Note: The Centre recently submitted documents explaining the decision-making process behind the Rafale deal to a group of Supreme Court petitioners.
Upon receiving the information, the petitioners were also allowed to file a response. The text below is a response submitted by advocate-activist Prashant Bhushan and former Union ministers Arun Shourie and Yashwant Sinha.
Read the full text of Modi Government’s note on how it decided to buy 36 Rafale jets here.
Submissions: Response to Union of India’s submissions in terms of the order dated 31.10.2018
By its order dated 31.10.2018, this Hon’ble Court directed the Union of India to make available the note on the “details of the steps in the decision making process leading to the award of 36 Rafale Jet-Fighters/Fighter Aircrafts” along with “details that could legitimately come in the public domain with regard to the induction of the Indian offset partner (if any)” to the petitioners herein.
The petitioners were also allowed to “file their response to the information that would be conveyed”.
This preliminary response is submitted pursuant to the said directions.
Misleading & false statements
1) At the outset it is submitted that the note detailing the decision making process is misleading. Information provided in the ‘Copy for the Petitioners’ is undated, unsigned, and not supported by an affidavit. It is unknown as to who was authorised to make available the details of the steps taken in the decision making process and who is accountable for the misleading and outright false statements that have been made on behalf of the Union of India to the Hon’ble Court.
The various misleading and false aspects of the note are as follows:
1.1) Para 8 on Page 3 of the note on Decision Making Process, states provisions of Para 71 of Defence Procurement Procedure, 2013 (DPP 2013) on which reliance has been placed to show that the procurement for the 36 Rafale aircrafts could have been proceeded with under an Inter Governmental Agreement (IGA). Curiously, the said provision is not quoted in its entirety and omits the three specific pre-conditions/cases under which a procurement may be carried out through the IGA route as opposed to the competitive route under that provision. As none of the three pre-conditions existed in the new Rafale deal for 36 aircrafts, the failure to quote the necessary pre-conditions that are mentioned in Paragraph 71 itself is designed to mislead the Hon’ble Court.
The provision as quoted in the note is as follows:
“There may be occasions when procurements would have to be done from friendly foreign countries which may be necessitated due to geo-strategic advantages that are likely to accrue to our country. Such procurements would not classically follow the Standard Procurement Procedure and the Standard Contract Document but would be based on mutually agreed provisions by the Governments of both the countries. Such procurements will be done based on an Inter Governmental Agreement after clearance from CFA.”
While the above extract may give an impression that the total and gross violation of the Standard Procurement Procedure may be justified in the Rafale deal for 36 aircrafts, it is not so.
Beginning immediately after the end of the quote, the rest of provision is as follows:
“The following cases would fall under the purview of this provision:
(a) There are occasions when equipment of proven technology and capabilities belonging to a friendly foreign country is identified by our Armed Forces while participating in joint international exercises. Such equipment can be procured from that country which may provide the same, ex their stocks or by using Standard Contracting Procedure as existing in that country. In case of multiple choices, a delegation may be deputed to select the one, which best meets the operational requirements.
(b) There may be cases where a very large value weapon system / platform, which was in service in a friendly foreign country, is available for transfer or sale. Such procurements would normally be at a much lesser cost than the cost of the original platform/ weapon system mainly due to its present condition. In such cases, a composite delegation would be deputed to ascertain its acceptability in its present condition. The cost of its acquisition and its repairs / modifications would be negotiated based on Inter-Governmental Agreement.
(c) In certain cases, there may be a requirement of procuring a specific state-of-the art equipment/ platform, however, the Government of the OEM’s country might have imposed restriction on its sale and thus the equipment cannot be evaluated on ‘No Cost No Commitment’ basis. Such equipment may be obtained on lease for a specific period by signing an Inter-Governmental Agreement before a decision is taken for its purchase.”
As none of the three conditions/cases apply to the procurement of the 36 Rafale aircrafts, and given that the provision has not been quoted in its entirety, it suggests mischief.
