The Rafale controversy revolves around the pricing of the aircraft. Is the per-unit price negotiated by the current NDA government any less than that which was negotiated by the UPA?
by Abhijit Iyer-Mitra & Angad Singh
As purchases go, there is more than enough muck to hurl around in this deal. What started off under the UPA as a desire for repeat procurement of 126 Mirage 2000s after the Kargil conflict had, by 2004, first morphed into the Multi-Role Combat Aircraft (MRCA) procurement, which then in 2007 morphed into the Medium Multi-Role Combat Aircraft (MMRCA) requirement. All this did was circumvent the possibility of purchasing a light aircraft and settle, instead, for a heavier two-engine fighter.
There were cogent reasons for this. By this time, it had become abundantly clear that the Sukhoi Su-30MKI program — a fusing of western technology on an eastern platform — never quite worked as promised. Plagued by multiple systems failures and abysmal availability, its most important function — the ability to air-deliver a nuclear payload deep inside China — was in doubt.
This is when the crucial decision was taken by the air force — and validated or ignored by the UPA government: that air delivery of a nuclear device would be an important element of this new fighter procurement. There was only one western platform available that filled this role: the Rafale. This meant that from day one, the competition was tilted in favour of the French aircraft, which then, predictably, went on to win.
There were, however, very cogent reasons for this: the Rafale’s heavy payload, its significant range advantage over other competitors and, most importantly, it had the highest singlenation content among the competing western aircraft. This was key because France has traditionally supported and/or turned a blind eye to Indian fusing of nuclear ammunition with French platforms. The other competitors came with limitations on this score.
Neither did the US platforms have the range nor was the US open to nuclear modifications to its aircraft. Likewise, the Swedish Gripen did not have the range, and it is doubtful if it could have been used in the nuclear role, considering Sweden’s dim view of nuclear proliferation.
The Nuclear Umbrella
Finally, the aircraft chosen as L2 (second-lowest bidder), the Eurofighter —because of its multinational character and the opposition of some partner countries to nuclear weapons —could not be a reliable nuclear-delivery platform.
So, operationally speaking, once the nuclear role was prioritised over its war-fighting ability, there realistically was no option but the Rafale. Which is why even if some other options were cheaper, India could not buy them. The fact that the announcement came from the Prime Minister and not the defence minister is confirmation of this nuclear role.
That’s why despite knowing the Rafale was not the cheapest, India realistically had no other options, with 36 being the bare minimum to maintain a credible nuclear-delivery force.
What, then, of the price? The fact remains that the tender that the Rafalewon in 2012 was unrealistic in price terms from start to finish, with GoI clearly not having done anything remotely close to due diligence. $10 billion for 126 modern fighters, single- or double-engine, in 2010, 2011or 2012 stretched incredulity to the extreme.
As predicted in the 2012 Institute of Peace and Conflict Studies report, ‘India and the Rafale: Anatomy of a Bad Deal’, French Senate data from 2009 indicate a per-unit cost of a whopping $308 million per unit, making it the single most expensive fighter at the time — only slightly cheaper that the F-22 stealth fighter.
What should be remembered is that this was the cost of the entire programme amortised over the total number of units (180) produced till 2012. Removing the development costs, the baseline estimate still ended up being $213 million, factoring in inflation since 2009.
This would have been the realistic baseline price, on top of which the costs of India-specific modifications (Active Electronically Scanned Array (Aesa) radar, helmet-mounted sight) would have been added on. All this, while the Indian defence press was still running stories as late as 2013 of unrealistically low costs.
In 2016, when the deal was finally signed, the price allowing for factoring in the 5% inflation (about $10 million) that should have happened over the four-year period from 2012, should have brought the price up to $223 million per unit. This, including all programme costs, but excluding weapons and India-specific modifications.
Tough Fighter
This means that the final negotiated per-unit price including programme costs (simulators, training and infrastructure) and India-specific modifications of $247 million is well within the ballpark figure. What is remarkable is that this figure has been reached despite losing economies of scale and cutting the order to almost a quarter of its original size.
While this government and the previous have not been transparent about the Rafale, the strategic logic of the deal has been quite obvious to most observers since early 2012 when the plane was chosen.
Has the process been suboptimal and marred by clumsiness? Emphatically yes. Is it crooked? Not based on the costs and facts as we see them.