Impatience Seals Worst Possible Defence Deal

With the price negotiations meandering into the fourth year, an impatient Narendra Modi intervened, circumventing the elaborate Request for Proposal (RFP) system of competitive bidding under which the medium multi-role combat aircraft (MMRCA) deal was initiated. The prime minister decided to purchase the Rafales “off the shelf” without transfer of technology at the government-to-government (G2G) level.

This was portrayed as Modi’s “out of the box” solution for a problem that didn’t really exist. Plainly, he mistook the hard, extended, bargaining between the two sides as evidence of red tape, and cutting it as his unique achievement. But impatience is a liability in international relations and can cost the country plenty.

Rather than pressuring French president Francois Hollande and the French aviation major, Dassault, which is in dire straits and was in no position to resist sustained Indian pressure to deliver the Rafale and the technologies involved in toto to India, Modi eased off, promising a munificent $5billion-$8 billion for 36 Rafales off the shelf minus any reference to the L1 (lowest cost) MMRCA tender offer, possibly a buy of another 30 of them, and no onerous technology transfer obligation.

It is a turn that must have astonished Hollande and Dassault with its exceptional generosity, surpassing in its muddle-headed excess Narasimha Rao’s handout of Rs 6,000 crore in 1996 to Russia to prevent the closure of the Sukhoi design bureau and production plant in Irkutsk, in return for nothing, not even joint share of the intellectual property rights for the Su-30MKI technologies subsequently produced there, which could have kick-started the Indian aerospace sector. Then again, India is a phenomenally rich country, don’t you know?—the proverbial white knight rescuing the Russian aviation industry one day, French aerospace companies the next.

But let’s try and see if sense can be made of Modi’s Rafale deal. Much has been said about the G2G channel as a means of securing low prices. The record of acquisitions from the United States in the direct sales mode, however, shows no marked drop-off in the price for the C-17s and C-130J airlifters and the P-8I maritime reconnaissance planes. But in terms of maintenance, almost all the 20-odd ANTPQ-36/37 artillery fire-spotting radar units bought by the army from the Pentagon, for instance, are offline due to the paucity of spares. Supplier states in this situation routinely manipulate the spares supply to configure politico-military outcomes they desire. No saying what France will do with respect to the entire fleet of IAF Rafales in the years to come. Usually, the practice also is to sell the platform cheap but rake in extortionist profit selling onboard weapons and spares. In any case, it is unlikely the price of a fully loaded Rafale will be less than $200 million each or $7.2 billion for 36 Rafales, $13 billion for 66 of these aircraft, and $25.2 billion for 126 planes.

Then again, French fighter planes have proved inordinately expensive to maintain. How expensive? According to a recent report by the Comptroller and Accountant General, in 2012-2013, for example, the total cost of upkeep of all 51 Mirage 2000 aircraft in the IAF inventory was Rs 486.85 crore compared to Rs 877.84 crore for 170 Su-30MKIs—meaning, the annual unit cost of maintaining a Mirage was Rs 9.5 crore versus Rs 5.2 crore for the more capable Su-30MKI. Now ponder over this: The cost of upkeep of a Rafale is authoritatively estimated at twice the cost of the Mirage and, hence, four times that of Su-30!

The “Super Sukhoi” avatar of the air dominance-capable Su-30 entering IAF is equipped with the latest AESA (active electronically scanned array) radar permitting the switching between air-to-air and air-to-ground roles in flight, and which radar will be retrofitted on the older versions of this plane in service. In the event, in what combat profile exactly is the Rafale superior?

The defence minister Manohar Parrikar was partial to the Su-30 option, having publicly stated that it was more affordable—its procurement price half that of a Rafale, and that owing to improved spares supply condition, its serviceability rate would rise to 75 per cent by year-end, exceeding that of the Mirage, incidentally. Even so, the loyal Parrikar praised Modi’s Rafale initiative as providing “minimum oxygen” for the IAF without letting on that it will maximally oxygenate French interests and industry!

