Arguing that the number of aircrafts has been the key reason for the high cost of Rafale jets, compared to the earlier proposed 126-jet deal of UPA government, NDA argued that they have managed to strike a better deal. The Congress-led UPA government was negotiating the deal in 2007, at Euro 79 million per bare-bones aircraft; it was later escalated to Euro 100.85 million in 2011. NDA claims that they bargained to bring down the cost to Euro 91.75 million, which is nine per cent cheaper.
But, the main reason for cost escalation is India-specific enhancements. The IAF has asked for 13 India-specific enhancements, which include missiles like MICA, Meteor and Scalp, helmet mount systems and other latest electronic warfare systems. Because of these add-ons, the price would have increased by Euro 10.3 million if 126 aircrafts were ordered. With only 36 aircrafts, the price per aircraft will increase by Euro 36.11 million.
Questioning the windfall for the Rafale manufacturer Dassault Aviation, senior Congress leader P. Chidambaram said, "It seems that Dassault is laughing all the way to the bank. The government has wronged the country in two ways: first, it has compromised national security by denying to the Air Force 90 fighter aircrafts that they desperately need; secondly, it has purchased two squadrons that will cost about Euro 25 million more per aircraft. At the 2016 exchange rate, Euro 25 million is equal to Rs 186 crore, which India will pay more per aircraft." Chidambaram reiterated Congress's demand for a Joint Parliamentary Committee (JPC) probe into the Rafale deal.
While defending the deal, a senior defence ministry official said that India had asked French officials to calculate the deal for 36 Rafale fighter jet price on 'actual cost' (price as of today) plus European Inflation Indices (variable figure which is currently around 1 per cent per annum).
"The MoD has also capped the European Inflation Indices to a maximum 3.5 per cent.This basically means that if the inflation indices go down [chances of it going down are more, looking at the current situation in European markets], India will have to pay less. And even if it goes up, India will not pay more than 3.5 per cent," the official said.
Whereas, the UPA had allowed French officials to calculate the "fixed cost" formula that allowed the French officials to include additional price of 3.9 per cent inflation indices from day one of the deal, the official said. So, had India gone ahead with the UPA deal, even if the European Inflation Indices had reduced, India would have still paid much more, as the additional cost of inflation indices (at 3.9 per cent) was already added at the initial level, according to the official.
Commenting on the offer from Rafale's competitor Eurofighter—designed by a consortium of companies from UK, Germany, Italy and Spain—the official said India did not wish to negotiate with multiple countries. Though Germans were leading the entire Eurofighter campaign, the issue of sovereign guarantee would arise. Defence Minister Nirmala Sitharaman, while responding to the debate in Lok Sabha early this month, said that Eurofighter made two unsolicited offers to get back into the race after losing out on Rafale in 2011. The first offer was made during the time of the UPA government and the second was made in 2015, a month before PM Modi announced the (36) Rafale purchase deal in Paris.
All 36 jets will be delivered to India in a span of 66 months, and it is time-bound. Any delay from the French side will attract penalty on the company in terms of liquidity, up to 5 per cent, and waiver in inflation indices. Ministry officials also claimed that under this deal, Dassault will have to ensure that at least 75 per cent of the entire fleet remains operational at any given time. "This warranty is signed for five years. There is an option for India to extend the same for two more years at the same cost."
