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All you need to know about India’s association with Dassault and process to purchase Rafale since 2004

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Shashank Goyal
IIM-A alumnus, Software Sales Professional, Writes about business, economy and politics; Passionate about numbers, facts and analysis Tweets @shashankgoyal01

Indian Air Force is authorized for 42 squadrons of fighter jets for effective defence on our borders, but its current strength is depleted to only 34 squadrons. The following timeline depicts the flow of events since 2004 –

  • 2004 – to strengthen the depleting squadrons of Indian Air Force, Vajpayee government initiated the original proposal to buy 126 fighter jets but they were moved out of power
  • 2007 – UPA government finally initiated RFP for 126 aircrafts
  • 2012 – Dassault declared L1 winner based on the approval of Rafale aircraft by Indian Air Force
  • 2012 – Dassault starts signing offset agreements with Indian partners including Reliance. This was reported in 2012 in leading publications including Reuters, livemint, Rediff, Times of India etc.
  • 2012 (when Dassault was selected as RFP winner and contract negotiations started) – the deal on the table was to buy 18 aircraft in flyaway condition from France and 108 to be made locally by HAL
  • 2013 (during negotiations) – Dassault refused to take responsibility for the 108 aircraft manufactured by HAL.
  • Their position was that India should sign two separate contracts – one with Dassault for 18 planes in flyaway condition
  • Another contract with HAL for 108 manufactured (assembled) by using kits supplied by Dassault
  • The above was a fair point but Government (UPA) wanted Dassault to own full responsibility for all 126 aircraft. Dassault refused to sign the contract for planes manufactured by HAL and the deal didn’t move forward
  • Result: deadlock – standstill – no progress – the deal was blocked while IAF was impacted by depleting squadrons
  • 2014 – Modi government resolved the deadlock, agreed for the planes to be bought in flyaway condition from Dassault – and increased the number from 18 to 36
  • Local manufacturing of remaining planes shelved for now and to be pursued separately – hence HAL was out of consideration (for Dassault)
  • Reliance is still in because of offset clause – offset requires Dassault to buy components from local Indian companies (invest 50% of the deal)
  • This supply of components could be for not just Rafale planes – but for other businesses of Dassault including civil aircraft like Falcon too
  • Hence Reliance and other Indian companies are now embedded in the global supply chain of Dassault – which is a win-win in the long term
  • Reliance and other companies are supplying partsnot manufacturing planes – hence the comparison with HAL is baseless – these are two separate parts of the deal. That too, not for Rafale immediately.
  • As part of the offset clause, Dassault needs to invest 50% of the deal (Euro 4 billion) in buying components from Indian companies
  • For offset – Dassault has signed up with 72 Indian partners – Reliance is just one of them. The complete list of offset partners is accessible here and it includes Tata, Mahindra, L&T, Godrej etc. among others
  • For the remaining aircraft to be procured through local manufacturing – since Dassault was not partnering with HAL, India is tying up with other companies like Boeing F/18,  Lockheed Martin F-16 and Saab Gripen
  • These companies are in the process of partnering with HAL, Mahindra, Adani and other Indian companies for local manufacturing
  • In Rafale deal, offset partners are chosen completely by Dassault – they are free to choose who they spend their 4 billion on – Indian government or French government has no say in that
  • By the way – it is more expensive to make planes in India because, in absence of modern technology, HAL takes 3 times more man hours
  • HAL’s production estimate for Rafale in man-hours was 2.7 times higher than the ones by Dassault. This is in line with 2012 report by India Today on Sukhoi planes where it worked out much cheaper to directly buy the planes from Russia than HAL manufacturing (assembling) them in India

Summary:

  • For 10 years UPA bought nothing while IAF’s squadrons were fast depleting
  • Modi government moved fast to go ahead with the purchase and dropped the local manufacturing part because it had become a showstopper for the Dassault deal
  • Local manufacturing is now being pursued with other partners, so essentially not HAL, but Dassault is out of local manufacturing
  • In Rafale deal, Reliance and other partners including Tata, Mahindra, L&T, Godrej etc. are involved for supplying components to Dassault – they have been chosen by Dassault and have been involved since 2012
  • India invested 8 billion in buying the planes but 50% (4 billion) will come back to Indian companies as part of offset clause
  • Many Indian suppliers will get embedded in the global supply chain for Dassault which is a long-term strategic benefit
  • IAF will start getting modern state of the art (and possibly nuclear-armed) fighter jets by 2019 and more from other manufacturers instead of waiting forever and helplessly seeing their squadrons getting depleted

The above are indicators of a deal that spells all round positive for India.

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Glaring holes in scam theory:

  • Meanwhile, check this 18 seconds video where the opposition has quoted four different prices for Rafale deal at four different occasions. None of these is relevant anyway if the deal was never closed
  • There are also four different scam values quoted by them so far. The last one is particularly interesting because they are alleging 1 lakh 30 thousand crore scam – in a deal whose total value is only 59000 crores

Such incoherent and baseless mentions make these allegations frivolous without any substance or relation to the above listed actual facts.

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Shashank Goyal
IIM-A alumnus, Software Sales Professional, Writes about business, economy and politics; Passionate about numbers, facts and analysis Tweets @shashankgoyal01

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