Even as former defence minister Manohar Parrikar called concerns expressed by the defence secretary on “interference” by the Prime Ministers Office in Rafale jet negotiations as "over-reaction", he did not react to the critical issue of sovereign or bank guarantee.
In the deal, signed in September 2016, India agreed to pay more than Rs 59,000 crore for 36 Rafale fighter jets.
Parrikar, who was the defence minister when Rafale deal was announced and then signed, in a handwritten remarks at the bottom of the letter, where the defence secretary was seeking his advice on the interference by the PMO in the Rafale negotiations, said the PMO and the French President's Office were "monitoring the progress of the issue which was an outcome of the summit meeting".
The concerns expressed in paragraph 5 of the note of then defence secretary, G. Mohan Kumar, "appears to be an over-reaction", the minister wrote, adding "Defence Secretary may resolve the matter in consultation with Principal Secretary to PM".
But, Parrikar was silent on the paragraph 4 of the letter, which talks about the letter of comfort in place of sovereign or bank guarantee."This is contrary to the position taken by the MoD and conveyed by the Indian Negotiating Team that the commercial offer should be backed by sovereign guarantee or otherwise by bank guarantee," says a letter written by deputy secretary (air) S.K. Sharma dated November 24, 2015.
However, a letter by the French Prime Minister Manuel Valls on September 8, 2016—a fortnight before the inter-governmental agreement was signed between French and Indian governments on September 23, 2016—claimed that their government would fully back the obligations made by their firms in the contract.
"In so far as the government of the Republic of India will be required to make down payments before the delivery of the aircraft and associated armaments, I hereby confirm that the government of the French Republic is fully committed in doing whatever is necessary to make sure that Dassault Aviation and MBDA of France, each in their own respect, do their utmost to fully respect their obligations in accordance with aforesaid inter-governmental agreement and annexed supporting protocols," the letter by the French prime minister to his Indian counterpart Narendra Modi stated.
"furthermore, assuming that Dassault Aviation or MBDA France meet difficulties in the execution, their respective supply protocols and would have to reimburse all or part of the intermediary payment to the government of India, the government of French Republic will take appropriate measures so as to make sure that the said payment or reimbursement will be made at the earliest," Valls's letter further stated.
The letter also stated that "these commitments made by the French government as well as the mechanism stipulated in inter-governmental agreement will prevent the inclusion of bank guarantees into the supply protocols which would have generated additional costs for the government of India as well as for the industrialists."
"Please rest assured of the mobilisation of my government by your side to implement our strategic partnership in the sector of defence. Please accept, Prime Minister, the assurance of my highest consideration," the French prime minister wrote to PM Modi.
