PM Modi cleared Rafale deal at over €2.5 billion higher than first benchmark price

13 December 2018
The Modi-led Cabinet Committee for Security approved the final price of the Rafale deal—over €2.5 billion higher than the initial benchmark.
The Modi-led Cabinet Committee for Security approved the final price of the Rafale deal—over €2.5 billion higher than the initial benchmark.

Information available with The Caravan that has been confirmed by a senior serving defence official shows that the initial benchmark price for the Rafale deal was set at €5.2 billion—€2.5 billion less than the deal signed in 2016. In view of apprehensions that the deal would be unviable at this price, the Defence Acquisition Council, or DAC, headed by the defence minister—Manohar Parrikar at the time—prescribed a revised mechanism for pricing. The method used for price revision was a departure from mandatory procedure. The final pricing was ratified by the Cabinet Committee for Security, headed by Prime Minister Narendra Modi. These facts do not form part of the government’s reply filed before the Supreme Court, suggesting that on these crucial issues it has been, at the very least, economical with the truth.

The final pricing for the Rafale deal was directly approved and ratified by the prime minister on 24 August 2016, overruling the pricing arrived at by the official who had the requisite expertise and was first tasked to do the job by the Modi government itself. The method used to arrive at the new benchmark was not in keeping with the procedure set down in the Defence Procurement Procedure 2013, or DPP, a Ministry of Defence document.

In May 2015, in keeping with the DPP in force at the time, an Indian Negotiating Team (INT) was constituted to negotiate the terms and conditions of the procurement of 36 Rafale aircraft after the French and Indian governments issued a joint statement in April 2015, during Modi’s visit to France. The INT, as prescribed in the DPP 2013, consisted of seven members. The government’s reply in the Supreme Court elaborates on this:

An Indian Negotiating Team (INT) was constituted … The INT was headed by the Deputy Chief of Air Staff of IAF and comprised of the Joint Secretary and Acquisition Manager (Air), Joint Secretary (Defence Offset Management Wing), Joint Secretary and Additional Financial Advisor, Finance Manager (Air), Advisor (Cost) and assistant Chief of Air Staff (Plans) as members from Indian Government side. The French side was headed by the Director General of Armament (DGA), Ministry of Defense, Government of France … Negotiations between INT and the French side started in May 2015 and continued upto April 2016. A total of 74 meetings, which included 48 internal INT meetings and 26 external INT meetings with French side were held during the negotiations.

The government reply further stated that, “As mandated by the DAC, the INT undertook a collegiate process involving due deliberations and diligence at various levels during the negotiations. Aspects pertaining to the responsibility and obligations of French Government, pricing, delivery schedule, maintenance terms, offsets, lGA terms, etc. were discussed and negotiated during these meetings.”

Hartosh Singh Bal is the political editor at The Caravan.

Keywords: Narendra Modi Rafale Defence Procurement Policy defence ministry defence Manohar Parrikar