Why the defence ministry is wrong in its Rafale defence
Ministry fails to explain why it didn't ask for a competitive Eurofighter quote

On Wednesday, the defence ministry issued a statement defending the National Democratic Alliance (NDA) government’s order of 36 French Dassault Rafale fighter aircraft.

While much of the statement is a reiteration of existing positions, the defence ministry has provided a singular and unconvincing defence of why it did not ask for, or entertain, a competing commercial offer for the Eurofighter Typhoon pitched by Airbus.

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Readers will recall that the Indian Air Force (IAF) held a tender competition for 126 Medium Multi Role Combat Aircraft (MMRCA).

Six fighter aircraft participated in the contest:
1. Boeing F/A-18 Super Hornet
2. Lockheed Martin F-16
3. Saab Gripen
4. MiG-35
5. Eurofighter Typhoon
6. Dassault Rafale

Of these six, two fighter aircraft were selected as technically qualified after extensive trials by the IAF; the Eurofighter Typhoon and the Dassault Rafale.

The commercial bids of these two aircraft were then opened and it was found that Dassault had submitted a bid for the Rafale that was lower than the bid submitted by Airbus for the Eurofighter Typhoon.

And so, Dassault was declared L1 and the defence ministry began negotiations with the French company.

The previous United Progressive Alliance (UPA) government was unable to convert the negotiations into an order. The NDA government failed to do any better, either, after coming to power. And as it turned out, after three and a half years, it became clear that there was going to be no agreement and the tender was withdrawn.

Shortly before the announcement of the withdrawal of the tender by then Defence Minister Manohar Parrikar in response to a Parliamentary Question, Prime Minister Narendra Modi announced an Indian request for an order for 36 Rafale aircraft during his visit to Paris in April 2015.

At this point, it might be pertinent to recall the starting point for negotiations laid down by Prime Minister Modi when he first announced the request for the 36 aircraft.

Here’s what he told the media:

“Keeping in mind the critical operational necessity of fighter aircraft in India, I have discussed with the president the purchase of 36 Rafale aircraft in a flyaway condition as soon as possible by agreement between the two governments. We have both decided that this purchase will be on better terms than the terms and conditions listed in a separate process. Our officials will discuss this issue in detail and take the discussion forward.”

These caveats were further detailed in the joint statement, which said:

“Government of India conveyed to the Government of France that in view of the critical operational necessity for Multirole Combat Aircraft for Indian Air Force, Government of India would like to acquire [36] Rafale jets in fly-away condition as quickly as possible. The two leaders agreed to conclude an Inter-Governmental Agreement for supply of the aircraft on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway; the delivery would be in time-frame that would be compatible with the operational requirement of IAF; and that the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by Indian Air Force, and with a longer maintenance responsibility by France.”

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The defence ministry said on Wednesday:

“In another effort to twist facts, the Government is asked why it did not conduct negotiations with a particular company representing a competing fighter aircraft. It seems to have been conveniently forgotten that the then Government itself had rejected that company’s unsolicited offer made days after closure of the bid process, declared Rafale (DA) as the L1 bidder and had commenced negotiations with it in February 2012.”

This is a true enough assertion, by itself, but fails to appreciate the accompanying context, either by accident or design, and results in a flawed understanding.

Central Vigilance Commission Rules

The reasons why the previous UPA government was in no position to entertain an unsolicited second Airbus offer for the Eurofighter Typhoon were the Central Vigilance Commission (CVC) rules that govern the conduct of government tenders in India.

Under these rules, once an L1 bid has been announced, the government is prohibited from soliciting or entertaining any revised competing bid from any other vendor. Even if the negotiations with the L1 vendor fail, the only alternative available to the government is to reissue the tender and hold the contest again, according to these rules.

“Negotiations shall be held with L-1 only,” says the 2005 CVC circular, which adds,”In case of L-1 backing out there should be re-tendering as per extant instructions.”

But these rules apply only to tenders.

Prime Minister Modi, in his announcement of the request for 36 Rafale aircraft, specified that this was under a ‘separate process’ and the IAF had issued no new tender.

Obviously, the government chose to conduct this separate process with the French government for the Rafale, because it had the IAF’s stamp of approval. In its statement on Wednesday, the defence ministry also justified the order, saying, “The aircraft had already been evaluated successfully by IAF during 2009-10.”

But readers will remember that the Eurofighter Typhoon fighter aircraft was also approved as technically qualified by the IAF.

And since this was a separate process, as explained by the prime minister, and not a tender, the CVC rules did not apply. The CVC prohibition that applied to MMRCA tender did not apply for this separate process.

Not only was the defence ministry in a position to entertain an Airbus offer for the Eurofighter Typhoon, under this separate process, they could have actively solicited an offer from them. While the UPA government was prohibited by CVC rules from entertaining an Airbus offer, there was nothing preventing the NDA government from doing so, when it decided to cancel the MMRCA tender.

Why this was not done remains a mystery, in spite of the lengthy defence offered by the defence ministry on Wednesday. And the defence minister is now in the unenviable position of having to defend something (not) done, much before she took office.

Postscript

Incidentally, the CVC circular also says “In case of inability to obtain the desired results by way of reduction in rates and negotiations prove infructuous, satisfactory explanations are required to be recorded by the Committee who recommended the negotiations. The Committee shall be responsible for lack of application of mind in case its negotiations have only unnecessarily delayed the award of work/contract.” But this is another story, altogether.

Separately, it may also be worthwhile noting that StratPost published a piece on the eve of Prime Minister Modi’s visit to Paris, titled India may need to walk away from Rafale to buy MMRCA.

Instead, what actually transpired was that the Indian government chose to walk away from the MMRCA to buy the Rafale.