Rafale scam: Both NDA and UPA have a lot to answer for indulging Dassault Aviation despite red flags

The Rafale deal has sauntered through both the UPA and NDA regimes. While the Congress-led UPA government in the past had spent considerable time negotiating with Dassault aviation, it couldn’t seal the deal to purchase 126 Rafale aircrafts. Then came the BJP-led NDA government, which junked the UPA deal and signed an inter-governmental agreement with the French government to buy 36 Rafale jets in place of 126 aircrafts. Soon, the deal got mired in huge controversy.

With the latest expose by French investigative news portal Mediapart, yet again, the BJP and the Congress are trading charges at each other. Mediapart has claimed that Dassault Aviation - the French manufacturer of Rafale - had paid kickbacks to unnamed Indian officials from 2002 to fix the deal in favour of the company through its agent Sushen Mohan Gupta. The news website has stated that between 2002 and 2012, Dassault had paid nearly €13 million (approximately ₹110 crores) to Gupta through offshore transactions and over-invoicing and Gupta in turn allegedly paid a part of this money to bribe Indian officials to fix the 126 MMRCA deal in favour of Dassault Aviation.

As per the French media outlet, the kickbacks were paid during the UPA regime. But a look at the Comptroller and Auditor General (CAG) report dated February 2019, shows how successive governments had entertained Dassault Aviation, which had time and again violated various defence procurement guidelines in order to bag a contract from India.

Exclusive. @mediapart publishes the "bogus invoices" that allowed Dassault to pay at least € 7.5 million to the intermediary Sushen Gupta in Mauritius between 2007 and 2012 to facilitate the sale of Rafale jet fighters to India. #RafalePapers Thread 1/3 https://t.co/jbVmHGIvcB

— Yann Philippin (@yphilippin) November 7, 2021

On 12 February 2019, the CAG tabled its report No.3 of 2019 in the parliament. The report was on the subject related to Capital Acquisition in the Indian Air Force. This report was later used by the BJP to show how PM Modi’s Rafale deal with France was a clean one. The CAG report was however criticised by many for being selective in its approach towards the Rafale audit. But with the latest revelations on Rafale by Mediapart, certain findings of the CAG report on the Rafale agreement assumes significance.

It was in August 2000 that the Indian Air Force had first initiated a proposal to procure 126 Multi-Role Combat Aircraft (MRCA) from a single-source vendor. It was forewarned by the IAF top brass during that time that if its fleet size was not replenished with new aircrafts, the number of squadrons would be reduced due to the retiring of the older fleet. The IAF also asserted that in order to reduce the maintenance expenses, it wanted to reduce the types of aircraft in its fleet from fifteen to three or at most four. According to the IAF, Mirage 2000, manufactured by Dassault Aviation, was a better option.

IAF started to induct Mirage 2000 in 1983. By 1999, IAF had 49 Mirages in its fleet already. The initial proposal was similar to the 2007 MMRCA Request For Proposal (RFP), which included direct purchase of 18 aircrafts in fly-away condition from France and 108 aircrafts to be manufactured in India by HAL under Transfer of Technology (ToT).

The Ministry of Defence, at that point in time, did not approve the proposal on the grounds that such a single-source (single vendor) procurement was not allowed as per the guidelines of the Defence Procurement Procedures. The MoD in turn asked the IAF to follow competitive bidding.

In March 2001, the IAF went back to MoD with the same old proposal. It said, based on their cost-benefit analysis of all available options, Mirage 2000 was the best option. IAF argued that even though the technical capabilities of Eurofighter Typhoon, Dassault Rafale and Lockheed Martin F35 were superior to that of Mirage 2000, their capabilities would be underutilised and the procurement and maintenance cost of these aircrafts were much higher in comparison to Mirage 2000. MoD shot down the proposal yet again in June 2001 and asked the IAF to go for a multi-vendor bidding process.

Extract from the cover page of the CAG report dated February 2019 on Capital Acquisition in Indian Air Force

Six months later, in December 2001, IAF approached the ministry again. This time with the same proposal but with a different twist. It suggested that the deal with Dassault Aviation should not be considered as a single vendor procurement but as a repeat purchase. Dassault was moving from Mirage to Rafale and that it offered to move its Mirage Production line to India.

Due to the continuous insistence from IAF, the government finally relented. Technical discussions were held from April to September 2002 between the manufacturer Dassault Aviation, Hindustan Aeronautics Ltd (HAL), Defence Research and Development Organisation (DRDO) and the Ministry of Finance. Nothing much came out of this engagement.

In March 2003, IAF approached the Defence Procurement Board (DPB). IAF argued that the Mirage 2000 MK II had the same capabilities and performance as the new generation fighter jets like Eurofighter, Rafale and Gripen but was less expensive when compared to these aircrafts. They also argued that American F16 and F18 are of the similar class of Mirage, but maintenance of these aircrafts would be difficult if the US imposed sanctions on India. Most importantly, IAF said, “state of the art avionics, sensors and weapons suite, developed for the Rafale can be added into Mirage because both are products of the same company”.

