The Rafale deal controversy is a theme in the politics of India that received public attention mainly between 2014 and 2018. It results from allegations of unethical behaviour related to the purchase of 36 Rafale multirole combat aircraft by the Indian Ministry of Defence from France's Dassault Aviation for a price estimated at €7.87 billion (₹58,891 Crore). The origin of the deal lies in the Indian MRCA competition, a multi-billion dollar contract to supply 126 multi-role combat aircraft to the Indian Air Force (IAF) with a transfer of technology.
On 14 December 2018, the Supreme Court of India upheld the Rafale deal, stating that neither irregularities nor corruption have been found. The Supreme Court delivered the final legal judgement on 14 November 2019, dismissing all petitions for a review of its December 2018 judgement. In June 2021, a French judge was appointed to lead a judicial investigation into alleged corruption and favoritism in the deal.
According to a media report, the Indian government had de facto declined a formal request for international cooperation to probe allegations of suspected corruption, influence peddling and favouritism. Reference was made to a diplomatic note dated 25 July 2023, by Emmanuel Lenain, the French Ambassador to India, highlighting difficulties in getting collaborating on criminal cases from India in general. The ambassador had noted, "Many cases are handled by our Indian partners with very long delays, often in an incomplete manner." An earlier report cited instances by both the Indian and French government to create hurdles in the corruption investigation.
Background
On 31 January 2012, the Indian Ministry of Defence announced that Dassault Rafale had won the MMRCA competition to supply the Indian Air Force with 126 aircraft, along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with a transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology. The negotiations with Dassault dragged on due to disagreements on warranty for aircraft produced by HAL. India wanted Dassault to ensure the quality of aircraft produced by HAL, but Dassault refused to do so. In January 2014, it was reported that the cost of the deal had escalated to $30 billion (₹1,86,000 crore), with each aircraft costing $120 million (₹746 crore). In February 2014, defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in the fiscal year 2013-14 due to budgetary constraints. In March 2014, HAL and Dassault signed a work share agreement to manage licensed manufacture. After the Indian general election in April–May 2014, the National Democratic Alliance led by Bharatiya Janata Party took control of the government from the United Progressive Alliance led by the Indian National Congress.
As disagreements over cost and warranty for aircraft produced by HAL continued, defence minister Manohar Parrikar said that the Sukhoi Su-30MKI could be acquired as an alternative to Rafale. Air Chief Marshal Arup Raha disagreed, saying that the Su-30MKI and Rafale had different capabilities, they were not interchangeable. In February 2015, it was reported that the Rafale purchase was headed for cancellation as it had been misjudged to be the lowest bidder due to deficiencies in Dassault's bid. On 25 March 2015, Dassault's CEO Éric Trappier said that although the deal was taking time, it was "95 percent completed".
During an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity". In July 2015, defence minister Manohar Parrikar informed the Rajya Sabha that the tender for 126 aircraft had been withdrawn and negotiations for 36 aircraft had begun. In January 2016, India and France signed a memorandum of understanding (MoU) for acquisition of 36 aircraft without finalising the financial terms of the acquisition. In May 2016, the two sides arrived at a figure of €7.87 billion (₹58,891 crore) for the agreement, compared to €11.8 billion quoted in April 2015 and €8.6 billion quoted in January 2016. Unnanmed government officials quoted by Press Trust of India said that the decrease in price was due to a change in escalation formula from a fixed 3.9% to a floating rate linked to European inflation indices along with a cap of 3.5%.
In September 2016, India and France signed an inter-governmental agreement (IGA) for the acquisition of 36 aircraft following clearance from the Indian Cabinet Committee on Security. According to The Hindu, citing defence sources, the agreement provided for many components superior to those in the original deal, in particular the weapons package. It was reported that India would acquire 28 single-seat aircraft at a cost of €91.1 million (₹681.7 crore) each and 8 dual-seat aircraft at a cost of €94 million (₹703.4 crore) each. The deal also included tailor-made enhancements for the Indian Air Force at a cost of €1.8 billion (₹13,470 crore), a weapons package costing €710 million (₹5,313 crore) and a performance-based logistics agreement at a cost of €353 million (₹2,641 crore). The weaponry procured included missiles such as MICA and Meteor beyond-visual-range air-to-air missiles and SCALP air-to-ground cruise missile. The India-specific enhancements included, among the dozen or so enhancements, the integration of an Israeli-made helmet-mounted display (HMD), radar warning receivers and low-band jammers.
