So where is the scam? 2016 NDA Rafale deal explored

Abingdonboy

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SO WHERE IS THE SCAM? The reality of the NDA’s (now) controversial 2016 Rafale deal

As certain political campaigns have heated up in recent weeks a deal signed more than twelve months ago that had been signed to much adoration and applause has suddenly become somewhat of a “hot potato”. Those who were silent then have now sought to cast doubt on not only the costs of the NDA’s Rafale deal but the justification for the deal itself. Let us examine the validity of such claims by first examining the true breakdown of the €7.87b 2016 deal.

2016 NDA Rafale deal breakdown:

-Unit cost (36 F3+* RafalesX$105m*) $3.8b
Weapons (including SCALP ALCM and METEOR BVRAAM) $1.2b
-Base costs (creating world class base level maintenance operations and state of the art climate controlled hardened air shelters) $2b
-IAF specific enhancements ** ( including improved hot an high performance, integration of Israeli systems and weapons) $2b

Total: approx. $9b (or €7.9b or Rs59,630 crore as we know the deal was valued at in 2016).

Notes
* an identical unit price to that paid by the French armed forces
** such costs are one off and will not be incurred for any future batches.



It should also be noted that the 2016 was for highly advanced versions of the Rafale (F3+) highly customised to operate in Indian conditions whereas the version being negotiated under the original MMRCA was the F2 version minus any Indian specific upgrades.

Another point of departure from the original MMRCA deal is that the NDA’s Rafale deal includes 50% offsets as opposed to 30% for the MMRCA. This vast sum of money that will be ploughed back into is already cleared to benefit the nation’s aerospace industry immensely. Firstly the French are already working to assist with the GRTE’s advanced but troubled turbofan engine, Kaveri, with a view of completing the work so as to be able to fit it onto a number of current and future platforms both manned and unmanned. Additionally a portion of offsets will be invested in a new joint venture between DA and Reliance defence; DRAL. DRAL will not only create massive job opportunities at its newly constructed greenfield facilities in Mihan, but will provide a dedicated localised supply chain for the Rafale on Indian soil. Another exceptionally beneficial point is the news that DA intends to place DRAL inside its global supply chain for their world renowned business jet, Falcon. Thusly, India will be in the possession of yet another globally recognised tier 1 supplier in the lucrative aerospace industry.

Based on news reports and information seen by this writer it can also be confirmed that DA has plans to expand the DRAL’s facilities into a standalone Rafale production line with the capacity to produce 18 Rafales per annum. This would see India create its first ever aircraft production line outside of the public sector, and here again the deal diverges from MMRCA as the original MMRCA plan was for HAL to receive the contract for local assembly. For seventy years India has been without serious capacity in the aerospace industry within the private sector that extends beyond sub-assembly production, this is all set to change within the next few years and the ramifications for this cannot be understated. Creating a competitor to HAL in India assisted by one of the world’s premier OEMs will have lasting effects for generations to come.


Furthermore, it should be noted that the NDA Rafale deal includes a comprehensive Performance Based Logistics (PBL) agreement wherein Dassault Aviation (DA) is legally obligated to assure that 75% of the IAF’s Rafale fleet is available for operations at any given moment in time. For comparison, in 2015 the IAF’s SU-30MKI fighter fleet had an availability rate of less than 50% (now should be closer to 60% thanks to measures sanctioned by former defence minister Parrikar) and the Indian Navy’s premier fighter, the Russian-built MiG-29K, had even lower availability rates than this.

The NDA Rafale deal was also able to secure an agreement to train the first batches of IAF pilots and ground technicians in France free of cost with an additional guarantee for 60 hours of usage of training aircraft for Indian pilots and six months of free weapons storage without charge.

With the significant investments made by the IAF for their Rafales, it would be truly unthinkable that the number would be capped at 36 or even 72 units. For the enormous customisation and basing costs to be justified significant follow on orders need to be placed but there is no doubt that such orders would benefit immensely from these new conditions. The Indian Navy in particular is now in a strong position to take advantage of the investments made by the IAF as they could pool training costs, spares management and operational procedure. To fail to take advantage of such investments by selecting another foreign fighter for the navy or perhaps and even more unjustifiable purchase such as a foreign single engine jet fighter would be unpalatable and a true insult to the Indian taxpayer.