DPB discussed and deliberated the proposal in detail for nine more months. In January 2004, it refused to accept IAF’s proposal and asked them to go for a competitive multi-vendor bidding process in accordance with the guidelines prescribed under the Defence Procurement Procedures.

IAF’s special liking for Dassault Aviation, thus, is not new.

CEO Dassault Aviation Eric Trappier’s speech on MMRCA deal on 25 March 2015

Coming to the MMRCA selection process, the CAG report highlighted a few issues with Dassault Aviation’s response to the 2007 RFP.

In a recorded interview given to this journalist and veteran journalist Paranjoy Guha Thakurta last year, Air Marshal Raghunath Nambiar, who had retired as Vice Chief of IAF, said that it took nearly two years for IAF to prepare a detailed Air Staff Qualitative Requirements (ASQR) for the MMRCA that had more than 630 parameters.

In the two-stage bid system that the 2007 RFP envisaged for the 126 MMRCA selection, the first stage was Technical Evaluation to assess the product according to the ASQR. In that round, CAG said, it was discovered that Rafale could not meet the 9 ASQR parameters prescribed in the RFP. Not only that, Dassault Aviation also did not submit the data for the Manufacturer’s List of Spares (MRLS) and the details of the Engineering Support Package (ESP).

For this reason, the Technical Evaluation Committee rejected Dassault Aviation’s bid. The Technical Manager (TM Air) of the MoD raised questions regarding the non-compliance of ASQR by certain manufacturers and asked the Technical Evaluation Committee (TEC) to obtain more clarifications from them. After Dassault submitted its clarifications, TEC upheld its earlier decision and rejected Dassault Aviation’s technical bid in early March 2009.

On 12 March that year, TM Air asked the bidders to provide further clarifications on the warranty and option clauses in their respective bids. After evaluating the responses, on 25 March, the TEC upheld its earlier decision to reject Dassault’s bid.

Dassault Aviation submitted another clarification, claiming Rafale is built under NATO specifications but six out of the nine missing ASQRs can be added to the aircraft on additional payment than what has been quoted in the financial bid. Financial bid was not open then because clearance on technical evaluation was pending. But Dassault Aviation failed to provide ESP and MRLS data and did not comply with the warranty and option clauses specified in the RFP. For these reasons, MoD completely rejected the technical bid for Rafale at the end of March 2009.

In April, Dassault made ‘a suo-moto representation’ to MoD, requesting the ministry to reconsider their decision to reject its technical bid. The company assured the MoD that it will modify the aircraft to meet all the ASQR parameters of IAF and abide by the RFP completely.

At this juncture - during discussions with Dassault - MoD officials realised it was not nine but Rafale had failed to meet fourteen ASQR parameters, which was the highest among all the participating bidders. According to CAG, Dassault called these fourteen ASQR parameters which Rafale lacked ‘India Specific Enhancements’ and charged huge sums to add them to the aircraft. With dismay, the report noted that MoD forwarded Dassault’s new presentation to the IAF for the review of TEC. In its report submitted to the ministry on 13 May, TEC said the new proposal of Dassault met the RFP requirements and recommended accepting it. Based on the TEC recommendation, on 28 May, the then Defence Minister A.K Antony approved the acceptance of the additional commercial offer from Dassault.

As per the DPP clauses, waiver of the ASQR needs special permission from the Defence Minister. But in the case of Rafale, the waiver was sought from Antony only on two ASQRs.

The DPP 2006, under which the process took place, states: “A technical offer, once submitted, should not be materially changed subsequently. However, minor variations which do not affect the basic character / profile of the offer may be acceptable. The following must be ensured:- (a) An opportunity for the revision of minor technical details should be accorded to all vendors in an equal measure to ensure fair play. (b) No extra time to be given to any vendor to upgrade his product to make it SQR compliant. (c) No dilution of SQR should be carried out. (d) The original commercial quote submitted earlier must remain firm and fixed.”

Hence, the CAG noted that Dassault Aviation made significant changes to its technical and commercial bid after submitting it initially and it was a clear violation of the DPP guidelines.

The report said: “The Ministry in its response stated that both the aircraft were noted compliant to all ASQRs requirements after having obtained the necessary waivers from the Raksha Mantri.” However, the Audit noted that the Ministry's response was factually incorrect. In the
parameters recommended by the SER (Staff Evaluation Report), the waivers were not even sought from the RM but MoD recommended them to be discussed by the Contract Negotiating Committee (CNC).

