Today’s papers carried reports on 50% Rafale offsets amounting to $4.5 billion or Rs 30,000 crore (“Rafale deal:France agrees to meet 50% of contract’s worth in India’s related sectors” http://economictimes.indiatimes.com/news/defence/rafale-deal-france-agrees-to-invest-50-of-contracts-worth-in-indias-related-sectors/articleshow/49487260.cms) — evidence that just the initial procurement cost of 36 of these so-called MMRCA is $9 billion as revealed in my preceding article in this blog dated Oct 19, with not an iota of tech-transfer, mind you.
The problem with the current indistinct offsets policy, and this is where the let-off is going to happen, is that what programs/projects to invest in and what indigenous capacity to build-up is left entirely to the French in this case to decide. In the past it has led to US defence companies writing off costs for “seminars and conferences” and the like against the offsets obligations. This offsets provision has not been tightened and Paris will feel free, for example, to consider its 5%-10% equity, via DCNS, in the Pipavav Shipyard, and similar extraneous expenditures as part of the Rafale offsets! It is — Heads French win, tails India loses!
The 50% offsets should be on the recurring expenditures on servicing and support for the lifetime of the aircraft $21 billion — minus upgrade costs — not on the $9 billion, meaning, fully $10.5 billion or Rs 75,000 crore should be extracted from Dassault as verifiable investment specifically in the aerospace sector programmes designated by DRDO. Otherwise the whole deal will be a dead loss. Recall that China got the whole production line and technology from McConnell-Douglas as a predicate for buying 100 of the latter’s medium range transporters in the 1980s — which seeded the aviation industry in China. But then Beijing knows where Chinese interests lie, and will move heaven and earth to protect and advance them. Delhi is in the business of enriching other countries at the expense of India!
All high-value armament deals are tense, nail-biting, poker games, except GOI invariably plays them as the perennial ingenue and amateur would — extracting nothing in exchange, in effect make one-sided transaction benefiting foreign states. Rafale as combat aircraft is no great shakes — it cannot even match the Su-30MKI in service with IAF for a decade. India should insist on Dassault transferring the entire production line along with the ancillary aerospace industrial capability as condition for buying this oldish plane. There’s still time because until the contract is signed GOI is in the driver’s seat — as I have written elsewhere; once it is signed Dassault will gain upper hand, and India can go cry in its cups.
Def Min Parrikar who is proving himself a weak and confused leader obviously cannot publicly over-turn PM Narendra Modi’s plainly quixotic announcement of the 36 Rafales-buy. But he can still ensure the demise of the Rafale deal by insisting that either India gets virtually the entire Dassault store to take the Rafale off France’s hands, or the PM goes over his head and the Cabinet’s in opposition to MOD’s advice, which Modi won’t do as he has enough political troubles which, incidentally, will only multiply once negative Bihar election results begin rolling in Nov 8. Then again, whether BJP wins or loses in Bihar, India is the big loser in the Rafale deal simply because the Modi govt won’t stand up for the national interest. And this is the way of a “nationalist” Indian government?!