There have been several irresponsible and ludicrous claims that have recently been made about the acquisition of the Rafale for the IAF with no regard to national interest or probity. This is addressed here to explain the issues involved.
The MRCA contest
Following the downselect of the Dassault Rafale for a 126 aircraft deal as part of the MRCA contest, the UPA government and MoD (Ministry of Defence, India) were unable to conclude a deal and this same situation followed a year into the NDA government. The problem was that aircraft prices in the contest did not include the total acquisition cost. The per unit cost provided by the competitors did not account for the very significant costs of the associated weapon systems, the infrastructure component at the airbases, logistics cost etc. and the deal was simply unaffordable. Also there were unsurmountable stumbling blocks regarding technology transfer, guarantees for HAL built aircraft by Rafale etc. Dassault had strong reservations regarding HAL's quality control, something that the IAF has had reservations about also. There was no way that the deal could be finalized.
The problem is that the whole MRCA process had flaws at the outset from a practical standpoint. It lumped aircraft from different eras, capabilities, weights, configurations and costs together in one contest with the price consideration only after the downselect to 2. The IAF following the rules, but with little reflection on the practical affordability, chose the 2 most capable but also the most expensive aircraft for itself. An IAF Air Marshall even stated on record that the IAF was not looking at the cost but rather the technical aspects. With the present budget of the IAF, and its other inventory holdings for different roles, buying a 126 aircraft tranche of either of these 2 aircraft, with their associated weapons, spares and maintenance costs was never feasible.
Domestic assembly of foreign aircraft is rarely cost effective, the cost of the Su-30MKI made in India by HAL is reckoned to be more than twice the cost of procuring it from Russia. So whatever the cost quoted by Dassault in the contest it was bound to go up when the final deal was reached.
The industrial and commercial relationships to fulfill the offsets were initiated by each of the competitors and Dassault went with Reliance, as did Boeing with Tata for instance. These relationships were established during the UPA era as was the downselect of the Rafale. The offset partners would serve as Tier-1 & 2 suppliers of components that were then to be assembled by HAL.
The new deal
Mr. Parrikar tried to steer the IAF to simply buy more Su-30MKIs, but the IAF’s preference for the Rafale was always clear. The government and the IAF were left staring at an approaching drastic fall in squadron numbers with no replacement options in time baring the LCA which was itself facing issues from missed certification deadlines, slow delivery from HAL and an unenthusiastic IAF. IAF has just 31 squadrons today against its authorized 42 and it will lose another 14 squadrons by 2020 due to retirement of older aircraft. In this situation a deal for a limited number of 36 aircraft at a per unit cost of just 91 million Euros, with the idea of using a separate process for cheaper single engine aircraft to fill in the numbers through license manufacturing. The unit cost for the Rafale for the IAF in the previous MRCA tender was never finalized due to it being stuck in the negotiation process, but indicative numbers put out by the MoD and the IAF point to it tending to be as much as 16% higher. The cost of the aircraft to be assembled in India was a key and intractable point of contention.
The final price for the whole package was brought down by stringent negotiation to 7.1 billion Euros from the 8.6 billion Euros that France asked for the 36 plane contract. The 7.1 billion Euros for the Rafale includes the weapons, logistics cost (infrastructure & spares for 5 years), performance guarantee, additional 13 India Specific Enhancement (ISE) etc. which all come up to about half the 7.1 billion.
The strong offset requirement amounts to 50 percent of the deal's value for France to reinvest in India's defense sector and create infrastructure in India for the Rafale to operate
There is no rationale in building a multi-billion Euro Assembly line to churn out just 36 aircraft, not even counting for the insurmountable issues that arose with the license manufacturing requirement.
There are several important enhancements in the new deal as compared to the old one. The version of the Rafale, F3R, has several improvements over the previously down selected F3. The Meteor air-to-air missile, considered to be the best in the world, is part of the new deal. Other special options include the Israeli HMD sight and its integration, Israeli Litening Pod and its integration, radio altimeters, cold start for high altitudes, Doppler radar (all special to India), the nuclear capable Scalp cruise missile, spare parts and engines and the stringent availability requirements. These options, while being great capability providers, add significantly to the cost of the whole deal. A Meteor missile for instance, is not only the best air-to-air missile, but also one of the most expensive at about a million euros each.
The stringent “performance based logistics” requires that at least 75 percent of the Rafale to be operationally available, which requires substantial stockpiling of expensive spares etc. The Su-30MKI availability has been about 50 percent for comparison. A benchmark is that a fighter consumes five per cent of its worth in consumables and spares each year.
The lifetime cost of an aircraft is typically estimated at 2.5 times the initial cost. This is higher for Russian aircraft which more than make up for their comparatively lower costs with the higher lifecycle costs. This along with the bad availability (roughly number of aircraft available for operational duties vs. the ones undergoing maintenance) of Russian aircraft, and the great experience that the IAF had with the Dassault Mirage-2000 on the same metrics, is another key reason for the IAF’s fondness for the Dassault Rafale. The IAF operates a veritable zoo of aircraft from all around the world with little commonality, each with its own logistics chain in different countries, and this is a major operational and expense issue. Therefore simplifying the Indian Air Force’s logistics chain by choosing an aircraft from the maker of the IAF’s Mirage-2000 (Dassault Systemes) which were made and are being upgraded by the same major companies (Thales, Safran etc.) that make the major components for the Rafale was a major consideration. Some of this lifetime cost is already included in the cost of the deal in the form of spares, engines and the performance based logistics requirement. The 7.1 billion Euros also includes climate controlled hangars for the 36 jets, setting up of support facilities, and pilot training.