1.1) Para 5 on Page 2 of the note on Decision Making Process quotes from the preamble of DPP-2016 while giving an impression that it alludes to DPP-2013. There is no “Preamble” in DPP-2013. The quotes in Para 5 do not appear in the ‘Foreword’ of DPP-2013 either.
1.2) In para 10, in support of procurements through IGA route, the note states that “The IGA is typically an assurance from a sovereign government for assistance in case of unforeseen problems, e.g. international sanctions, contract failure, need to integrate more sophisticated weaponry, requirement of product support etc…IGA also facilitates and strengthens the foreign industry’s commitment for long term support for the equipment and spares through a matching commitment by a sovereign government”. An impression is given that the IGA route was preferred as the French Government provided an assurance in case of unforeseen problems. This is in fact false. The note fails to mention that the Ministry of Law & Justice specifically and repeatedly objected to the fact that in the agreement for procurement of 36 Rafale aircrafts the French government did not provide a ‘Sovereign Guarantee’ as required and instead merely provided a ‘Letter of Comfort’ of little value. The said objection of the Ministry of Law & Justice was eventually overruled by the Cabinet Committee on Security and the French government has not provided a ‘Sovereign Guarantee’ or ‘Bank Guarantee’ as required. Furthermore, the note fails to mention that in the absence of a ‘Sovereign Guarantee’, the Ministry of Law & Justice also objected to the seat of Arbitration being outside India and the fact that in case of a dispute the Indian Government is first required to take recourse to arbitration with the vendor i.e. Dassault Aviation, a process that could take years to conclude. It was highlighted that these terms & conditions were not favourable to India’s interest specifically because under the agreement huge payouts were required to be made by the Indian Government whereas the delivery of the equipment would be years away.
A copy of the said note from Ministry of Law & Justice is annexed as Annexure 1 at Pages _____ to _____ .
1.3) As regards the earlier procurement for 126 aircrafts, Para 16 states that:
“the contract negotiations could not conclude mainly due to unresolved issues related to 108 aircraft to be manufactured in India. These issues pertained to lack of common understanding between HAL and Dassault Aviation on following :- (i) Man-Hours that would be required to produce the aircraft in India: HAL required 2.7 times higher Man-Hours compared to the French side for the manufacture of Rafale aircraft in India. (ii) Dassault Aviation as the seller was required to undertake necessary contractual obligation for 126 aircraft (18 direct flyaway and 108 aircraft manufactured in India) as per RFP requirements. Issues related to contractual obligation and responsibility for 108 aircraft manufactured in India could not be resolved”. The contention that the original procurement process could not be concluded due to lack of common understanding between HAL and Dassault Aviation is false. The negotiations had commenced in February of 2012. By March of 2014, a ‘Work Share’ agreement had been signed between HAL & Dassault under which Dassault was to be responsible for 30% of the work & HAL was to be responsible for 70% of the work. That the differences between Dassault & HAL had been resolved has been confirmed by Mr. T. Suvarna Raju who was the lead technical negotiator on behalf of HAL and retired as HAL Chairman. Mr. Raju has dared the government to put the files in the public domain. Moreover, just 16 days prior to a totally new deal being announced, on the 25th of March, 2015, the CEO of Dassault Aviation, Mr. Eric Trappier stated in presence of the IAF Chief & the HAL Chairman that, “After an outstanding amount of work and some discussion, you can imagine my great satisfaction to hear…from HAL chairman that we are in agreement for the responsibilities sharing, considering as well our conformity with the RFP (Request for Proposal) in order to be in line with the rules of this competition. I strongly believe that contract finalisation and signature would come very soon.”
Apparently, on 25.03.2015, Dassault was in final stages of negotiations with India for 126 aircrafts and HAL was to be Dassault’s partner in India. The Indian Air Force Chief, Dassault’s C.E.O, and the H.A.L. chairman were unaware of any new deal. Moreover, the statement of the CEO of Dassault shows that they were completely satisfied with having HAL as their partner.
