Saturday, November 29, 2014

EXCLUSIVE: Specifically Why India's Rafale Deal Is Held Up

So, as I mentioned in my earlier post, sticking points in negotiations between Dassault Aviation and HAL remain the chief reason why a draft contract hasn't reached finality. There have been a few reports that point to general difficulties in negotiations between HAL and Dassault on liability for the 108 aircraft that the former will license build in Bangalore. What you probably haven't heard about are the specific stumbling blocks. There are basically three:

  1. Responsibility for the 108 aircraft in terms of liability, damages and attendant clauses on access, inspection and post-manufacture testing. Dassault's concern is that HAL hasn't built up any of the fixed assets which the company feels would be the minimum requirement to begin discussing the modalities of the kind of liability HAL wants Dassault to take on for the jets built in India. With the last 60 aircraft to be as much as 90% 'Made in India',   
  2. The ball is apparently in HAL's court, with Dassault telling the Cost Negotiation Committee (CNC) that it still awaits figures from HAL on the financial specifics of the liability it is seeking to transfer to Dassault. Dassault has asked HAL to clarify the specifics of any similar liability parameters in comparable deals like HAL's Su-30 MKI production line on license from Russia.
  3. Modalities of licensee/licensor and the manner in which the final agreement sets down their roles. Things are actually more contentious than most believe/report. Dassault has even flagged up issues with access to HAL's facilities.
Done and dusted clauses of the exhaustive contract cover pretty much all other aspects. The company's aversion for HAL manifested itself two years ago when it was revealed that Dassault wanted to built some of its aircraft with Reliance Industries' new defence business. With an irritated HAL putting its foot down and asserting itself as the principal production partner, the relationship between the two has been, well, uncertain at best. Both sides will be looking to new leadership at the MoD to get things moving.

36 comments :

Anonymous said...

no jet make would accept to assume responsability to pay for the sub contractor without any control.

ask Boeing, they say No, Ask LM, they say No, Ask Russia, they laught, ask China, never get answer, Airbus/EADS negociation for ever. Dassault was always clear since the begining and wanted work with India Reliance, not with HAL. The HAL condition is unacceptable for any jet maker and Dassault would never accept it.


Anonymous said...

The F-35 would smoke the Rafale. The frogs know this and want to offload it to the Indians asap. The Indians are increasingly experiencing buyer's remorse buying an expensive turd no one else wants.

Anonymous said...

Hal building Rafale ????

Jane bhi do yaron.

Anonymous said...

@del - Very interesting points Shiv. I was unaware of these 3 details.

1. I am not sure how HAL wants to hold Dassault responsible by putting in a liability clause

2. What Dassault has shared about HAL, where not having the built-up fixed asset capacity is nothing new. I can bet that the Rafale will not only 'cost more', but there will be a 'huge delays' in delivery time by HAL. Past performance indicative of future.

3. Where is the MoD in all this? Why is HAL dictating terms? How is the MoD allowing HAL to dictate terms in this negotiation? HAL has yet to deliver on the following:
a. Basic trainer
b. IJT
c. LCA
d. LCA - Naval version
e. Sukhoi 30MKI - Behind schedule

Why does the Govt. no look at the private sector? We need to move away from HAL to better options within our own country.

Last, given our critical requirement for the AF, just go ahead and buy 126 from Dassault. I view would be to go for 250. Let HAL or anyone else be the sub-contractors.

Anonymous said...

Shut down HAL.

Anonymous said...

Shiv has always been very interested in the Rafale deal as made evident by the nature of his posts. Is there a hidden part of the relationship ?

Are suppliers allowed to change the terms of the tender in India ? Never. Are we discussing it because the company is Dassault in this case ?

If HAL wishes to rake up issues, do you think there is dearth of possibilities. The contract will get doomed if HAL adopts the same approach.

victor raj said...

F-35 is 350 mill. $ per aircraft and Rafale is 156mill. $ per aircraft. Rafale 14000$ operating cost per hour(approx), f-35 31000$ per hour. Don't go by figures given in wiki for f-35 that was excluding enginw , radar and lot of critical equipments. Also it is unproven, single engine, under development, comes with no TOT, delivery may be by 2025, it doesn't suite India's needs, its mostly a stealth attack aircraft not a defender. We need it for protecting our skies. May be Indian Navy can buy f-35 after 7 years for our aircraft carriers.

