sector engineering majors hoping to snare a contract for ‘making in India’ the Kamov 226 light utility helicopters being negotiated with Russia. All of them returned empty handed because, much to the discomfiture of the Indian government and largely ignored by the pink press and corporate media, Russia said it would work with the public sector Hindustan Aeronautics Ltd (HAL)!

Artificial methods to grandfather sweet deals for chosen Indian corporates, with whatever other gratifications are on offer, are no way to build genuine independent capability to develop and manufacture advanced defence hardware. ‘Make in India’ should only be about some people making money. It should be a route to self-reliance, which it is not under the present dispensation.

Disclaimer: The views expressed here are the author's personal views, and do not necessarily represent the views of Newsclick.

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