It further states: “The Staff Evaluation Report had recommended for waiving of non-compliance of Rafale aircraft to four ASQR parameters as they were not needed in the first place. Three of these parameters were not put up to the RM for waiver by the DG Acquisition stating that they should be negotiated with the L1 vendor during CNC. This was never taken up by CNC during negotiation as recommended by the Ministry even though it had significant price implications. Most importantly, the audit noted that carrying over technical issues to price negotiation was incorrect. Technical matters cannot be negotiated and technical compliance/noncompliance was to be determined in the technical evaluation.”

The 2007 RFP mandated that the vendors must quote Firm and Fixed prices in their commercial bids. But Dassault Aviation submitted a quote with a base price of June 2007 which was subjected to escalation. CAG noted that this bid was non-compliant with the RFP and should have been rejected.

CAG report of Feb 2019 on Capital Acquisition in Indian Air Force

Curiously, the Staff Evaluation Report submitted to the Defence minister in September 2010 had stated that the bids of the two vendors (Rafale and Eurofighter) were on a ‘Firm and Fixed’ cost basis and the MoD did not bother to take special waiver from the Defence Acquisition Council (DAC) or Defence Minister for this non-compliance of the bid terms. And, the Contract Negotiating Committee (CNC) did not check whether the competent authority had given a special waiver for this deficiency.

Who were these officials who compromised the set guidelines and procedures to accommodate and later down-select Dassault Aviation as the winner of the MMRCA competition? What was their motive? Did these officials receive kickbacks?

In 2015, the Modi government cancelled the RFP and the negotiations ended with Dassault for the purchase of 126 Rafale aircrafts. In April that year, PM Modi, during his official visit to France, in a surprise move, announced that he had asked the then French president Francois Hollande to supply 36 Rafale aircrafts in fly-away condition to India instead.

In February 2012, the then TDP Rajya Sabha MP MV Mysura Reddy alleged irregularities and favouritism in the selection of Rafale as L1 (Lowest Bidder). The then Defence Minister AK Antony ordered an investigation which included officials from the Central Vigilance Commission. After a few months, the commission gave a clean chit to the selection process. For unknown reasons, in July 2012, Antony ordered a second probe. This time by an internal team of MoD officials.

In 2018, when the Rafale 36 deal was challenged in the Supreme court, the government informed the court that the committee constituted by Antony in 2012 had submitted its report in March 2015. The government told the court that during the investigation, the committee found that the calculation done then to determine the L1 was flawed and Rafale was not the lowest bidder. Hence, the government had “started the process to withdraw the RFP” in March 2015.

Strangely enough, on 10 April, PM Modi announced his decision to procure 36 Rafale jets from France.

PM Narendra Modi’s announcement to procure 36 Rafale in fly-away condition from France on 10 April, 2015

If the government was aware that the selection process and calculations were flawed, Dassault used undue influence and bribed officials and manipulated its bid to become the L1, why did the government not ban Dassault like the previous government banned AgustaWestland for alleged bribery? What prompted the PM to approach the same company and order the same aircraft?

Mediapart, in an earlier report had said that Gupta had accessed sensitive files related to the negotiation, including the spreadsheets created by the Indian Negotiating Team (INT) that was set up by the govt to negotiate the pricing and other terms and conditions for the purchase of the 36 Rafale ordered by PM Modi. According to Mediapart, Gupta also accessed the “unsolicited offer” submitted by EADS with 20% less price in 2014 to the then Defence Minister Arun Jaitley. Gupta supplied these documents to Dassault Aviation, which helped the company gain an undue advantage in its negotiations with INT and put the Indian side on the back foot.

Shockingly, the Ministry of Law and Justice, in an internal note to the MoD, pointed out that clauses related to “Penalty for use of undue influence, Agents/Agency commission and access to the book of accounts” of the supplier were not included in the Inter-Governmental Agreement signed between India and France for the purchase of 36 Rafale jets.

2016 internal note from Ministry of Law and Justice to the Ministry of Defence

The CAG report had found that a team of Independent External Monitors had stated in March 2015 that at the TEC stage itself, the proposal of Dassault was non-compliant to the RFP with respect to the ASQR, warranty clause and the option clause. The report said that the proposal of Dassault should have been rejected at the TEC stage itself. It also said that the price bid of Dassault was non-compliant, as it was incomplete and not in the prescribed format. Despite that, the Modi government went ahead and signed the deal with France a few days later.

The kickbacks, as reported by Mediapart, were allegedly paid during the UPA regime. But both the successive governments have shown excessive interest in engaging with Dassault Aviation, which should have been blacklisted a long time ago for its unscrupulous business practices. The question is, what explains the reluctance of the government to order an independent investigation either by a JPC or a court monitored special investigation into the Rafale affair? As for now, Dassault Aviation and its partners are working with over 50 companies in India. The company continues to claim on its website that negotiations are underway with India “to establish potential new cooperations”.