So where is the scam?

Every single penny is accounted for, the deal abides by the contours of DPP-2016 and we can categorically state that the deal the present govt signed was superior to that of the one that had been proposed under MMRCA as the technical benefits specifically for the Kaveri and LCA projects are immense. Under the MMRCA deal there had been no such obligation to support local strategic projects. Furthermore there are sting rumours that the confidential IGA signed by the two governments in January 2016 contained an understanding that France would assist in a number of strategic projects of India that go far beyond aerospace. The biggest drawback of the NDA’s Rafale deal is that so few orders were placed; 36 against a total requirement of 189 units (126+ 63 unit follow on clause). This can be addressed by additional follow on batches but this has yet to be solidified as of yet and with each passing day the IAF’s existing strength depletes yet further.


Thus, the final note of this essay should be that the very last thing the Indian military and nation as a whole can afford right now is for the modest attempts to modernise the armed forces to become politicised and tarred with the label of “scam”. Let us trust in the institutions and systems in place to detect any irregularities where they exist, indeed should there be any shortcomings in the deal we are well aware that the CAG shall highlight it in the future. Let us allow those charged with leadership and security of the nation to carry out their service, we have the experience of the previous decade to understand just how corrosive inaction caused by fear of becoming “tainted” by scandals related to defence procurements can be. Let it not escape our attention that the very corners questioning this deal had themselves selected the platform but been unable to make progress and it was the present government that had inherited this situation and had made the most out of a troubling situation keeping in mind the immediate requirements of the Air Force.

Indeed, one finds it troubling just how many defence procurement deals have been scuppered in the recent past because of “anonymous complaints” from parties unknown alleging wrongdoing in a broad range of areas from anti-submarine helicopters to small arms to surface to air missiles. It had become common knowledge that aggrieved foreign original equipment manufacturers had taken to this practice on losing Indian tenders and thus had become so rampant that then defence minister Parrikar had openly declared that he would refuse to entertain any complaints that were unsubstantiated.

Political mud slinging may have become the norm across the political landscape and thus many may have become desensitised to such nefarious campaigns, however when it comes to defence procurements these intellectual arguments can have a very real and very damaging effect, let us not forget the lessons of the past. The Bofors scandal had a lasting impact far beyond the political cost to a particular political party, from the year the last FH77B gun had been inducted into the army (around the late 1980s) until this very year not a single artillery piece had been ordered meanwhile India’s enemies had been able to procure thousands of very sophisticated systems. It should not be forgotten that these controversial weapons were declared “saviours” during the 1999 Kargil war but the availability of such weapons was found insufficient. It would be beyond unfortunate for us to encounter such a situation again, where we all the the baby to be thrown out of the bath water and where we find ourselves in need of vastly more Rafales at the exact moment when we need them most.


Sources


Indian Air Force pitches for 36 more Rafale Jets, follow-on order will result in 40 percent savings - Defence News India

IAF pitches for 36 more Rafale fighters after it gets the first 36 from France - Times of India

Qatar, France Complete Dassault Rafale Fighter Jet Deal

Everything You Wanted To Know About The Rafale Deal But Didn’t Know Where To Ask
 
T

Tarun

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#3
Summary:

Rafale deal.png





Point be be noted:

In UPA MMRCA Proposal Reliance was considered as a Tier-1 supplier for HAL (at that time Reliance had 0% of Defence experience) whereas now, it is partners for 100mn USD offset and has a established Defence experience with a Defence firm RDL.
 
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Abingdonboy

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Summary:

View attachment 564

Point be be noted:

In UPA MMRCA Proposal Reliance was considered as a Tier-1 supplier for HAL (at that time Reliance had 0% of Defence experience) whereas now, it is partners for 100mn USD offset and has a established Defence experience with a Defence firm RDL.
Simply awesome work bro.
 

Sathya

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#6
MMRCA had ToT but final cost of the deal is unknown.

Here Off the shelf purchase will benefit other Indian programs, MII with Rafale ToT.
 