1.4) At para 18 it is stated that, “As the contract negotiations reached a stalemate and RFP compliance could not be ensured, the process for RFP withdrawal was initiated in March, 2015, and RFP for 126 MMRCA was finally withdrawn in June 2015” That the process for withdrawal was initiated in March, 2015, is belied by the aforementioned statement of Dassault’s CEO on the 25th of March, 2015, in the presence of the IAF Chief & HAL Chairman. Were both unaware that the process for withdrawal of RFP had begun. Moreover, even two days prior to the new deal being unilaterally and suddenly announced, on the 8th of April, 2015, the then Foreign Secretary , S. Jaishankar stated, “In terms of Rafale, my understanding is that there are discussions under way between the French company, our Ministry of Defence, the HAL which is involved in this. These are ongoing discussions. These are very technical, detailed discussions. We do not mix up leadership level visits with deep details of ongoing defence contracts. That is on a different track. A leadership visit usually looks at big picture issues even in the security field.” Six facts are evident from what the Foreign Secretary said just two days before the Prime Minister’s announcement: [i] Negotiations were still going on regarding the Rafale aircraft; [ii] Manifestly these were going on under the original RFP for 126 aircrafts; [iii] HAL was very much to be a part of the project as it was of the negotiations; [iv] The Prime Minister of India and the President of France were to focus on the “big picture issues even in the security field”; [v] No new deal for Rafale aircrafts was on the agenda for the talks in Paris; [vi] Consequently, no preliminary ground work was done as regards any new deal.
1.5) Ironically, para 19, describes in detail the desperate need of the IAF to induct new aircrafts in order to be able to meet the threat of a two front war. It states that, “the combined effect of our own reducing combat potential and our adversaries enhancing their combat potential made the situation asymmetrical and extremely critical. An urgent need was felt to arrest the decline in the number of fighter squadrons in IAF and enhance their combat capabilities.” This is absolutely telling. Precisely for this reason, the IAF had given their requirement for 126 aircrafts for which the deal was near completion. It defies logic and reason as to why given that the IAF’s requirement was for 126 aircrafts was that deal summarily jettisoned and ONLY 36 aircrafts were procured all in a fly away condition from France with no Make in India by HAL and Transfer of Technology. No where does the note mention as to who determined that the number of aircrafts to be procured would arbitrarily be lopped down to 36 severely compromising the countries National Security. No where does the note mention that the IAF asked for just 36 aircrafts. The note is conspicuously silent on when, how, and by whom was this number arbitrarily arrived at. It is absolutely bizarre that the government has now again initiated a new RFP for procurement of 110 odd aircrafts in 2018 for which the same vendors have again participated and which process has brought the country back to square one and pushed back the IAF’s requirements to maintain the sanctioned strength of 42 squadrons by at least another decade. The extremely serious question that arises is whether akin to what has happened in this case, another government could also jettison this new acquisition for 110 aircrafts once the process is about to be culminated and again go in for an arbitrary number of aircrafts decided by corrupt high ranking public officials for reasons are not bonafide.
On urgency, as has been elaborated in the main petition, there is no substantial difference between the comparative procurement timelines of the 126 deal and the 36 deal. Except that the IAF now gets 36 aircrafts in the time in which it could have got 126 along with Make in India & Transfer of Technology. On urgency, as regards the original procurement process of 126 aircrafts, the then Defence Minister, Arun Jaitley, told Parliament on 8th of August, 2014 that, “The 18 direct fly away aircraft are expected to be delivered in three to four years from the signing of the contract. The remaining 108 license manufactured aircraft in India are expected to be delivered during the following seven years.” Apparently, the Government was proceeding with the original procurement process with no hint of any emergent situation that required the drastic overturning of the deal as was done by the Prime Minister suo moto in Paris just a few months later. By the government’s own admission, if the original procurement process had been completed on the 10th of April, 2015, 18 aircrafts in ‘fly away’ condition would have been delivered by April of 2019, and the remaining 108 that were to be manufactured in India would have been delivered by 2022. Reportedly, under the new deal, the first aircraft would not be inducted until September of 2019, i.e., a full four years after the old deal was summarily discarded. The last of the 36 would only be inducted by late 2022.
