RIP Rafale Deal?
A bribery scandal now unfolding relating to the import of AW101 helicopters for the Indian Air Force (IAF) has reportedly made India’s Ministry of Defense (MoD) proceed “with extreme caution” in the processing of the procurement deal for Dassault Rafale fighters. MoD’s caution is warranted. Within MoD itself, there was some dissent initially over the way the financial estimates of the shortlisted bidders were allegedly calculated to favor the Rafale, but these were quickly dismissed. Investigators of the chopper scam have found some earlier links between one of the middlemen involved in this deal and Dassault. That connection ended more than a decade ago and is not relevant to the Rafale acquisition. A thorough probe might well unearth serious improprieties in the Rafale deal. But MoD need not wait for it. The requirement for the procurement of a new fourth generation medium combat aircraft no longer exists and the likely current cost of the Rafale acquisition makes it an unwise choice now.
The IAF raised the need for 126 medium multirole combat aircraft (MMRCA) more than a decade ago. After many twists and turns, MoD issued a request for proposal (RfP)in August 2007. An elaborate technical evaluation eliminated all the contenders except the Rafale and the Euro fighter Typhoon. Of the two, the Rafale’s bid was lower. The reaction in India to the selection of the Rafale was one of self-congratulation on conducting allegedly the world’s best fighter evaluation. Defence Minister A. K. Antony came in for fulsome praise for leaving the technical vetting to the IAF. MoD’s role up to this point, apparently, was limited to totaling up the various cost estimates submitted by the two vendors. The excessive praise for the evaluation process misses the point that the processing of arms procurement proposals is not an Olympic sport. You do not get points for technical excellence. What counts is the outcome, not the process. The question to ask in the case of the MMRCA bid is, did the procurement process result in the selection of the best aircraft to meet India’s needs (not necessarily the best of all aircrafts) at the most cost-effective (not necessarily the lowest) price? The answer to this question is not simple.
Whichever aircraft is chosen would serve with the IAF until beyond 2050. Being a fourth generation aircraft, the Rafale, like all its competitors in the MMRCA bid, would be obsolete long before that. Since India would be acquiring two fifth generation aircrafts—one being developed in partnership with Russia and the other being developed domestically—the MMRCA is essentially an interim buy, contemplated initially because of the delay in the development of the Light Combat Aircraft (LCA). Rather than exploring a cost-effective option—a point Ashley Tellis made—the technical vetting tilted the scales in favor of the Rafale, the second costliest aircraft on offer, by eliminating all the cheaper options. The process, for all its technical excellence, remains highly opaque. Most likely, the requirements specified capabilities that only the Rafale and the Typhoon could have met. All that we know is that the list was pared down to the Rafale and the Typhoon after technical evaluation (full details of which are not known) and that of the two, the Rafale was the cheaper one. Again, we do not know cheaper by exactly how much, with reports putting the difference at $5 million to as much as 25%. In any case, the technical evaluation process guaranteed the selection of the Rafale.
It has been known for several years that China was working on stealth aircraft. Jane’s Defence Weekly reported as far back as December 2002 that China was developing a heavy stealth fighter. While India’s lumbering evaluation of the MMRCA bids dragged on, China unveiled two stealth aircrafts in the last two years. Yet that knowledge had no apparent effect on the MMRCA process. If a deal is signed with Dassault in late 2013, the first of the Rafales will be delivered in late 2016—three years after signing of the contract. Meanwhile, the LCA will enter squadron service in 2015, thus eliminating the raison d’etre for the MMRCA acquisition. Deliveries of the rest will continue into the 2030s. By then, stealth aircraft and UAVs would have proliferated. The Rafale would have become obsolete by the time it enters IAF service in large numbers. The fifth generation fighter India is co-producing with Russia (with each passing day it looks less and less like a co production, but that is another story) is scheduled to begin production in India in 2022 even as India is producing Rafales. The Russian version of it would be available even earlier. Acquiring the Rafale when India is producing a fifth generation aircraftof roughly the same cost but much greater capabilities makes no sense.