Shiv Aroor said...

anon @ 12.08pm: 'hidden part of the relationship'? The reason I, and pretty much everyone else is (and should be) interested in the MMRCA programme is because it'll see the single largest outflow of our (Indian) public money on a single defence deal ever. Or are you suggesting that my interest is non-journalistic? In which case, yawn.

Sahil said...

I think HAL is suffering from massive ego problem, as the sole aircraft manufacturer in the country. Its time to rope in some private players into the equation. HAL needs to be reminded that HAL works for the Indian Govt. not the other way around.

Anonymous said...

Serious question : Why HAL does not want to be held liable for the work of its own engineers and technicians ?
They want to be paid for their work but they don't want to be held liable. This is puzzling and worrisome.

Anonymous said...

NSR says ---

The Rafale contract headed in the same way as Scorpene deal...

A bad deal is lot worse than no deal at all when the contract reported costs $22 to 30 billions for 126 fighers...extremely exorbitant to consider...

To recover from fast eroding strength of fighters, India must do the following...

Order 40 more Tejas I to keep the manufacturing line warm and use them for ground, tank, strike, and formation attacks to deter Pakistan...

Put HAL on war footing to get the Tejas II design and development going...this is the fighter that should replace Mig-21...not the Rafale...

Bargain hard with Russia for 100% TOT and MOTs of the following fighters and then order enough to arrest the declining numbers...

Since India already manufacturing SU-30MKI, it should go ahead and order some more of it...

Order some more of Mig-29Ks too so that the numbers will go up quickly...

For multi-role fighter bomber, Russians have SU-34 which can carry almost 8 to 10 tonnes of bombs and missiles, etc

Develop and order long range and medium range BVRAAMs so that Pakistan and China will not even dare to come near the border...

I think Rafale with the costs and uncertain TOT/MOTs will cripple Indian defense and its growing business structure...

Brazil and UAE walked away from the Rafale deal because of the cost and technology sharing issues...

So India should do so too...

Best regards to Shiv Aroor...

Manoj K. said...

From the content of the comments (well, except few ones), one can easily deduce the level of knowledge regarding MMRCA possessed by those commentators. I will humbly request those elite commentators to point out a single task which can not be performed by existing aircrafts.

Moreover, if IAF is really worried about depletion of squadron strength, why can't IAF order more Su-30 MKI fighters from HAL ? In comparison, Su-30 MKI is more powerful with a lower price tag and IAF will save precious foreign exchange to the tune of $ 20 Billion.

I was amazed to find one particular comment questioning @ShivAroor's motive for bringing MMRCA topic to focus. Had the commentator researched a bit about @ShivAroor & his journey of Defence journalism before commenting, such laughable allegations would have been avoided.

aero said...

dassault is afraid that HAL will absorb the technology involved in advanced composites to its other programs. Dassault is afraid that HAL will absorb AESA radar tech and apply the expertise gained to develop radars for SU-30,LCA and FGFA. Dassault is afraid that the engine tech will be absorbed by HAL and develop its own engine for HAL programs. where as this will not be the case with Reliance. Kits from dassault aviation will land in bengaluru in containers.technicians poached by reliance from HAL will open the containers and screw the screws as specified by their masters in france.This the technology will remain with france.Thats why France is scared of HAL. HAL is India!!!! please note HAL builds LCA as per designs of ADA!!!!

Anonymous said...

90% 'Made in India' ??

Dude its Assemble in India, at least you should speak up truth.

a) is components are made in India ? (if yes then what percentage ?)

b) if HAL is unable to assemble and test then I don't know what else they can do

c) 20 billion dollor, GoI could have bought SAAB and its manufacturing facility - and avoided all of the mess

Sancho said...

"two years ago when it was revealed that Dassault wanted to built some of its aircraft with Reliance Industries' new defence business"

Can you elaborate this in more detail, since the relation between Reliance and Dassault is not much reported. Did they wanted to produce complete Fighters, or an increased workshare? How far is Reliance with setting up their production facilities compared to HAL?

