Law

With Its Big Little Lies on Rafale, the Modi Govt is Treading a Treacherous Path

The decision announced in Paris on April 10, 2015 by a government that promised to "eradicate all corruption" violated every safeguard of the Defence Procurement Procedure 2013.

During his tour to Bengal in 1925, Mahatma Gandhi visited Nawabganj. Addressing a group of school children, he remarked, “You all spin and wear khaddar but tell me how many of you always speak the truth and never lie?”

A few boys raised their hands. “Well, now tell me how many of you occasionally happen to lie.” Two boys raised their hands first, then four and finally almost all. “Thank you”, said Gandhiji, bidding good bye. “There will always be hope for those of you who know and own up that they occasionally lie. The path of those who think they never lie is difficult. I wish both success.”

It’s clear that persistent denials on the Rafale deal by the Narendra Modi government can only result in making its path more difficult.

The Defence Procurement Procedure 2013 declares in its Foreword:

“Defence Acquisition is a complex decision making process that needs to balance the competing requirements of expeditious procurement, development of an indigenous defence sector and conformity to the highest standards of transparency, probity and public accountability.”

The expeditious procurement of 36 Rafale aircrafts cannot be at the cost of the standards of transparency, probity and public accountability.

In its 2014 manifesto, BJP had declared, “Corruption is a manifestation of poor governance. Moreover, it reflects the bad intentions of those sitting in power. All pervasive corruption under the Congress-led UPA has become a national crisis.”

The party promised to establish a system “which eliminates the scope for corruption” through “public awareness, technology enabled e-governance, system based policy driven governance” etc. amongst others. It promised a transition “from representative to participatory democracy” and promised “openness in the government”.

Yet, the government’s decision to acquire 36 Rafale jets remains shrouded in deep secrecy and mystery.

Also read: Can Narendra Modi Be Convicted of Corruption for the Renegotiated Rafale Deal?

India began the process to buy a fleet of 126 Medium Multi-Role Combat Aircraft (MMRCA) in 2007. The contenders in the bidding process for this mega deal were Lockheed Martin’s F-16s, Eurofighter Typhoon, Russia’s MiG-35, Sweden’s Gripen, Boeing’s F/A-18s and Dassault Aviation’s Rafale. Bids were opened in December 2012 and Dassault emerged as L1. Its original proposal offered 18 planes to be manufactured in France and 108 in India in collaboration with Hindustan Aeronautics Limited.

However, even after lengthy negotiations on price and transfer of technology, the deal could not go through till May 2014. 

On April 11, 2015, Le Figaro, a newspaper owned by the Dassault group, reported:

During his official visit to Paris, the Prime Minister Modi asked François Hollande to supply “ready to fly” combat aircraft that will be produced in France.

Prime Minister Narendra Modi’s visit to Paris has spurred a last-minute acceleration and change in direction with respect to the sale of Rafale aircraft to India. It was at the Élysée, alongside François Hollande, that the head of the Indian government announced on Friday night, his intention to acquire 36 Rafale jets. “I asked the president (François Hollande) to supply 36 “ ready to fly” Rafale jets to India,” he said soberly, speaking in Hindi.

The surprise of the day: it was not the contract for the purchase of 126 aircraft, 108 of which are expected to be assembled in India, and being negotiated for three years, that was concluded. New Delhi has made use of a clause of this contract to order aircraft that will be built in France, in Merignac, Gironde.

But the implementation of the “contract of the century” involving the assembly of 108 aircraft under the leadership of the Indian public manufacturing company, HAL (Hindustan Aeronautics Limited) proved to be much more complex than expected. The first difficulty that has prolonged the negotiations in recent months: the Indians wanted the French aircraft manufacturer to vouch for the aircraft assembled in India, with Indian components. For Dassault Aviation, it was inconceivable to bear the entire industrial responsibility for a jet when it could not control the entire production line. There was, however, common ground reached on this point.

The choice to finally order aircraft made in France is a departure from the industrial policy of Narendra Modi. Since the fall, the Indian Prime Minister launched a communication campaign around the “Make in India” The assembly of a hundred Rafales in Bangalore was one of the flagship programs. But the negotiation of the initial contract, covering the 126 aircraft, will continue, assures the Ministry of Defence. (translated from the French original)

On the same day, Le Monde reported:

 

The Indian Prime Minister visiting the Elysee announced, on Friday, the purchase of 36 fighter aircraft manufactured by Dassault in France. After Egypt, another unexpected agreement? Negotiations between the French and Indian governments were completed on Friday, April 10th, for the purchase of 36 Rafale jets.