1.6) Para 22 states that “in the case for procurement of 36 Rafale aircraft, all the requisite steps…as per requirement of Defence Procurement Procedure-2103 have been followed”. As will be shown in detail in the section on Decision Making Process, this is false. There was no SQRs, Categorization Committee’s Recommendation, Statement of Case, or Acceptance of Necessity by Defence Acquisition Council existed on 10th of April, 2015, when without authority the Prime Minister unilaterally announced the acquisition of just 36 aircrafts with no Make in India by HAL and no Transfer of Technology and foreclosed the discretion of multiple institutions.
1.7) In light of the same the Union of India should be required to submit the said information on an affidavit and specifically asked to detail the steps and procedure undertaken prior to the 10th of April, 2015, when the Prime Minister made the announcement for the new procurement and jettisoned the near complete old procurement with its all important objectives.
2) Arguendo, if factual details in the note are correct, they show that the decision making process was arbitrary and violative of the Defence Procurement Procedure (DPP). In short, DPP provides that the Services Head Quarters initiates a new deal by giving their requirements for the quality and quantity of the equipment that they need. This is called the Services Qualitative Requirements (SQRs). Thereafter the matter goes to a larger body called the Categorisation Committee which then decides whether the equipment could be purchased/made domestically or would have to be purchased from abroad or a combination of the two. Thereafter an even higher body called the Defence Acquisition Council (DAC) based on a Statement of Case (SOC) prepared by the IAF SHQ, approves the quantity, quality and whether the equipment should be purchased/made domestically or purchased from abroad or a combination of the two.
The DAC gives it’s approval called the Acceptance of Necessity (AON). It is only then that either a competitive route for procurement or an IGA may be opted for (The procedure is described in detail at Pages ____ to ____ of Vol.1).
The following is apparent from the note:
2.1) The IAF Services Head Quarters (IAF SHQ) did not initiate any new deal. The deal was unilaterally initiated by high ranking public servants without authority on 10th of April, 2015.
2.2) IAF SHQ did not give any Services Qualitative Requirement (SQR)/Statement of Case (SOC) for acquisition of just 36 aircrafts. The recommendation of IAF as codified in the AON granted on 29th of June, 2007, was for procurement of 126 aircrafts. The note is silent on who arbitrarily determined the quantities to be procured on 10th of April, 2015 and the procedure undertaken to determine the said quantities.
2.3) The note confirms that there was no recommendation from the Categorisation Committee for procurement of all aircrafts in a ‘fly-away’ condition. The note is silent on who determined that all 36 aircrafts were to be purchased in a ‘fly-away’ condition from France and Make in India by HAL and Transfer of Technology with the most important goal of self reliance in manufacture of advanced fighter aircrafts were to be summarily jettisoned. The note is silent on the procedure undertaken to make the said determination on 10th of April, 2015.
2.4) The note confirms that there was no Acceptance of Necessity (AON) by Defence Acquisition Council (DAC) for procurement of 36 aircrafts all in a ‘fly-away’ condition prior to the sudden unilateral announcement by the Prime Minister on 10th of April, 2015. The note concedes that an ex post facto AON was obtained from the DAC on the 13th of May, 2015. Para 23 of the note on Page 7 of Decision Making Process admits that, “approval of the Defence Acquisition Council (DAC) for procurement of 36 fly-away Rafale aircraft from the French Government through Inter Governmental Agreement (IGA) was taken on 13th May 2015.”
2.5) Para 23 of the note states that, “the background of the case was brought to the notice of the DAC where it was mentioned that operational capability of 36 Rafale aircraft will be in accordance with the SQR for the procurement of MMRCA.” This confirms that a fait accompli was presented to the DAC and an ex post facto AON was obtained. In the absence of any SQR for a new deal or recommendation from Categorisation Committee, it is unclear as to who “brought to the notice of the DAC” the contours of the new deal and on whose recommendation the DAC gave an ex post facto AON.