While Modi talked of a low G2G price for the Rafale, he said nothing about its servicing bill. According to a former Vice Chief of the Air Staff, the total life-cycle costs (LCC) for a fleet of 126 Rafales calculated by Air Headquarters is over $40 billion. How will the LCC be downscaled if only 36 or 66 Rafales are eventually bought? If the real acquisition price of the ordnance-loaded Rafales is added to the LCC the total outgo will be upwards of $50billion-$55 billion, a figure this analyst had mentioned many moons ago.

Indeed, the odds actually are that India will end up buying the entire MMRCA requirement from France. Why? With 36 aircraft slotted in the direct sales category, it is already cost-prohibitive for any Indian private sector company to invest in a production line valued at $5billion-$6 billion to produce the remaining 60 or even 90 aircraft. In other words, by pledging to buy enhanced numbers of Rafales from Dassault the Narendra Modi government will be constrained by economic logic to buy the rest from this source as well, a denouement the IAF had always desired. Why else was the IAF Chief Arup Raha so desperate to get the PM to commit to buying significant numbers of this aircraft outright on the pretext of “critical” need when the Rafales will come in only by 2018 at the earliest but importing Su-30s from Russia would have beefed up the force by this year-end?

Previous prime ministers have been victimised by bad advice, and paid the political price, for instance, Rajiv Gandhi with regard to the Bofors gun. Modi will have to carry the can for this Rafale transaction—a boondoggle in the making. With the opposition parties and Dr Subramaniam Swamy waking up to its potential to politically hamstring the BJP government and mar Modi’s prospects, anything can happen.

[Published in the New Indian Express, April 17, 2015, at http://www.newindianexpress.com/columns/Impatience-Seals-Worst-Possible-Defence-Deal/2015/04/17/article2767483.ece

About Bharat Karnad

Senior Fellow in National Security Studies at the Centre for Policy Research, New Delhi, he was Member of the (1st) National Security Advisory Board and the Nuclear Doctrine-drafting Group, and author, among other books of, 'Nuclear Weapons and Indian Security: The Realist Foundations of Strategy', 'India's Nuclear Policy' and most recently, 'Why India is Not a Great Power (Yet)'. Educated at the University of California (undergrad and grad), he was Visiting Scholar at Princeton University, University of Pennsylvania, the Shanghai Institutes of International Studies, and Henry L. Stimson Center, Washington, DC.
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11 Responses to Impatience Seals Worst Possible Defence Deal

  1. Yogendra Kumar says:

    Would the purchase of Rafale in this manner make India vulnerable to pressure from other arms supplying countries, such as Russia, US, Sweden etc.? What happens to the policy of developing indigenous production capability?
    Yogendra Kumar

    • Very good Q. Yes, it does because the other suppliers will adopt similar tactics, and otherwise try and push India into obtaining a similar kind of high value deals. As I have been arguing in my columns, of course, buying anything outright does put indigenous projects at a minimum under stress and at a maximum out of business.