The agreement included a 50% "offset clause", which required the companies involved in the agreement—primarily Dassault, Thales, Safran and MBDA—to invest 50% of the contract value (approximately €3.9 billion or ₹30,000 crore) back into India, with 30% of the total (approximately €1.2 billion or ₹9,000 crore) reserved for the Defence Research and Development Organisation (DRDO). Of this 50%, 74% (approximately €2.9 billion or ₹22,200 crore) was to come from purchase of goods and services from India, which was expected to bolster the government's efforts to promote Indian defence equipment manufacturers.
On 3 October 2016, Reliance Group and Dassault Aviation issued a joint statement announcing the creation of a 51:49 joint venture named Dassault Reliance Aerospace Limited (DRAL) to focus on aero structures, electronics and engine components as well as to foster research and development projects under the "Indigenously Designed Developed and Manufactured" (IDDM) initiative. Dassault intended to invest in excess of €100 million in the joint venture as part of its offset obligations. The joint venture was to manufacture components for Legacy Falcon 2000 series of jets such as the nose, cockpit and doors at the DRAL facility in Nagpur starting from January 2018.
Allegations on the deal Allegations of price escalation The day after the signing of IGA between France and India, Indian National Congress spokesperson Manish Tewari asked for details of the agreement to be made public and questioned if there was an escalation of per-aircraft cost from crore to crore. A couple of months later in November 2016, minister of state for defence Subhash Bhamre informed the Lok Sabha that the cost of each Rafale aircraft acquired under the IGA was approximately ₹670 crore. In November 2017, Congress leader Randeep Surjewala alleged that procurement procedures were bypassed in acquisition of Rafale and questioned if there was an escalation of per-aircraft cost from crore to crore. Defence minister Nirmala Sitharaman denied the allegations of procedural wrongdoing and said that approval from Cabinet Committee on Security had been obtained before signing of IGA. She said that the prices could not be compared as the tender for 126 aircraft and the agreement for 36 aircraft had different requirements. Air Chief Marshal Birender Singh Dhanoa also denied the allegations and said that the agreement for 36 aircraft was signed with better terms than the one that was being negotiated under MMRCA tender. French government officials also rejected the allegations of violation of procurement procedures.
In an interview, former chief of air staff Arup Raha said that Defence Procurement Procedure allows for government-to-government procurement and there was no procedural bypass in signing of the IGA. He added that the agreement for 36 aircraft was cheaper than the previous proposal and had a better maintenance and weapons package including provisions for training, a better performance-based logistics package and two aircraft maintenance and overhaul facilities that were not present in earlier proposal. He said that most of the confusion over cost was due to comparison of prices from different base years and comparison of different deliverables.
Allegations of favouritism
In November 2017, Congress leader Randeep Surjewala alleged that HAL was bypassed in the Rafale contract and questioned the presence of Anil Ambani in France during Modi's announcement to acquire 36 fully built aircraft. He also alleged that the necessary government approvals were not obtained before the formation of joint venture between Dassault Aviation and Reliance Defence Limited. Congress vice-president Rahul Gandhi accused Indian prime minister Narendra Modi of dropping the requirement of licensed manufacture by the state-owned Hindustan Aeronautics Limited to ensure that the privately owned Reliance Defence Limited obtained an offset contract from Dassault.
Anil Ambani's Reliance Defence Limited denied the allegations by Surjewala and released a statement that he was present as a member of Indo-French CEO Forum. The statement added that no government approvals were required for foreign investments of up to 49%. Reliance also threatened to sue Congress if the allegations were not withdrawn.
Defence minister Nirmala Sitharaman denied the allegations and said that transfer of technology to HAL would not be economically feasible in a smaller contract for 36 aircraft, which was an emergency purchase to make up for a decade-long delay. She said that no government approvals were required for the joint venture between two private companies. Air Chief Marshal Birender Singh Dhanoa also denied the allegations and added that technology would be transferred to DRDO. French government officials also rejected the allegations, saying that the offset contracts would be handed by four companies including Dassault and 500 companies would benefit in total.
Controversy 2017 While campaigning for 2017 Gujarat Legislative Assembly election, Rahul Gandhi raised the issue of Rafale deal to attack Narendra Modi. He repeated the allegations of price escalation and favouritism towards Reliance Defence Limited. Former defence minister Manohar Parrikar justified the costs, saying that the cost of the aircraft is often eclipsed by the cost of equipment required to make it combat-ready. He said that the new agreement includes development costs for integration of a helmet-mounted display and a serviceability agreement. He blamed his predecessor in the previous United Progressive Alliance government, A. K. Antony for delaying the acquisition by creating uncertainty over the lowest bidder.