2.6) As a unilateral decision was taken in France on 10th of April, 2015, without requisite recommendations from the IAF, it is stated in the note that it was “mentioned” to the DAC that SQRs from the earlier procurement of 126 MMRCA would be superimposed for the new procurement of 36 Rafale aircrafts. This is a clear usurpation of the authority of IAF SHQ and various other institutions. Per para 17 of DPP-2013, “SQR would invariably be finalized prior to seeking AoN for the scheme. A copy of SQRs duly approved by the respective SHQ authorities would be submitted along with the ‘Statement of Case’ for seeking AoN. No amendment of SQR is permissible thereafter. In an unforeseen situation, where an amendment to SQR becomes necessary after accord of AoN, the case should be resubmitted for revalidation of AoN earlier accorded.” This is to be read in conjunction with para 20 of DPP-2013 which states, “For cases where the original RFP has been issued within one year from accord of AON and later retracted for any reason, the AON would continue to remain valid, as long as the original decision and categorization remain unchanged, provided the subsequent RFP is issued within one year from the date of retraction of original RFP”. The original decision and categorisation as codified in the AON granted on 29th of June, 2007, was unilaterally changed by high ranking public servants on 10th of April, 2015. The original decision for 126 aircrafts was reduced to 36 and original categorisation for Make in India with Transfer of Technology was changed to procuring all aircrafts in a ‘fly-away’ condition.
In light of the same, Para 17 read with Para 20 of DPP-2013, make it clear that the imposition of SQRs from the earlier procurement process was without basis.
2.7) It is apparent from the note submitted by the Union of India that all requirements mandated by the DPP-2013 were violated in the Decision Making Process —if any—that led to the announcement of the new deal and signing of the Joint Statement on 10th of April, 2015. The note is conspicuously silent on the process that led to the initiation of this new deal even as the procurement under the original RFP of 2007 was alive and near completion and expected to be signed as per the C.E.O. of Dassault on 25th of March, 2015, just 15 days prior to the announcement of the new deal and regarding which a ‘Work Share’ agreement had been signed between Dassault and HAL in March of 2014. The Foreign Secretary was not even aware of any new deal on the agenda of the talks on 08th of April, 2015. No formal prior consultation had been done with the IAF or MoD. It is unknown as to who decided to jettison the old deal and suo-moto initiated a new deal and under what authority. A fait accompli was presented to IAF and the DAC and an illegal ex post facto AON was evidently obtained. There is a prima facie case of abuse of office by high ranking public servants and requires investigation by the CBI.
Pricing and loss to exchequer
1) The details of pricing have not been made available to the petitioners. However it has been reported that the said details have been submitted to the Hon’ble Court in a sealed cover.
The following needs to be brought to the attention of the Hon’ble Court:
1.1) The government has repeatedly stated that the new deal for 36 aircrafts had many new ‘India Specific Enhancements’ and additions that were not present in the old procurement process for 126 aircrafts to justify the huge escalation in price of procurement of the 36 aircrafts.
1.2) This assertion is given the lie by the India-France Joint Statement of 10th of April 2015 which states explicitly that, “The two leaders agreed to conclude an Inter-Governmental Agreement for supply of the aircraft on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway; the delivery would be in time-frame that would be compatible with the operational requirement of IAF; and that the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by Indian Air Force, and with a longer maintenance responsibility by France.” (emphasis supplied).
1.3) Further the government’s own note admits that the ex post facto AON granted on the 13th of May, 2015, was as per the SQRs of the earlier procurement process and thus contradicts the government’s stand of escalation in price on account of enhancements/add ons not present in the earlier deal. This had earlier also substantiated by a news report in the Indian Express at Pages ___ to ___ of Vol. 2.
1.4) Furthermore, after studying the RFP issued in 2007, in a series of reports, the Business Standard has reported that the specifications of the aircrafts are the same as in the earlier procurement and that the price per unit of the aircrafts has increased from Euro 155 million per aircraft to Euro 217 million per aircraft in the new deal despite that. This is an escalation of about 40% in the price against public interest.