Anonymous said...

REALITY CHECK,, PRESENT F35 PRICES $108 million per F-35A, $134 million per F-35B and $125 million per F-35C. Lockheed just sold
at the following prices.
For 29 F-35s for the U.S. — including 19 F-35As, six F-35Bs and four F-35Cs — the first two F-35As for Israel, the first four F-35As for Japan, along with two F-35As for Norway, two F-35As for Italy and four F-35Bs for the United Kingdom, according to the release

Pentagon: Latest F-35 Deal Shaves Unit Cost by 4% | DoD Buzz

That's a 3.6 percent reduction since the last batch and its seems that there will be a 15 percent reduction when the F35 is in full production by 2019

victor raj said...

Your c option is very good. Iam not sure why India is ignoring it. May be because of our volatile enemies china and pakistanPakistan.

Anonymous said...

Anon @5:23 AM

That last statement made my day.

Anyways, isn't it like that....always ?
We never absorbed Mirage tech properly, neither did we played with Sukhois. Honestly, is this same HAL from Marut era ?

While mostly people say that we should learn from our imports, why can't we develop something on our own ? Rafale is no game changer, but a continuation of bureaucratic cycles.

sivbal said...

Bases on my experience HAL is just an airframe assembler. They will not take up a little bit of R&D. If that's the case they would have taken the lead role in developing LCA. Also every one know the fate of IJT and the trainer aircraft Deepak which caused many rookie pilot's life.
HAL absorbing sophisticated technology is a big joke.
I am not sure how dassault can be responsible for aircrafts HAL is building?
Compare to SU-30MKI rafale is a generation ahead. LCA is very low in range. Also what ever war footing you put the HAL they will not deliver.first let them deliver the first lot of production tejas on time.
I don't know why HAL want to built all the aircrafts that India needs starting from basic trainer to medium transports. This PSU that doesn't follow delivery schedule wants to become the sole airframer in the country to compromise our country's defences from the sky!!

Anonymous said...

I liked the comment that we could have bought SAAB for $20B and all the jets. I entirely agree with that. French are too expensive for what we get. We paid $40million per aircraft to upgrade mirage 2000. We could have kept the Mirage 2000 and bought 30 new Gripens. One rafale maybe better than one Gripen but 3 Gripens are much better than 1 Rafale. For some reason IAF loves French toys. We keep telling ourself that they are reliable partners. Now they have shown their true colors by not delivering Mistral ships for which Russians have paid in full. If we fight a war that they disapprove we may not get the birds when we need them. We should walk away from this black hole deal.

Ron said...

any update from the meeting?I heard there has been some progress in the matter

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Jerrick Kant said...

Offence or defence, air-to-air or air-to-ground, whatever the scenario.. the F-35A still smokes the Rafale. Cost is only $108 million and falling fast.

We're the only dunderheads in the world willing to pay over $20bn for a 4th gen fighter. Advanced 4th gen... but still 4th gen.

Chinese are probably laughing away.

Anonymous said...

@anon 8:35 pm. I disagree with your opinion on the capability of the Rafale and its price tag in comparison to the gripen.

However, I am in complete agreement with your thesis that the French are as likely to armtwist the IAF as the US in times of disagreement with India's national interest. Your example of the mistral deal is spot on. If they are doing it to the ruskies they sure as hell would not blink if they feel the need to do it to India.

I wonder if they realise that they could be creating a credibility deficit for themselves as trading partners.

Gilberto Rezende-Rio Grande/RS said...

Shiv as Modi gov is more near to the private sector their options must be:
1) HAL must be "tamed" to behave better;
2) bring Reliance Industries as Prime Contractor in MMRCA as Dassault want just to the beginning;

Dassault is a private french company and is comprehensive that it is not comfort in a tide relationship with a Indian State company like HAL. The companys cultures are opposite.