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#7
Summary:

View attachment 564




Point be be noted:

In UPA MMRCA Proposal Reliance was considered as a Tier-1 supplier for HAL (at that time Reliance had 0% of Defence experience) whereas now, it is partners for 100mn USD offset and has a established Defence experience with a Defence firm RDL.
Could you please post this message on Rahul Gandhi's Twitter, so that he could get some spoon feed reality, and help him to come out of the the illusion of the political Chamchas sorrounding him, with a Kind Note -- "Why is that he is always found himself on the wrong side"
 
T

Tarun

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#8
Could you please post this message on Rahul Gandhi's Twitter, so that he could get some spoon feed reality, and help him to come out of the the illusion of the political Chamchas sorrounding him, with a Kind Note -- "Why is that he is always found himself on the wrong side"
Gujarat elections are already over and now you will experience that this issue will not be available anymore.

Congress used this issue as a political tool for their personal benefits. But Gujratis are way smart to understand the issue hence didn't respond to it.

@Aashish
Try to add a share button to individual posts..
 

Abingdonboy

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#9
Gujarat elections are already over and now you will experience that this issue will not be available anymore.

Congress used this issue as a political tool for their personal benefits. But Gujratis are way smart to understand the issue hence didn't respond to it.

@Aashish
Try to add a share button to individual posts..
Govt is apparently expecting opposition to use Rafale deal to derail winter session of Parliament
 

vstol Jockey

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if we go by what was stated when Modi announced this deal in Paris, It is very clear that there is a massive scam in this deal. it was stated that IAF will get these fighters at 25% discount compared to Fr AF. We all know that the FrAF price included 19.7% VAT and 7% profit for DA. The actual price of this aircraft as calculated by me based on the briefings to French Senate and DA postings on their own financial data was less than Euro 60m. This price was for the FrAF specific aircraft without weapons and other stuff like basing/maintenance. So I will restrict my post to just the flyaway cost. However India signed a basic aircraft deal for Euro95m per aircraft. The cost of making India specific changes is additional to it. So what we have done is that we are paying over 55% extra cost for basic aircraft compared to what was promised.
The so called offsets are actually being paid for by us thru this inflated cost and in reality there are no offsets. Every tech coming from France is being paid for by this additional cost. If this is not a scam than what qualifies as a scam?
 

randomradio

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#11
if we go by what was stated when Modi announced this deal in Paris, It is very clear that there is a massive scam in this deal. it was stated that IAF will get these fighters at 25% discount compared to Fr AF. We all know that the FrAF price included 19.7% VAT and 7% profit for DA. The actual price of this aircraft as calculated by me based on the briefings to French Senate and DA postings on their own financial data was less than Euro 60m. This price was for the FrAF specific aircraft without weapons and other stuff like basing/maintenance. So I will restrict my post to just the flyaway cost. However India signed a basic aircraft deal for Euro95m per aircraft. The cost of making India specific changes is additional to it. So what we have done is that we are paying over 55% extra cost for basic aircraft compared to what was promised.
The so called offsets are actually being paid for by us thru this inflated cost and in reality there are no offsets. Every tech coming from France is being paid for by this additional cost. If this is not a scam than what qualifies as a scam?
The aircraft was supposed to come at 25% discount compared to MMRCA, not ADLA.
 

Bon Plan

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Sorry, you are wrong. please read the news reports of tht time.

Read that 2013 article in a french support : Le véritable prix du Rafale, par version

specialy :
"Voici les coûts de production de chaque variante du Rafale

Rafale B, biplace armée de l’air : 74 M€ ttc (ttc =with VAT) 61.87 M€ ht
Rafale C, monoplace Armée de l’air : 68.8 M€ ttc 57.52 M€ ht
Rafale M, monoplace marine : 79 M€ ttc 66.05 M€ ht"

traduction : Production cost of each Rafale variant at the end of 2013 :
Rafale twin seater (in a french definition) is : 74 €million with VAT, and 62€ million without VAT, as for export.
etc...