The 126 Rafales in the initial procurement was originally estimated to cost about $10.24 billion as of the RfP date, or about $81.3 million per fighter. These estimates were clearly unrealistic. The Costis already rumored to have doubled. By the time the contract is finalized, the cost could go still higher. Recent reports say India is contemplating increasing the order to 189. That could take the total cost to at least $30 billion. A mid-life upgrade, going by the example of the recent agreement on the Mirage 2000 upgrade for the IAF, could cost another $30 billion (assuming a total Rafale fleet of 189). Once you add the cost of munitions and maintenance, it could all mean a total program cost of $100 billion. This is an unacceptably high expenditurefor an interim solution to the IAF’s fighter shortage, on an aircraft that will be obsolete almost as soon as it is inducted in squadron service. A large part of the cost would go to French companies through license fees for the domestic manufacture and the cost of the components that they would directly supply.
A deal this size calls for much greater transparency and a guarantee that the country gets its money’s worth of tangible benefits.There would be some justification if the MMRCA deal helps India get the critical technologies it lacks. Anyone who has followed India’s troubled LCA program would know that advanced aero-engine technology is India’s most dire need. The reporters who may have seen the RfPs and may be familiar with the various bids have not disclosed details of what India asked for in terms of transfer of technology (ToT) and what the vendors have offered. Since India was conducting a parallel negotiation with France’s Snecma (the maker of the Rafale’s engine)for collaboration on India’s indigenous Kaveri engine, it is safe to assume that the MMRCA terms did not include the engine technologies India needs.As contract negotiations for the Rafale progressed, it emerged that France was balking at transferring other critical technologies (including radar technology) and meeting the 50% offsets obligation stipulated in the RfP.
One would have thought that MoD would have become wise to the French game by now and hardened its stand. Instead of dangling the threat of cancellation over Paris, someone or the other from India is constantly reassuring the French that the deal is indeed going through. In the wake of reports that Dassault was trying to wriggle out of the ToT and offsets requirements of the deal, all of which it had formally accepted in its tender, visiting Indian External Affairs Minister Salman Khurshid in fact sounded out his hosts on increasing the order for the Rafale from the initial 126 to 189. The minister effectively undercut India’s negotiating position in the ongoing contract negotiations with Dassault. Any other country would have kept hanging over the French the threat to walk away from the deal if the vendor’s terms were unfavorable.
The MMRCA procurement made sense when it was first proposed. The burgeoning costs and the change in circumstances caused by the delay of over a decade in issuing an RfP and processing proposals make it an unwise acquisition now. The Rafale is no doubt a great aircraft and it would be very nice to have it in IAF colours. But India’s defence budget is not limitless and there are a great many other items the Indian armed forces need urgently. India has other, more cost-effective, means of rectifying the IAF’s fighter shortage. The easiest way is to increase the rate of production of the Su-30MKI, which HAL is currently producing from raw materials. The LCA also will be ready for serial production before Dassault can deliver the first Rafale to India. For the price of one Rafale, the IAF can probably get three LCAs. The IAF’s priority should be developing the AMCA as soon as possible. It is time to formally end the MMRCA procurement process.
About the author
Appu Kuttan Soman is a diplomatic historian, and was a Research Fellow at the Belfer Center for Science and International Affairs at the Harvard Kennedy School of Government, Harvard University from 2007-2009. His research interests include arms control, nuclear history, and South Asian security. He is the author of Double-Edged Sword: Nuclear Diplomacy in Unequal Conflicts: The United States and China, 1950-1958 (Praeger, 2000), and Through the Looking Glass: Diplomacy, Indian Style. He holds a PhD in US diplomatic history from Vanderbilt University and master’s in Psychology and bachelor’s in History and Psychology from Andhra University in India. He was an Associate of the Charles Warren Center for Studies in American History at Harvard University from 1995-1997.