1.4.1) As regards the increase in price the report states, “The price per Rafale aircraft that the government agreed in 2016 with French company Dassault for 36 fighters is 40 per cent higher than what Dassault had offered in 2012, in a global tender for 126 medium multi-role combat aircraft (MMRCA). Two senior defence ministry officials who were directly involved in contract negotiations with Dassault from 2012 onwards, have revealed to Business Standard that Dassault’s winning bid amounted to Euro 19.5 billion for 126 Rafale fighters. The Euro 19.5 billion quote averaged out to Euro 155 million per aircraft. This included the cost of 126 fighters, technology transfer, indigenization, India-specific enhancements, weaponry, spares and maintenance guarantees. At an exchange rate of Rs 65:14 to the Euro on January 30, 2012, when Dassault was declared the lowest bidder, its price amounted to Rs 127,000 crore, averaging almost exactly Rs 1,000 crore per Rafale fighter, inclusive of all the above additional aspects…Even HAL’s labour costs were factored into this price. In comparison to that Euro 155 million average cost per Rafale, the National Democratic Alliance (NDA) government’s September 2016 purchase of 36 Rafale fighters for Euro 7.8 billion works out to Euro 217 million per Rafale – exactly 40 per cent higher than Dassault’s 2012 quote”. (emphasis supplied)
1.4.2) Disputing that the increased cost is on account of any add ons or enhancements, the report states, “It is not clear how the NDA government – including Defence Minister Nirmala Sitharaman and Finance Minister Arun Jaitley, backed by senior IAF officials – has claimed that the 36-Rafale contract with Dassault in 2016 cost the IAF nine-20 per cent less than Dassault’s 126 Rafale offer. These officials have argued that the Euro 7.8 billion cost of 36 Rafales included add-ons like weaponry, spare parts and logistic guarantees. However, the IAF’s 2007 tender for the MMRCA – termed “Request for Proposals” (RFP) – which Business Standard has reviewed in detail includes all these enhancements in the 2012 price. The 2007 RFP stipulates that vendors must price in the “total cost of acquisition”. This includes the purchase cost of the “bare bones” aircraft, specified enhancements, weaponry, spares, maintenance and the cost of operating the aircraft for 40 years, including the cost of fuel, oil and lubricants. The 2007 RFP requires vendors to price seven specified aspects into their bids. These are: (a) Direct acquisition cost, or the cost of buying and building 126 Rafales along with weaponry (termed M1); (b) Cost of Total Technical Life (TTL) reserves, or the spares needed over the Rafale’s service life of 40 years (M2); Cost of reserves for ensuring availability of 75 per cent of the fleet at all times (M3); Cost of intermediate level periodic servicing (M4); Cost of depot level overhaul (M5); Operating cost of the fleet for 40 years (M6) and the cost of technology transfer for building the Rafale in India and for other technologies specified in the RFP (M7). Appendix F of the RFP mandates that the “total cost of acquisition” (M8), would be arrived at by adding all seven aspects above – i.e. M1 to M7. The vendor with the lowest “total cost of acquisition” would be declared L-1, and would be awarded the contract. In fact, the difference between the two bids is actually greater, because the 126 MMRCA bid involves building 108 fighters in India, which adds to the cost. In contrast, the 18 Rafales that were to be supplied in flyaway condition would cost significantly less…Dassault’s Euro 19.5 billion quote remained valid at the time Prime Minister Narendra Modi announced in Paris on April 10, 2015 that he had requested President Francois Hollande to supply 36 fully-built Rafale fighters in a government-to-government arrangement. In February 2015, at the Aero India 2015 show in Bengaluru, Dassault chief Eric Trappier confirmed: “Our pricing remains the same from Day One of L-I (lowest bidder). So there has been no change on that front.” (emphasis supplied)
1.1.1) The report points out that weaponry and its cost was included in the price quoted by Dassault as per the 2007 RFP. It states, “Part 1 of the RFP specifies the missiles and bombs to be supplied, such as 336 Active Beyond Visual Range (BVR) missiles, 168 All Aspect Missiles, etc. A separate section (Annexure IV to Appendix A) specifies the capabilities that the weapons must have”. (emphasis supplied).