The issue of the Rafale jets is still under discussion and we should be able to move forward on mutually acceptable terms,” said Modi to the Figaro, a newspaper owned by the Dassault group, which published this on Thursday, April 9th, just before his arrival in Paris. (translated from the French original)

Also read: Jaitley’s ’15 Questions’ Only Reinforce the Murky Nature of Modi’s Rafale Deal

It also reported something which so far has not been discussed in the Indian press:

This agreement, if it were to materialise, would remove some of the uncertainties related to the financing of the 2014-2019 Military Planning Law (MPL). For several years, the French State committed it would guarantee the production rate of Rafale jets, with a minimum of eleven aircraft per year, so as to not impact negatively, the Dassault assembly chain and its 500 subcontractors. However, the new MPL has only awarded 26 Rafale jets for the French army, and this guarantees production only until the end of 2016. The State has planned at that time to stop its purchases of Dassault aircraft so as to be able to allocate this budget to other priority equipment.

During the MPL, Dassault must produce 66 Rafale jets, at the rate of eleven aircraft per year. Apart from the production meant for France, the other 40 must be bought by foreign countries, failing which Paris must acquire them. With the 24 jets ordered by Egypt and those that will be ordered by India, the goal relating to the production of jets for foreign countries will be attained. (translated from the French original)

Prime Minister Modi had decided to scrap the tender process of 2007 and substitute it with an agreement between him and the French president, which was now being touted as an inter government agreement.

The 2013 policy expressly provides that such agreements may be necessitated due to “geo-strategic advantages that are likely to accrue to our country” and can only be done after clearance from a competent financial authority (CFA). The policy expressly specifies the cases covered under 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.

(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.

(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.”

The policy mandates that in cases of large value acquisitions, especially those requiring product support over a long period of time, it may be advisable to enter into a separate Inter Government Agreement” but, “such an Inter Governmental Agreement is expected to safeguard the interests of the Government of India and should also provide for assistance of the foreign government in case the contract(s) runs into an unforeseen problem”.

Clearly the decision announced on April 10, 2015, in Paris violated every safeguard of the said policy. None of the eventualities contemplated for acquisition under an IGA are applicable and certainly the interests of the Government of India have not been safeguarded nor is there any guarantee from the Government of France undertaking to provide assistance for unforeseen problems in future.

Rafale jet fighters on the assembly line in Dassault Aviation’s factory in Merignac, France. Credit: Reuters

It is unclear if the cabinet or its committee on defence or for that matter the CFA have taken any prior decisions with regards to such a deal. Procedures followed by the government subsequent to Modi’s announcement make a mockery of the safeguards and the established procedures and promised transparency and would be completely unconstitutional and illegal. France has clearly palmed off to India its obligation to buy the aircraft manufactured by Dassault and remaining unsold as mentioned by Le Monde. The ‘Make in India’ plan and transfer of technology are compromised.

Also read: ‘The Rafale Transaction Is a Case of Criminal Misconduct’

Price is another issue on which Modi’s government has compromised very seriously. Equally, the involvement of Reliance Aerostructure Limited (now Dassault-Reliance Aerospace Limited) as the offset partner is whimsical, arbitrary and completely dangerous for the security of the nation. This company was incorporated on April 24, 2015, days after Modi’s announcement, with a paid up capital of just Rs 5 lakh and was rechristened on February 10, 2017. The 2013 policy states,

“The offset clause would be applicable for all procurement proposals where indicative cost is 300 Crore or more and the schemes are categorised as ‘Buy (Global)’ involving outright purchase from foreign / Indian vendors and ‘Buy and Make with Transfer of Technology’ i.e Purchase from foreign vendor followed by Licensed Production…”

Appendix D gives detailed guidelines with the following objective: 

“The key objective of the Defence Offset Policy is to leverage capital acquisitions to develop Indian defence industry by (i) fostering development of internationally competitive enterprises, (ii) augmenting capacity for Research, Design and Development related to defence products and services and (iii) encouraging development of synergistic sectors like civil aerospace, and internal security”

Paragraph 4 of the guidelines expressly defines an Indian Offset Partner as under:

“4.1 Indian enterprises and institutions and establishments engaged in manufacture of eligible products and/or provision of eligible services, including DRDO, are referred to as the Indian Offset Partner (IOP).

4.2 The Indian offset partner shall, besides any other regulations in force, also comply with the guidelines/licensing requirements stipulated by the Department of Industrial Policy and Promotion as applicable”.