BUT : there was some inflation since & the indian model includes some refinements.
AND : you must add the 50% offset, that mecanically increase the price (maybe not by 50%).
 

vstol Jockey

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#14
Read that 2013 article in a french support : Le véritable prix du Rafale, par version

specialy :
"Voici les coûts de production de chaque variante du Rafale

Rafale B, biplace armée de l’air : 74 M€ ttc (ttc =with VAT) 61.87 M€ ht
Rafale C, monoplace Armée de l’air : 68.8 M€ ttc 57.52 M€ ht
Rafale M, monoplace marine : 79 M€ ttc 66.05 M€ ht"

traduction : Production cost of each Rafale variant at the end of 2013 :
Rafale twin seater (in a french definition) is : 74 €million with VAT, and 62€ million without VAT, as for export.
etc...

BUT : there was some inflation since & the indian model includes some refinements.
AND : you must add the 50% offset, that mecanically increase the price (maybe not by 50%).
Rafel-C is less than Euro 60m even with 7% profit for DA. So what I posted is correct. In the new deal we are paying for India specific changes over and above the net fly away price whci happens to be Euro 95m per aircraft. So tell me is this deal not a scam with 60% extra being paid for compared to what France pays.
 

Picdelamirand-oil

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Rafel-C is less than Euro 60m even with 7% profit for DA. So what I posted is correct.
No it's not correct because if you remove VAT and profit you don't have a price, you have a cost and what we promise is 25 % reduction on the price. Moreover if we made 25% off a cost, we would sell at a loss which is prohibited by the rules of trade.
 

vstol Jockey

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No it's not correct because if you remove VAT and profit you don't have a price, you have a cost and what we promise is 25 % reduction on the price.
25% reduction was from what France was paying for Rafale. and that included 19.7% VAT and 7% profit for DA. Now if the price was less than Euro 60m in 2013, how can it be Euro 95m in 2019 at delivery date? And that too when all other costs including spares, weapons, basing, training and India specific changes are separate.
 

Picdelamirand-oil

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Now if the price was less than Euro 60m in 2013,
France was paying a price of € 70 million but it's not a 2013 price: the article was in 2013 and the money was € of 2013 but the price was an old one at this moment so it was for a F3 without AESA and last version of SPECTRA, DDM and so on.
And finally the reduction was compare to the last MMRCA price:

NEW DELHI: France agreed to a 25% discount on its earlier offer to clinch the deal for an off the-shelf purchase of 36 Rafale aircraft during Prime Minister Narendra Modi's visit to Paris last month. This will be the base on which further negotiations will take place on Wednesday.

The ballpark cost per aircraft as per Dassault's winning bid for the 126 MMRCA programme — the old, nowscrapped, Rafale deal — came to about $300 million, taking into account the estimates of Hindustan Aeronautics Ltd (HAL). Sources told ET that the objective was to bring this down to a little over $200 million a piece.

The overall cost is not expected to cross $8 billion for the entire 36-aircraft fleet, French sources said. MMRCA stands for medium multi-role combat aircraft.
Read more at:
//economictimes.indiatimes.com/articleshow/47168431.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
 
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randomradio

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Sorry, you are wrong. please read the news reports of tht time.
France offers 25% discount to India on purchase of 36 Rafale jets
France agreed to a 25% discount on its earlier offer to clinch the deal for an off the-shelf purchase of 36 Rafale aircraft during Prime Minister Narendra Modi's visit to Paris last month.

It was a 25% discount compared to the cost of the 18 flyaway aircraft in MMRCA. No one ever said the discount was 25% less than what ADLA paid, that's impossible.
 

Bon Plan

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#19
Rafel-C is less than Euro 60m even with 7% profit for DA. So what I posted is correct. In the new deal we are paying for India specific changes over and above the net fly away price whci happens to be Euro 95m per aircraft. So tell me is this deal not a scam with 60% extra being paid for compared to what France pays.
And what about Offset ?
 
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Tarun

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#20
25% reduction was from what France was paying for Rafale. and that included 19.7% VAT and 7% profit for DA. Now if the price was less than Euro 60m in 2013, how can it be Euro 95m in 2019 at delivery date? And that too when all other costs including spares, weapons, basing, training and India specific changes are separate.
You are comparing cost per unit of F3R with a lowered variant & in different time periods which is not fair , along with this you are not considering inflation in the cost (due to which UPA deal require price hike in 2012 against what was promised in 2005).

Please do a fair comparison by considering all facts and figures..

Good Day