1.1.2) On enhancements it is reported that, “The government has argued that India-specific enhancements have raised the Rafale’s price, including helmet mounted sights, radar warning receiver, radio altimeter, Doppler radar and cold start. The 2007 RFP contains all of these elements. Annexures II and III to Appendix A specify a high-end avionics suite, including AESA radar, helmet mounted display sights, radar warning receiver, missile approach warning receiver and an airborne self-protection jammer. Indian Air Force (IAF) sources explain there were Indian specific enhancements in both the Rafale configurations. The 2016 avionics might have had marginally improved capabilities, but with no significant effect on price.” (emphasis supplied)
A copy of the complete Reports as published in the Business Standard are annexed as Annexure 2 at Pages _____ to _____.
1.1) In light of this it is imperative that the CAG audit the bids under both the deals to examine the total loss to the national exchequer. In fact a group of retired bureaucrats have written to the CAG highlighting its abdication of responsibility in not having conducted the audit even three years after the deal and continuously missing deadlines to submit its reports. It is imperative that the CAG conclude the audit at the earliest.
A copy of the letter written by a group of retired Civil Servants to the CAG is annexed as Annexure 3 at Pages ___ to ____.
1.2) On 31st of October, 2018, the government contended before the Hon’ble Court that details of the pricing cannot be brought in the public domain on account of the secrecy agreement between India & France of 2008. The said secrecy agreement notes that information would be subject to the National Laws of the two countries. Article 4 of the agreement states, “The parties shall in accordance with their national laws and regulations, take all measures necessary for protection of classified information” . In terms of Article 4, the said agreement would be subject to various laws in India such as the RTI Act under which the pricing of procurement cannot be a secret. President Macron of France had earlier stated that it was up to the Government of India to decide if it wanted to make available the details as regards pricing. In light of the same, the details of pricing should be made available to the public at large. In fact, as shown in the petition, details of pricing have been revealed by the Government of India in Parliament. On 18th of November, 2016, in response to a question asked in the LokSabha on the acquisition of fighter aircrafts, the MoS, Defence stated that, “Inter-Governmental Agreement with the Government of French Republic has been signed on 23.09.2016 for purchase of 36 Rafale aircraft along with requisite equipments, services and weapons. Cost of each Rafale aircraft is approximately Rs. 670 crore and all the aircraft will be delivered by April 2022.” Dassault Aviation & Reliance group of companies revealed the price as about 1660 crores per aircraft in their joint press release.The issue is as regards the discrepancy in the stated prices which needs clarification.
A copy of the secrecy agreement between India & France of 2008 is annexed as Annexure 4 at Pages ____ to ____ for perusal of the Hon’ble Court.
1) The malafide manner in which HAL was dropped as the Production Agent for Dassault Aviation in India under the 126 procurement procedure and a few days old Reliance group of company which had no experience in Defence sector whatsoever, was given the offset contracts amounting to thousand of crores of Rupees has been elaborated on in the petition at Pages ____ to _____ of Vol 1.
Facts & statements of the then French President Hollande show that Reliance was proposed as an offset partner to the French by the “Indian side” as part of a “new formula” of the Indian government when the new deal was announced on 10th of April, 2015. Pages ____ to ___ of Vol. 1. The petition highlights contemporaneous news reports in the French Media from April of 2015, highlighting the involvement of Reliance group as part of the new deal. Pages ___ to ___ of Vol. 1. The French have been reported to have had “no say” in the selection of the offset partner. Officials of Dassault have reportedly stated that Reliance was “imperative and obligatory” as part of the new deal. Pages ___ to ___ of Vol. 1. The joint venture agreement between Dassault & Reliance Aerostructure Limited was made in April of 2015 itself as per the Press Release from Dassault Aviation (Pages ___ to ___ of Vol. 1). Land used by the JV was applied for and granted to Reliance in June of 2015 in a record time. The said JV was formally announced within days of the signing of the main procurement contract and the concurrent offset contract on 23rd of September, 2016. (Pages ___ to ___ of Vol. 1). Ministers of the government were present at inauguration ceremonies for the said JV. (Pages ___ to ___ of Vol. __) Dassault’s investment into the JV was cleared by Foreign Investment Promotion Board (Pages ___ to ___ of Vol. 1).