There has also been the ludicrous claim that India should not pay for the R&D cost of the Rafale. The main component of the cost for modern combat aircraft is in fact the R&D. This is akin to arguing with Apple to not pay the cost of the R&D component of the cost of an iPhone. The R&D component for combat aircraft, which are not manufactured in bulk as a commodity, is much higher
Other Rafale sales
The Rafale is also cheaper than any of the international deals that Dassault has concluded so far from the number of aircraft and the total cost even though India has asked for several more options.
The cost of the deal comes to about 217 million Euros for Egypt and 262 million Euros for Qatar as compared to roughly 197 million Euros for the IAF. Here the deal cost was simply divided by the number of aircraft for comparison as each one is structured differently. The IAF deal however, has the most number of special requirements, and the highest offset requirement. The Egyptian Rafales are to the older F3 standard.
There has also been a new campaign from the same political party who is trying to scuttle the Rafale deal to pitch for the selection of the more expensive and less attractive Eurofighter. This is very suspicious.
Take the cost for example. It has been stated that the revised and unsolicited offer by Eurofighter after they lost the contest to the Rafale is only 138 million Euros which makes it cheaper. This is a blatant lie that should be clear to anyone who takes the effort to review the material presented. The per unit cost of the Rafale as noted before is only 91 million Euros. Weapons, special packages, training and so on are only negotiated after aircraft selection and are very specific to individual customer requirements. To compare a full deal for the Eurofighter, we can look at the recent purchase (in 2015) of 28 by Kuwait for 8 billion Euros, almost 300 million Euros per fighter on average. There is no indication of the size of the weapons package and there are no special requirements or offsets in the deal. Defense product inflation is typically about 3.5%/year.
And then the huge time lag introduced by comparing 2 aircraft again when the entire urgency is to induct Asap to arrest soon to fall squadron numbers. That was the key reason for the emergency purchase that the government and IAF were faced with as the MRCA was going nowhere, the LCA is still maturing, the FGFA is a far way away with its own other issues etc.
As for the aircraft themselves, both are very good aircraft. However there is one area where the Rafale clearly stands out. It is a far more mature aircraft with full “omnirole” capability where it excels at both air-to-air and ground-attack operations and can carry 140% of its weight in munitions. One reason for this is that while the Eurofighter has potential, it is managed by a 4 country consortium that makes it difficult to coordinate the aircraft’s maturation roadmap, the same reasons for its higher cost. Since the IAF possesses a superlative air-superiority platform in the Su-30MKI that has bested the Eurofighter in air-to-air combat (in the Indradhanush exercises between the IAF and the RAF), the superior ground-attack abilities of the Rafale are more relevant. Also the Eurofighter divides its work-share amongst the industries of the 4 consortium counties resulting in more operational availability issues and higher operational costs than the Rafale.
The Eurofighter and the AgustaWestland Scam
Furthermore, Finmeccanica the Italian company which is an important part of the Eurofighter consortium is de facto blacklisted in India due to the corruption in the 2013 AgustaWestland helicopter scam during the UPA regime. No deal with Eurofighter is possible until the de facto blacklist is removed for a corruption investigation that is still underway. The Kuwait deal for Eurofighters was signed directly with Finmeccanica. Some of the most important parts of the Eurofighter such as the radar are made by Finmeccanica which has the largest share in the consortium at 36%.
Italian prosecutors have alleged in court that Ahmed Patel, political secretary to Sonia Gandhi, received kickbacks from the deal. AgustaWestland a fully owned subsidiary of Finmeccanica was implicated and the Indian Ministry of Defense has stopped contracts with all Finmeccanica companies. Finmeccanica recently renamed themselves as Leonardo S.p.A. as part of a rebranding exercise.
In February 2017, Austria sued Airbus and the Eurofighter consortium including Italy’s Leonardo, alleging deception, corruption and fraud. They also found the aircraft too expensive to operate and will phase it out of service by 2020. As AviationWeek one of the most respected aviation journals in the world put it: “It is a matter of concern for an aircraft manufacturer when one of the richest countries in the world declares its fighter is too expensive to operate.” And this is just for 15 fighters. There have been numerous allegations with regard to the Saudi contract as well.
While the Eurofighter did take part in the MRCA contest, this was before the AgustaWestland scam was uncovered.
The way forward
The way forward requires a focus on indigenous equipment to make equipment levels affordable. This is where the IAF and the Indian Army lag behind the Indian Navy. Services around the world take great efforts to handhold and support local design and manufacturing in contrast to the IAF and the IA. Both are now engaged in trying to scuttle the LCA and the Arjun tank respectively. In contrast the Pakistani Air Force has been supporting and inducting the much less capable (compared to even the base LCA Mk-1) JF-17 Thunder fighter which is Chinese designed and assembled in Pakistan. It would be ideal if the single engine fighter requirement that replaces the MRCA process can be fulfilled by the LCA Mk1A & Mk2, requiring great efforts by the IAF, DRDO and HAL, and crucially cooperation between them. The Pakistani army is inducting the Pakistani made (Chinese designed) Al-Khalid tanks that are far less capable and survivable than the sophisticated Arjun. This is absolutely needed for local Industry to grow in capability and maturity from the present situation, even if there is much to be desired at present. A lot of this has to do with institutional attitudes that have to change, and with India’s higher defense management that has to be reformed. Not an easy or quick process for sure.
And finally regarding the ethics of the politicians and other vested interests trying to derail this deal for their own interests, it can only be said that it is a very sad state of affairs indeed.