As the controversy surrounding Rafale deal escalates in media and parliament, here is an explainer and a timeline relating to this controversial deal. We have attempted to list the controversies surrounding the deal and the reason Anil Ambani reportedly wrote to Congress Chief Rahul Gandhi.
The story started around 6 years back when The Indian Air Force expressed its requirement for a new twin-engine fighter jet in order to replace the aging Russian fighters that are being phased out. After testing and scrutinizing a number of global options, the Air Force in 2012 put the Rafale, built by France’s Dassault, and the Eurofighter Typhoon on its final list. The Congress-led United Progressive Alliance government had put out a tender for 126 fighter jets and, because of a lower bid offer, had planned to buy 18 Rafales in fly-away condition from Dassault, with the remaining to be built in India along with the state-owned Hindustan Aeronautics Limited.
However, the contract never happened due to lack of agreement on various terms of RFP (Request for Proposal) compliance and cost-related issues. Further, the transfer of technology remained the primary concern as Dassault Aviation wasn’t ready to own the responsibility of quality control of the production of 108 aircraft in India. While Dassault projected for 3 crore man hours for the production of the aircraft in India, HAL’s (Hindustan Aeronautics Ltd) estimate was nearly 3 times higher, thus escalating costs manifold. 
During 2014 Lok Sabha elections, Congress-led UPA failed miserably and BJP government came into power. In 2016, on a visit to France, Prime Minister Narendra Modi announced a completely new deal, in which India would be getting 36 Rafale jets from France, all in fly-away condition. Under the terms of this Rs 59,000 crore deal, all the planes would be built in France, but Dassault would have to offset about 50% of that cost in India. As a part of deal…
1. India will pay a 15% advance and deliveries will start in 3 years.
2. The French government will also provide the latest weapons like the Meteor and Scalp missiles.
3. The deal also includes a five-year support package that assures high availability of the fighter.
4. An additional clause of the deal states that France will invest 30% of the 7.8 billion euros in India’s military aeronautics-related research programmes and 20% into location production of Rafale components.
The Off-Set Clause
Being one of the largest defence deal, full terms and conditions have been kept under secret and very few information is available at public domain. As we mentioned above and as per the agreed deal, France is supposed to invest 30% of the total cost in India’s military aeronautics-related research programmes and 20% into local production of Rafale Components. This expenditure from Dassault will be governed by the Defence Offset Guidelines and all offset proposals will be approved by the only defence minister.
But What Reliance is Doing in Rafale Deal
As per the agreement, Dassault is free to work with any Indian organization to complete its offset obligations subject to due approval from Government of India. As per the report from livefirst.com, Dassault had signed agreements with 72 Indian firms to fulfill its obligations but soon after the agreement was complete, the bulk of that INR 30000 Cr has been invested in the Indian ecosystem diverted through Dassault Reliance Aerospace (the joint venture between Anil Ambani’s Reliance Aerostructure and Dassault). As per an independent report, Reliance will end up receiving approximately INR 21000 Cr. of total 30000 Cr.
Media Trail and Due Allegations
However, Anil Ambani led Reliance Aerostructure has released a press note stating that it is Dassault’s key partner and Dassault share of offsets is approximately 25% and remaining offset obligations being shared by Thales, Saffran, MBDA & Others and therefore allegation that Dassault giving INR 30000 Cr offset contract to Reliance is totally baseless. Another allegation, the original deal on Rafale was supposed to include the government-owned Hindustan Aeronautics Ltd. which has over 60 years of experience in similar domain whereas Reliance Defence nor any of its associated companies have any experience of manufacturing aerospace and defence equipment.
1. Anil Ambani’s Reliance Group incorporated a defence company just days before Modi announced the new Rafale deal. Why?
2. Ambani also accompanied Modi to France on the same visit that led to the announcement of the deal although he was one of a member of senior Indian businesspersons to go with the prime minister.
3. An organization which has never manufactured even a screwdriver or bolt has been awarded such a crucial contract
4. At the time of Dassault deal with Reliance Defence which had only been around for one year, already had a debt of INR 8000 Cr and losses of INR 1300 Cr.
5. Nearly all of the Anil Ambani run companies are in serious debt condition. None of his business ventures has done well in the past.
6. The Reliance company that runs the Pipavav Shipyard is dangerously close to being considered as a non-performing asset
In November 2017, Congress alleged a huge scam in Rafale Fighter Jet deal saying that the contract has violated the procurement procedure to benefit Anil Ambani led Reliance Aerostructure. Congress has further alleged that the deal signed with France Government doesn’t cater for technology transfer. According to Congress, the entire deal has been reframed to benefit Anil Ambani.
Congress Claims – India is paying too much
Rahul Gandhi led Congress party further claims that BJP government has bought the jets at an inflated price of INR 7.87 billion euros (around 59000 Cr) which means around INR 1670 Cr per aircraft whereas UPA government had negotiated a price of INR 570 Cr.
In November 2017, Congress alleged a huge scam in Rafale Fighter Jet deal saying that the contract has violated the procurement procedure to benefit Anil Ambani led Reliance Aerostructure. Congress has further alleged that the deal signed with France Government doesn’t cater for technology transfer. According to Congress, the entire deal has been reframed to benefit Anil Ambani led companies. However, the defence ministry’s internal calculations indicate that the each Rafale Jet works out INR 59 Cr. cheaper than what it would have cost under UPA deal.
Congress Claims – Cheaper Option has been rejected
The government’s internal notes indicate that a key reason behind scrapping the UPA’s Rafale deal was that the French aircraft was turning out to be more expensive than the Eurofighter after detailed commercial discussions. The Indian Air Force had selected the Rafale jets after following all due process during the UPA regime however it was not the only aircraft to be selected as there were multiple options available i.e. Eurofighter, which was cheaper, as per government’s analysis.
In July 2014, Germany had even made an offer to the NDA government to further reduce the price of the Eurofighter by around 20% but India didn’t respond. Congress Claims that detailed discussions with Germany could have at least forced Dassault to offer a more competitive price for Rafale jets.
36 vs 126
The BJP government has decided to strike a deal for 36 Rafale Jets against the much larger requirement of Indian Air Force. The decision to buy 126 jets were made after much analysis and consideration. In July 2014, Germany had even made an offer to the NDA government to further reduce the price of the Eurofighter by around 20% but India didn’t respond. Congress Claims that detailed discussions with Germany could have at least forced Dassault to offer a more competitive price for Rafale jets. However, the final deal for 36 jets was made without even a follow-on clause to purchase a similar number in the future at similar prices. As a result, the air force is now hard pressed for resources.
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