2) In its note on offsets, which is also undated, unsigned, & sans an affidavit, the government admits that the offset contract was signed simultaneously with the main procurement contract in terms of the requirements of the Offset Guidelines on 23rd of September, 2016. However, it is stated that, “as far as the discharging of the offset obligations is concerned, there is no mention of any private Indian Business House(s) in IGA or Offset Contract…As per the Offset Contract, the vendor is required to confirm the details of IOPs/products either at the time of seeking offset credits or one year prior to discharge of offset obligation”.
3) To ensure deniablity, on 5 August 2015, the Government quietly amended the Defence Procurement Policy 2013 by inserting a clause. Para 8.2 of DPP-2013 originally stated: “The TOEC [Technical Offsets Evaluation Committee]will scrutinize the technical offset proposals… to ensure conformity with the offset guidelines. For this purpose, the vendor may be advised to undertake changes to bring his offset proposals in conformity with the offset guidelines. The TOEC will be expected to submit its report within 4-8 weeks of its constitution.” However the August 5, 2015 amendment absolved the vendor from having to submit his offset proposals to the TOEC’s scrutiny as a pre-condition for the award of the contract. Instead, now offset proposals could be submitted years after the contract was awarded. This was enabled by adding the following sentences to Para 8.2 above: “If the vendor is unable to provide these details at the time of the TOEC, the same may be provided to DOMW (Defence Offsets Management Wing, an upgraded version of DOFA) either at the time of seeking offset credits or one year prior to discharge of offset obligations through that IOP.” This amendment was, unusually, made applicable retrospectively: “These amendments shall come into effect immediately and shall also be applicable to all offset contracts and on-going procurement cases, irrespective of the applicable DPP.” There can scarcely be more conclusive proof of a premeditated effect to cover up the party to whom the offset contract had been steered.
4) However, notwithstanding the said amendment, government’s contention still violates the Offset Guidelines of the Defence Procurement Procedure. Prior to the offset contract being signed, every vendor is to submit offset proposals to MoD for approval. Para 7, of Offset Guidelines deals with ‘Submission of Offset Proposals’. Per Para 7.2, the offset proposal is submitted in two parts. Technical Proposal and Commercial Proposal. It states, “The technical and commercial offset proposals should be submitted in two separate sealed covers to the Technical Manager of Acquisition Wing.” That Para 8 deals with ‘Processing of Offset Proposals’. Per Para 8.4, “The Commercial Offset Offer will contain the detailed offer specifying the value of the offset components, with a breakdown of the details, phasing, Indian Offset Partners” The requirements for submitting the Commercial Offset Offer are detailed in Annexure III to Appendix D of DPP which states, “Note: Vendor to provide following along with commercial offset offer: -(a) Undertaking that IOP is an eligible offset partner as per applicable guidelines.(b)Company profile of IOP/agency. (c) Details with values of the proposed offset, including details of Tier-1 sub-contractors, if any. (d) Letter of IOP/agency confirming acceptance of the offset project in case of direct purchase or investment.”
5) That Para 8.6 requires that all offset proposals have to be approved by the RakshaMantri. It states, “All Offset proposals will be processed by the Acquisition Manager and approved by RakshaMantri, regardless of their value.”
6) In light of these provisions of the Offset Guidelines, the information submitted to the Hon’ble Court that is undated, unsigned, & sans an affidavit ought not be relied upon.
7) All the aforementioned details highlight that the decision making process for acquisition of 36 Rafale aircrafts and the consequent increase in price and grant of offsets to Reliance was not bonafide and requires investigation by the CBI for cognizable offences committed by high ranking public servants under the Prevention of Corruption Act.
Petitioner in Person
Prashant Bhushan (On behalf of all petitioners)