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The benefits of having a Gujarati prime minister

By Claude Arpi
April 13, 2015 11:37 IST
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Narendra Modi knows how to calculate and remain pragmatic.

Take the unexpected Rafale deal -- perhaps the first time a PM has considered the country's defence procurement as a priority, over the considerations of the babus' and over his own 'Make in India' project,' says Claude Arpi.

Narendra Modi with Francois Hollande in Paris

The advantage of having a Gujarati prime minister is that he knows how to calculate and he remains pragmatic.

Take the unexpected Rafale deal agreed in Paris during Narendra Modi's visit. It is perhaps the first time that a prime minister has considered the country's defence procurement a priority, over the considerations of babus' and over his own pet project 'Make in India', which will now be delayed for years, as far as the technology transfer for the Rafale is concerned.

The move was particularly pragmatic because it will cost less to India's exchequer. Buying 36 Rafales 'off-the-shelf' will cost some 4 billion Euros, which means one-fourth or one fifth the original plan to 'Make in India' 108 planes with Hindustan Aeronautics Ltd, a government undertaking always prone to delays and over-costs.

Further, it will bring the required 'oxygen' for the Indian Air Force which faces two rather aggressive neighbours with a rapid depletion of its fleet.

Defence Minister Manohar Parrikar, who did not accompany the prime minister on his trip (Modi travelled without a single minister, the senior-most member of his delegation being Ajit Doval, the national security advisor), said that it is a 'great decision.'

He hoped that the Rafale will be inducted into the IAF in two years time, adding that: 'India has finally broken the ice over the deal which has been pending for the last 17 years.'

Parrikar had it wrong, it is 14 years, but that is a detail.

Before speaking about 'two years' for the delivery, a contract will have to be signed. There was indeed nothing about the multi-role combat aircraft in the 20-point 'List of agreements/initiatives/announcements' inked during Modi's visit in Paris, but the French and India media were unanimous to say that the main outcome of the Hollande-Modi encounter was the 'purchase' of 36 Rafales for the IAF.

Only the joint statement, issued at the end of the meeting between the French president and the Indian prime minister, mentioned the Rafales. Point 14 says: 'The Government of India conveyed to the Government of France that in view of the critical operational necessity for Multirole Combat Aircraft for the Indian Air Force, the Government of India would like to acquire (36) Rafale jets in fly-away condition as quickly as possible.'

The fact the (36) is in brackets shows that the agreement about the number must has been reached at the very last minute.

The interesting point is that 'The two leaders agreed to conclude an Inter-Governmental Agreement for supply of the aircraft, the delivery would be in time-frame that would be compatible with the operational requirement of IAF,' and the plane will be in the same configuration 'as had been tested and approved by the Indian Air Force.'

In other words, a separate 'inter-government' contract will be signed.

Is the deal really through?

Probably! Though in December 1981, a purchase of 150 Mirages 2000 was announced to counter the American F-16s ordered by Pakistan, but the final agreement was for 40 planes only, although a preferential credit rate of 9.25 per cent was then offered to India.

At that time too, the IAF needed a fighter aircraft badly.

Before the PM's visit to Paris, it was difficult to predict what would happen to the Rafale which was clearly stuck in the Medium Multi-Role Combat Aircraft procedure, put in place by then defence minister A K Antony.

India was obviously keen on the 'Mother' of all 'Make in India' projects which would have heralded a number of win-win situations for India and her foreign partners, especially in the small scale sectors, as HAL would have required the services of some 500 small sub-contractors to built the aircraft.

Let us remember the facts: The initial Request for Information had been issued in 2001, 14 years ago! It was only six years later that the Request for Proposal was published, as the then minister A K Antony wanted to add new clauses, such as the Total Life-cycle Costs, in the Indian defence procurement policy. This is where the 'complications' started.

Five years later, in January 2012, Dassault Aviation was selected for supplying to the IAF after a long competitive process, which lasted five years, with the American F/A-18 and F-16, Russian MiG 35, European Eurofighter and Swedish Saab Gripen in the race.

Why so many years to come back to the starting blocks?

The answer is mainly because of the complicated and tortuous Defence Procurement Policy drafted by the former 'honest' defence minister.

Further, the transfer of technology had a price (the price of the plane made in Bangalore was always going to be higher than the made-in-Bordeaux one).

Dassault could not give for 'free' to India decades of R&D and perhaps more importantly, the French firm was not going to take the responsibility for what would happen in Bangalore with HAL and its sub-contractors.

Though an appetiser was served on March 25, 2015 when the IAF got its first two 'refitted' Mirage-2000, this did not help the Rafale negotiations.

Since December 2014, when French Defence Minister Jean-Yves Le Drian visited India, it was clear that the negotiations were on fast track; Parrikar and his French counterpart had agreed on that point.

Paris knew that the new Indian team was pragmatic ('des gens rationnels', rational people, a French person close to the talks, said), but how to get over the MMRCA mechanism?

In February, Le Drian came again to Delhi, this time with a letter from President Francois Hollande to 'unblock' the issue before the end of the financial year (Modi's visit to France was not finalised at that time).

Paris had formed a specialised and 'empowered' cell with Le Drian; Eric Trappier, Dassault-Aviation CEO; General Benoit Puga (military chief of staff of the president) and Jacques Audibert, Hollande's Diplomatic Councilor ('sherpa'); a few defence and legal advisors were added to the secret cell; Paris was taking the talks extremely seriously.

Considering that until the time the Indian delegation arrived in Paris, ahead of the prime minister on Thursday, April 9, tough discussions was still on for the 126 planes (the bone of contention being the 108 planes to be manufactured in Bangalore), the decision to purchase 'off-the-shelf' was a quick, pragmatic, and smart move.

It brought the IAF's 'critical operational necessity' on the negotiating table while dropping the MMRCA framework.

The modalities, the number and the delivery framework could not be completed in time to be included in the joint statement, but the French were relieved when the Indian prime minster confirmed the 'deal' during his joint press conference with President Hollande.

The IAF and the Indian finance minister (in view of the smaller amount involved) must be relieved too.

A French defence blog wrote that till the time Modi spoke, the French had been like Saint Thomas, wanting to 'see' before believing.

The rest is history.

A French friend who had closely followed the Rafale saga told me: "This guy (Modi) is a genie.' In a few hours, with just a few advisors, he managed to fix a deal out of an inextricable situation; and for all the parties involved (one could say, first and foremost for the IAF), this appears a win-win solution.

Modi's 'Make in India' scheme was the only loser; however, the next day in Toulouse, the Airbus chairman pledged $2 billon to 'Make in India'; the programme continues in other ways.

The 'oxygen' provided by the 36 planes should give enough time to Delhi (and Paris) to devise a more feasible scheme for the balance aircraft.

The Gujarati businessman/PM knows how to calculate and first and foremost, he remains pragmatic, while keeping India's highest interests in mind.

Nevertheless, the tragedy remains that India has lost 14 years to reach this decision to buy planes 'off-the-shelf' with the cost escalation involved.

Hopefully a lesson for next time?

Image: Prime Minister Narendra Modi and French President Francois Hollande enjoy a tour on the Seine river, past the Eiffel Tower in Paris. Photograph: Benoit Tessier/Reuters

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