  2. Email from T.C. Govindan reproduced here:
    Mr. Karnad,
    I agree with most of your views. But you have left out some important points which you had raised earlier. By purchasing 36 planes, Govt is violating the age old practice not to purchase similar equipments that Pakistan is likely to get from Arab countries. This is a vital point.
    It appears, that PM surrendered to French pressure like Rajiv Gandhi surrendered to British in the case of Westland helicopter “Under a dubious deal in 1985, the then Prime Minister Rajiv Gandhi, contrary to expert advice and under pressure from his British counterpart, Margaret Thatcher agreed to buy 21 Westland-30 civilian helicopters for 65 million pounds under a UK grant-in-aid scheme.” Since Independence the civilian Govt except Indira Gandhi’s were carried away by the three service chiefs. She had purchased what is required by India through G2G level. She might have purchased more number of equipments. A rumor was spread that Russian equipments are inferior to American equipments . She had purchased so many Mig 21 planes. But the fact is that IAF could not use them so effectively because Mig 21 s were supplied without Guns and only provided with two Side winder missiles, which did not perform well. Later on IAF asked Russians to provide Guns . In 1971 war IAF had only 34 effective squadrons, each of which consisted of 12 planes . IAF had 16 air craft per combat squadron but the effective availability during the 1971 war was 12 per squadron. So in 1971 IAF had 408 effective planes. Now we have 582 effective fighter planes.
    SU-30 MKI 224
    Jaguar 145
    MIg 27 85
    Mig 29 89
    Mirage 59
    Total 582
    In 1971 war IAF used two planes to conduct one sortie. Front plane is called front gunner and other plane is called rear gunner. Those days front gunners had to do so many operations at a time particularly at the time of dog fight. He had to chase the enemy plane and reach very close to the enemy plane to enable the correct hit. The range of fighter planes in those days were very limited particularly Gnat. So the front gunner had to keep a watch on fuel gauge even while chasing . The illumination of the dash board was so poor in Gnat that the pilots had to use torch. The main job of rear gunner is to warn the front gunner whenever he noticed another enemy plane attacking the front gunner. In one case the rear gunner could not give warning to front gunner due to communication failure . In another case a Gnat pilot had gone and landed in a Pakistan air field as the fuel was so low that the plane was likely to crash any moment. All these bottle necks have been taken care of in SU30 MKI and Tejas. Since SU30 MKI is being operated by two pilots there is no need for an extra plane to work as gunner during sortie. So SU30 MKI is equivalent for two planes . Tejas can conduct sortie without gunner because it has been provided with AESA avionic of Israeli design . If we use AWACs, all our fighter planes can conduct sorties without escort plane. AWACSs will give warning . Now we have double the fire power over a period of time. More over if we consider 12 fighter planes in a squadron, it is stated that we have 48 .5 squadrons. If we consider 16 fighter planes in a squadron, we have now 36 squadrons. The important thing to consider is the number of planes, not the squadrons. This is the kind of tricks they play against the civilian Govt. with the help of foreign agents.
    In the case of Bofors it was a real requirement of our Army and we got technology from them and proved to be very effective during Kargil war. Similarly SU30 MKI is the second best in the world. F22 is slightly better, because it is fully stealth. Its avionic is superb, because it is developed by three countries. Same is used in Tejas . That is the reason even Pakistani pilots are afraid of Tejas.
    Expert view
    Indian LCA is not claiming it is the best multi role aircraft in the world in all respect but its air frame is of composite material which makes the aircraft light & fly long distance, fast with little fuel which makes it similar to F15 Eagle, Eurojet fighters, Su 27MKII & Su-30MKI . The engine F404-IN20 of LCA Tejas jetfighter is manufacturered by General Electric, currenrly used by European figter jets. Tejas employs C-FC materials for up to 45% of its airframe by weight, including in the fuselage (doors and skins), wings (skin, spars and ribs), elevons, tailfin, rudder, air brakes and landing gear doors. Composites are used to make an aircraft both lighter and stronger at the same time compared to an all-metal design, LCA Tejas is the world’s smallest, light weight, multi-role combat aircraft. Use of composites in the LCA resulted in a 40% reduction in the total number of parts compared to using a metallic frame. Furthermore, the number of fasteners has been reduced by half in the composite structure from the 10,000 that would have been required in a metallic frame design. The composite design also helped to avoid about 2,000 holes being drilled into the airframe. You just imagine how many thousands of holes drilled to JF17 metal Air-frame which will result in fatigue in addition to Chinese WS Engines !! It will be ideal for them to get upgraded F-16s & Mirage IIIs instead of going for JF-17’s. Life of skilled PAF pilot is valuable for their wife & children.
    All along they fooled the previous Govts and now they succeeded in fooling the present Govt. Most of the facts I wrote here is known to the present MOD.
    This is not a good deal at all considering our past experience. France is going to gain from this deal. No machine will be able to maintain without small spare parts. Rafael is going to charge exorbitant price for every spare part. This is kind of purchases have been going on since Independence. If the spares are not available, maintenance staff start cannibalizing the equipments by stabling planes or try to develop indigenously. Developing indigenous parts is not an easy process particularly rubber components. Air valves and fluid valves require rubber O rings and valve seatings have to be replaced at fixed intervals. Most of the foreign manufacturers will charge exorbitantly. The Govt. will never be able to purchase by paying the high cost. Then IAF maintenance staff will have no option but to start using rubber components manufactured locally. Except India, no other country operates so many different types and makes of planes. It is very difficult to procure quality spares. The Govt even failed to purchase Battery for submarine . Like Mig-21, Rafael planes will turn out to be another flying coffin. It is very difficult to produce high quality rubber components. In India there are many small rubber companies, but they will never maintain quality when they produce in bulk, as compared to Dunlop and other standard companies. HAL also will not be able to produce world class quality equipments because their work culture is not good. That is the reason Rafael backed out from the initial promise. Apollo 13 failed due to defective O ring.
    Please open the link and read.
    http://www.freeindia.org/1971war/skies_west.html