Paragraph 6 deals with management of offsets and provides as under:

“6.1 The Acquisition Wing in the Department of Defence will be responsible for (i) technical and commercial evaluation of offset proposals received in response to RFPs and (ii) conclusion of offset contracts.”

Paragraph 7 deals with submission of offset proposals and directs inter-alia as under:

“7.1 Para 26 of Chapter I read with Schedule I of DPP 2013 prescribes the standard RFP document. Para 6 of the RFP format will apply when offsets are attracted. At the stage of submission of the techno-commercial proposal, the vendor will submit a written undertaking in the format at Annexure I to Appendix-D to the effect that he will meet the offset obligations laid down in the RFP as per the Defence Offset Guidelines…

The technical and commercial offset proposals should be submitted in two separate sealed covers to the Technical Manager of Acquisition Wing.”

Paragraph 8 deals with processing of offset proposals and mandates:

“8.1 The Technical Offset Evaluation Committee (TOEC) will be constituted by the Technical Manager with approval of the Director General (Acquisition). The TOEC will include representatives of the Service Headquarters, Defence Finance, DRDO and DOMW. The Committee may also include experts, as may be deemed necessary, with approval of the Director General (Acquisition).”

“8.6 All Offset proposals will be processed by the Acquisition Manager and approved by Raksha Mantri, regardless of their value. Offset proposals will also be incorporated in the note seeking approval of Competent Financial Authority (CFA) for the main procurement proposal for information of the CFA. The offset contract will be signed by the Acquisition Manager after the main procurement proposal has been approved by the Competent financial Authority. A signed copy of the offset contract will be made available to DOMW”

The guidelines provide detailed requirements, undertakings, obligations, reporting and penalties. By ostensibly allowing Dassault to choose the offset partner, the Modi government has given a complete go by to the guidelines and the safeguards contained therein. What it has done is to adopt a novel hybrid procedure of purported Inter Government Agreement with the vendor Dassault, selecting the Indian offset partner. The Defence Procurement Procedure of 2013 and its safeguards on transparency, probity and public accountability have been thrown out of the window.

The Supreme Court has time and again warned:

It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant.” The power or discretion of the Government in such matters has been held to be “confined and structured by rational, relevant and non-discriminatory standard or norm” and departure there from would necessarily be liable to be struck down. (Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489)

In Reliance Energy Ltd. v. Maharashtra State Road Development Corpn. Ltd, (2007), the Supreme Court went further and held:

“Article 14 of the constitution embodies the principle of non-discrimination. However, it is not a free-standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to “right to life”. It includes opportunity… “Level playing field” is an important concept while construing Article 19(1)(g) of the Constitution… This is because the said doctrine provides space within which equally placed competitors are allowed to bid so as to subserve the larger public interest. “Globalisation”, in essence, is liberalisation of trade. Today India has dismantled licence raj. The economic reforms introduced after 1992 have brought in the concept of “globalisation”. Decisions or acts which result in unequal and discriminatory treatment, would violate the doctrine of “level playing field” embodied in Article 19(1)(g).”

Interestingly, the petitioner therein was also a company from the Anil Ambani group.   

During his campaign for the 2014 election, Modi repeatedly promised to eradicate corruption. At a speech in the United States in September 2015, he rhetorically asked the audience on corruption, “Is the country not disappointed?”. The public replied, “yes”. He again asked, “Is there not anger against corruption”, “Yes”, people responded. He then asked, “I am standing before you. Tell me if there is any allegation against me”, “No”, people shouted.

Yet, Modi is singularly silent on the Rafale deal.

Also read: Indian Govt Suggested Reliance as Partner in Rafale Deal, Hollande Tells French Website

When François Hollande, the former French president with whom Modi announced the deal in April 2015, clarified that the choice of the Anil Ambani-led Reliance group as the offset partner was imposed, stating that, “We did not have a say. The government proposed this service group and Dassault negotiated with Ambani. We did not have a choice. We accepted the interlocutor that was given to us”, Modi’s party and ministers repeatedly attacked Hollande.

But for the same Hollande, Prime Minister Modi while riding the metro in New Delhi in January 2016 had categorically said, “President François Hollande is a very close friend of India” and that “we are very happy that we have formed an agreement for purchase of 36 Rafale aircraft with France”.

The Modi government ought to learn a lesson from Mahatma Gandhi’s profound remarks in 1925.

Dushyant Dave is a senior advocate and former president of the Supreme Court Bar Association.