Big Indian Political Push Sees #RafaleDeal Through

The splendid irony of the the M-MRCA! After a decade of decidedly non-political tendering and selection based on performance and arithmetic, it has taken a hearty helping of political intervention to push a deal through. The commentary on a selection process that was once trumpeted as patent-worthy is a separate post that's waiting to be written.

The idea that India and France needed to come up with something completely separate from the stubbornly stalled M-MRCA negotiations became clear last year when then Defence Minister Arun Jaitley (who also headed the Finance Ministry in a dual charge) briefed Prime Minister Narendra Modi about the 'stall'. While price negotiations continued at the MoD, the political wheels had no choice but to begin turning. It was the first big indication that a rumours of a collapse were far fetched, and that this government actually intended to get a deal done, whatever that deal was. Pressure from the Indian Air Force helped. Two things began happening in tandem at the time.

The dialogue over 36 Rafales was straight-up political, and did not involve acquisition managers from either side. A channel was opened between the Indian and French governments, which kept the M-MRCA programme teams briefed about progress in discussions. By January this year, the deal was a real option on the table, with India conveying in uncertain terms that if the Indian Air Force were to commit to purchasing 36 Rafales outright, the financial and other terms needed to be markedly better than those under negotiations for the M-MRCA.

In fact, Defence Minister Parrikar was quoted to have said today, "The Rafale fighter deal is a great decision taken on terms and conditions that are better. The jets are to be inducted in IAF in a span of two years."

Parrikar, who played hardball on the M-MRCA negotiations, played (and continues to play) a central role in giving the French government and Dassault the clearest possible message that flexibility would be key to arriving at an 'out of the box' solution de-linked from the MoD negotiations, given that this was a real impasse with no forward movement visible. This happened in February. The French government agreed near instantly to the proposal of 36 aircraft bought outright from Dassault in the full configuration finalised under the M-MRCA technical bid.

Livefist's understanding is that while the the deal for 36 Rafales is separate from the ongoing M-MRCA negotiations (the joint statement clearly states that), there arithmetic is likely to work out as follows: The 36 flyaway Rafales essentially replace the 18 Rafales that were to be purchased outright as part of the M-MRCA, leaving the negotiations to arrive at a deal on the lincense-build of 108 Rafales at HAL. That's 144 Rafale jets under consideration, or eight squadrons. The precise numbers could sway depending on how things move in negotiations -- remember, sticking points over the Dassault-HAL license build remain.

The one solid reality today is this: India will fly the Rafale. There's no longer any doubt about the fact that the French jet will fly in Indian colours. Of course, there are several questions:
  1. Is the new deal an admission that the M-MRCA selection process & 'L1' centric procurement process has essentially failed?
  2. Does the new deal essentially say that the Indian procurement process cannot be purely technical, and will always finally need a political push?
  3. Could this decision have repercussions within the framework of the M-MRCA, in terms of possible action by Eurofighter, the L2 in the contest?
  4. How does the government combat perceptions now that an 'out of the box' political solution was necessary to push through a deal that should have been seen through on merits and negotiations?
  5. What repercussions does the new deal (note, it's still being negotiated) have on India's bargaining power across the M-MRCA table?
  6. Does the new deal get India a better over-all price?

Labels: , , , ,