As the election season approaches, Rahul Gandhi has determined that the Rafale deal is the best strategy to corner Narendra Modi government and every day he and his party is making numerous accusations about the deal. And these accusations are being further circulated on mainstream media and social media. Many people forward such messages thinking that to be true, without knowing the fact.
In that context, it is important to look at some of these accusations in an objective manner.
Has Modi taken away the contract to make Rafale in India from HAL and given it to Reliance?
No. This allegation is totally false. The 36 jets that India will be purchasing from France, will be 100% manufactured in France. India is buying them off-the-shelf. Not a single Rafale jet will be manufactured in India. So the question of either HAL or Reliance making it in India does not even arise. If India decides to buy any more Rafale fighters, they may be made in India in future, but that will be under a separate agreement.
Has Anil Ambani got a contract worth US$ 20 billion?
No. India will pay US $8.9 billion for the 36 fighter jets. And as per offset obligations imposed by India, Dassault will have to invest back 50% in India. Although Rahul Gandhi had initially alleged that Reliance will benefit by US$ 4 billion, approximately the entire offset amount, later he added US$ 16 billion for “Rafale lifecycle Contract” that Reliance was supposed to get.
No so-called “lifecycle” contract has been signed by anyone, no such deal exists. This is purely a falsehood of ‘Clown Prince’ as Arun Jaitley has christened him recently. And no, Reliance is not getting the entire value of offset investment either. Both US$ 20 billion and US$ 4 billion figures are baseless.
Is Reliance is the sole partner of Dassault in India for the Rafale deal?
No. Reliance is not the only business house that Dassault has partnered with for the offset obligation. So far, Dassault has finalised agreements with 72 different companies to supply various products and services. One company among those 72 is Dassault Reliance Aerospace. The list of Indian Offset Partners of Dassault includes other Indian business groups like L&T, Mahindra Group, Kalyani Group, Godrej & Boyce, Tata group etc. As per the offset clause, Dassault is free to select partners as per its need. And it is not necessary that the offset partners will have to work on the Rafale project only, they can work on any project by Dassault.
Dassault is negotiating with tens of other companies for contracts. A jet plane is an extremely complex machine, with thousands of different parts, each manufactured to perfection, that comes from hundreds of different companies. Aircraft manufacturers source their components from all over the world. Even if there was no offset obligation, Dassault will still have to source parts from numerous companies, the offset obligation ensures that some of those companies are from India. Which increases investment in the country, leads to job creation, and help in overall growth in the economy.
One significant name in the list is Snecma HAL Aerospace Ltd. It is a joint venture between Hindustan Aeronautics Ltd (HAL) and Snecma (Safran) of France. This joint venture will make parts for Rafale jet’s Snecma M88 engine. Therefore, the allegation that HAL has been completely left out is false. As the jets will be made in France, only some parts of that will be made in India as per offset obligation, and HAL is already a part of that.
Why choose Reliance who has no experience in defence and aircraft manufacturing?
The Reliance arm in the joint venture is Reliance Defence, which was formed after Reliance group purchased Pipavav Defence, which is in the business of building warships and other vessels for the Indian navy. This means the company does have experience in the defence sector. Indian defence sector has been opened for private businesses only recently. That’s why only a few companies have limited experience in this field, that too in making components, not full products. It may be noted during the earlier round of bidding for MMRCA during UPA government, Dassault had tied up with Mukesh Ambani’s Reliance Aerospace, which was a newly formed company without any experience in defence or aircraft business.
So what is the deal with Reliance?
The 36 Rafales will not be made in India, so it’s a no-brainer that Reliance will not be making that. But the interesting point is, they are not even making parts for it. Yes, at present Dassault Reliance Aerospace is not even making parts for Rafale like HAL and some Indian companies will be doing, forget the whole plane. The company is making parts for the Falcon 2000 civil jet plane that is manufactured by Dassault Aviation. This company is now part of the global supply chain network of Dassault, and they have already started manufacturing parts and sending them to assembly plants. Dassault will be investing around € 100 million in the joint venture with Reliance as part of offset obligations related to the Rafale deal, which is less than 3% of the total offset obligation. Reliance is not getting US$20 billion or even US$4 billion as Rahul Gandhi seems to believe, the current investment is less than USD$ 120 million.
This is the current position. In future Dassault will get some parts for Rafale made in Dassault Reliance Aerospace, as the company has mentioned in their counter to the allegations of ex-French president Hollande, just like dozens of other offset partners will make various Rafale parts. Reliance has also signed a JV with Thales, which is a major component supplier of Rafale and they also have offset obligations. At present their investment with Reliance is not known. Therefore in future Reliance’s share in offset investment will go up, but that will never be US$ 20 billion or even US$ 4 billion, that is because several other offset partners are there.
What was Hollande’s allegation?
Basically, nothing. First, French magazine Mediapart quoted the former French President as saying that the government of India had suggested Reliance to France. Following that statement, the French government and Dassault Aviation issued statements. The French government said that they have nothing to do with the deal between Dassault and Reliance. Dassault said that there was no pressure and Dassault had chosen Reliance on their own. Following this, Associated French Press quoted Hollande saying that he is not aware of any pressure applied by the Indian government and France has nothing to do with the deal. That if any pressure was applied, only Dassault can say. Dassault, as already mentioned, had already denied these allegations.
Yes, Anil Ambani got a contract for making parts for a legacy business jet that aviation operators and high net worth individuals buy, not a modern 4.5 generation Medium Multi-Role Combat Aircraft that Indan government is buying.
Note: Additional information has been added to this article on 24th September 2018