    T.C.Govindan

  3. What is it about this deal that I am not able to understand?

    * In the name of supplier diversification, are we buying the Rafale without any obligation of technology transfer (which in itself is a big scam) while ignoring the vastly superior SU-30 MKI which we can produce locally at a cheaper price?

    * Because the SU-30 MKI is a superior plane, and because an air force needs a mix of planes of different capabilities, are we buying the Rafale which is technologically inferior to the Su-30 MKI but more costly?

    It seems to me that the strategy of the IAF is to stonewall all purchases that it does not want to make for reasons of its own, even to the extent of crippling itself. Then, it presents its sorry plight to the country through well-timed and -placed leaks, thereby putting pressure on the political leaders to satisfy unreasonable and illogical demands.

    Modi and Parrikar, sadly, have failed the nation in this instance. They may have helped our Doolittles put the final nail in the coffin of the Tejas.

  4. Shail says:

    supporting indigenisation is de riguer, however, lack of accountability of DRDO and HAL needs to be checked. Painting rosy pictures of Tejas Performance and regional / global competitiveness is Fraud and misleading. A old generation 1990s Tech, low endurance, non BVR equipped low thrust to weight platform being projected as a world beater is ridiculous. Also the Platform has only 30% indigenisation by value and 15% by combat potential. and leaves us extremely vulnerable to sanctions.
    HALs actual production capacity of this platform is so poor that its a national secret.
    On top of all this …. 3.5 hrs TRS time..you got to be kidding me,,,even the spitfire was better in WW2. And a maintenance nightmare to boot, uproot half the components for small routine repairs???
    Indigenisation ..YES..like this NO..

  5. Shail says:

    Reluctantly Indian..you may wish to check your FACTS before making silly and wild accusations.

  6. Shail says:

    So..dont buy Rafale..but the options suggested in this and other posts are not very viable

  7. !@#$%^&*()_+ says:

    Su30MKI with its quasi AWACS capability liked via something like Datalink-2 with a clutch of LCAs will kill of as many Rafales as can be brought to any given threater.

    But is this only about technically beating a french aircraft.

    It is easy to take down people talking up Rafale and most times they just slither out of an arguement. No value for money. Sensors that cannot see as far as previous generation PESAs on bigger aircrafts, non stealthy air frame with even non-stealthy payloads hanging around. What the hell did IAF see in this silly thing.

    But having said that, can we really stock more Sukhois and can we really have more LCAs in equivalent time frame. I would happily take LCAs even the Mk-1 over rafale but only if I can field twice more the numbers. But to field twice more the numbers I have to be able to produce them first. How many can we produce? Are they enough?

    I just wish this is the last of our stupid emergency buys, and relevant people inside IAF are tracked for their doings during the last 10 years, being the Moun-mohan of the Congress Raj.

  8. sriramdatla says:

    Sir the recent news is that the IAF opted for another 3 C17 GLOBE MASTERS A BIT LATE and since boeing is ending its globe master program. Only 1 c17 is available. Sir when boeing is ending its program why can’t we buy the c17 assembly line and build it our selves and make it a bit cheaply.
    We can gain huge expertise and the designers who come with the line can be used to design a better aircraft for us or a variant of that. Why can’t we capitalize on stuff like this?

  9. sriramdatla says:

    Sir ALH Dhruv has been working perfectly in Indian terrain but its exports have been very low. Is the HAL not doing enough and the ALH is getting a pretty bad press about the 4 crashes out of 7 bought by EAF. Do you think it is really failing ?

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