Here in F-X2 Brazilian programme the similarity in corporate cultures between SAAB and Embraer play a major role in how fast our agreement was signed. Even with the major issue that SAAB don't have the 8 Gripen F (biplace) required by FAB (Brazilian Air Force) because this variant was not ordered by Sweden. Now it will be developed to Brazil with Embraer. We buy the Gripen E and a develop program to the Gripen F (and a potential one to a Sea Gripen).
Currently BR Navy have ask SAAB a technical study if a Naval gripen variant could full operate in our Aircraft-Carrier "São Paulo" (ex-french Foch).
The vessel was recently ordered to a "India's Like" major modernization that will last to the end of 2018 and could extend its operational life for more three decades, if BR Navy could change the A-4 Skyhawk for a Sea Gripen Variant.
I tell you all about because before the selection of Gripen, in 2010, our Defense Ministry ordered that the BR Navy will operate a Naval variant of the F-X2 winner for BRAF. Based on that naval planners considered that if Super Hornet or Rafale wins BEFORE BR Navy will need a NEW air-carrier and then thinked that there is no chance that a Sea Gripen programme would be financed by our gov.
But Gripen is the winner and the "Gripen F" by SAAB/Embraer get already the green light! If a Sea Gripen could operate in our current aircraft-carrier the Sea Gripen development programme could be put underway immediately !
BETTER as India Military forces are (after US Navy) the greatest defenders of the operational use of biplace air fighters since the experience of Mirage 2000H in Kargil War in 1999.

As the Gripen F for BRAF has a green light it would be wise for BR Navy join the programme and adopt the Sea Gripen only in biplace form. Using the WSO US Navy doctrine.
This plane could light the interest of India and as the Gripen uses a similar engine to the Tejas Mark II, BR and IN Navy could negotiate co-participation on the development of US Navy F414-EPE engine that could be The final pull US Navy to order the production of this new engine with 116 kN (18% more thrust), well desirable in a Navy fighter... :)

Anonymous said...

Not getting into the debate of wether rafale is worth it or not. Recently airbus reduced its stake in dassault by 4% for 990 million USD. That makes it 24 billion for 100%......food for thought.....

Anonymous said...

While french think IAF pilots can work wonder with rafale, they have no faith in HAl!!! Why?

HAL's SU-30 MKI production with composites developed from tejas program is an example of how good or bad HAl is.

If they can trust RIL, which had next to nill experience what is wrong with HAL?

Reason is with RIL there will be nill transfer of tech with cloak on real cost. With HAL it could not be done.

Anonymous said...

Well all said and done the Gripen does not serve the purpose the IAF is looking for and its not kickbacks it is a part of the bigger puzzle that will be reveled after 2018

Anonymous said...

HAL has becoming a non-state rogue entity.

Anonymous said...

India should ditch rafale as in case of Russian mistral delivery ,it can ditch india also

Suren Singh Sahni said...

Rafale is the most lethal fighter better than any. In simulated dog fights it thrashed F22and F35 in flight Global web sites. It carries the most weapons than any other fighter. Wisely chosen by India.

Anonymous said...

@Manoj K
Let's recall Operation Safed Sagar for Kargil. The MIGs failed to perform well at high altitudes, which required the IAF to bring in Mirage 2000, which performed admirably. Now Mirage 2000 was introduced way back in 1984. Don't you think Rafale is an appropriate requirement, given IAF's experience with its fleet in an actual conflict?
Another issue plaguing the IAF is the aircraft maintenance downtime and the availability of suppliers and spares. In both cases, the Russians have more of a problem than a help. Dassault, with its modular aircraft design and its demonstrated support capabilities during Kargil performs admirably in both cases. Again, experience trumps an argument, don't you think?

Dalip Bhati said...

The French are playing pricey and snobbish by saying we cannot absorb the technology Arre just wait a while and see what India does

Anonymous said...

Shiv heard of "Skunk Works 2015".
If you have pls post

Anonymous said...

I think is time India scraps the MMRCA deal and goes ahead with indigenous LCA and LCA-MKII. Its not worth spending 30 Billion on an aircraft which has been rejected by most of the countries.Instead spend half of it on LCA to make it a more capable fighter.

Anonymous said...

They're building the Su 30s...pretty well at that!