And when did this proposal start? The necessity was felt by the forces in 2001, that is post Kargil. The enemy was on the mountain top and we were using the Bofors guns to fire at them, and it took us three months to get rid of them. If we had combat aircraft of a multirole, and you could strike from a 50 or a 100 km distance on target from the aircraft, the whole war game would have been different. Therefore, the forces felt that you need this combat aircraft which is fully loaded and is multirole, so it performs many functions, the details of which we cannot go into and that is what the Raksha Mantri rightly said, because these are national security considerations.
2001 is when the need was felt, 2003 the acceptance of necessity was recorded, and 2004 the UPA came. Both our neighbours are empowered in this area, China more so. The UPA itself put out the tender, got offers, shortlisted two, in 2007 asked for the price bids, found Rafale to be the L1, cheapest, and spent close to a decade, till 2012, shortlisted on price and quality Rafale. And, for some reason, that indecisive government, then turned around and said it needs to be re-examined and facts have to be reconsidered and then put it in the cold storage.
India’s security was compromised. I have, therefore, in the questions that I have raised today, was it policy paralysis or decision paralysis that you allow India’s security to be compromised by indefinitely not taking a decision or was there any collateral consideration which compelled you to just abandon it and put India’s security at risk? After all, once you have gone through a tendering process. There are two ways in which defence forces acquire their acquisitions -- either by competitive bidding or by an inter-governmental agreement. India and Russia have had several intergovernmental agreements in the past, we have a history. They went through a competitive bidding, shortlisted and then virtually abandoned it. The forces were crying foul that we need to enhance our combat ability because we live in a troubled zone.
Therefore, my first set of questions to the UPA is, why did you indefinitely delay it? Why did you abandon it? Did you not seriously compromise India’s national security when you did this? And then what happens is the next phase, when in 2014, the NDA government came into power.
You are questioning their (Congress) motive regarding questioning you about the Rafale…They have no issues on Rafale being the preferred choice. After all it was the UPA government which decided. Not the Euro fighter and not the others which bid. L1 was Rafale. In fact, they selected 126 aircraft and they were going in for 126 aircraft for (Rs) 526 crore (each). Then comes the NDA and decides that no, we do not want this. We do not want HAL (Hindustan Aeronautics Limited) and we would rather go for just 36. That is the problem that they have, that where are the specifications, how much did you pay and why extra?
Let us come to the pricing issue. I am going to tell you something that is very limited because I am raising some questions, let them (Congress and Rahul Gandhi) answer it. Every fact that they have said on pricing is factually false, I repeat, every fact is false and not one fact is true. Mr Rahul Gandhi
himself has given seven different prices in different speeches with regard to the Rafale, that is the 2007 offer. And the simple case is they have made it as if it is a kindergarten or primary school debate.
Well, I was paying 500 and something, You have paid 1600 and something. That is the argument being given. It shows how little understanding he has. I have, at least twice, repeated this sentence, how much does he know and when will he know? Can you compare a basic aircraft’s pricing with a loaded aircraft? Can you compare a simple aircraft with a weaponised aircraft? So let us now, for this purpose, and I am going to give you a broad fact, and, therefore, put this question to them. 2007 they accepted the L1 price. What was the price? The basic price was, let us say X. The basic price X had an escalation clause that till such day each aircraft is delivered, the price will keep escalating.
If in 2012 they had come to an agreement, the first would have been delivered in 2017. From 2007 to 2017 the escalations would have gone up, along with a foreign exchange variation. So there is India specific add-ons and the foreign exchange variants.
Let us first see the basic price of the aircraft without add-ons. Is the Congress party aware that if you take the 2007 L1 offer and the escalation clause without the add-ons, the price negotiated in 2015-16 is cheaper? How did this arise?
The price that the NDA government negotiated is cheaper than the 2007 price with escalations. How can that be possible?
That is factually correct. I am making an assertion.
Even an apple costs more than what it did six years ago.
To the apple, you add the escalations. So 2007 price, plus, let us assume this contract is signed in 2016. From 2005 to 2016, take the basic price, the escalation and the foreign exchange cost. In 2015, the Indian Prime Minister and French President agreed that you will have 36 fully loaded aircraft being given to India. They will not be manufactured in India, and these will be given on terms cheaper than the 2007 terms, better terms. I am asking a basic question, you can take the simple aircraft and the fully loaded aircraft. The 2007 offer had both. What was negotiated from 2015 to 2016 and finally executed in 2016, with the escalations and the currency variations, the basic aircraft price turns out to be 9 per cent cheaper. Is the Congress party aware of this?
The 9 per cent cheaper price that you are talking about, two of your former NDA colleagues, besides Mr Rahul Gandhi…
They haven’t looked at the file. You see, those NDA colleagues, if they were in NDA, would be speaking a different language. Our tragedy in the NDA has been, particularly in the BJP, we have had a fair share of career nationalists. They are nationalists and with us as long as it suits their career. And, therefore, when they speak a contrarian language, I don’t attach much credibility to them.
One of them has also been involved with the Bofors investigation as a journalist; they now see merit in the Congress party’s allegation. They have said this discrepancy in price amounts to a loss of (Rs) 35,000 crore to the exchequer.
I think you can mention any figure. Somebody might be involved as a journalist, I was involved as a lawyer in the Bofors investigation so I know more than what the files say. There was Mr Quattrocchi’s bank accounts, there were people being paid. If you had the slightest ethical integrity, Bofors was a case where we detected the bank accounts into which the Swedish companies paid the money in Switzerland. We were able to identify the beneficial owners of those bank accounts, and one of the owners was somebody then close to the ruling party or the ruling family, Mr Quattrocchi. Now, where are all these facts? It is a government to government agreement. The Government of India and the Government of France. Therefore, there is no private party in this contract.
The allegation that the Congress is making is, the way it is similar is, that there is some sort of crony capitalism with regard to the (Rafale) offsets.
Let us first come to the pricing. My question therefore is, if you are fully aware -- Mr (AK) Antony fully read the file and abandoned the contract -- he would tell his party that the L1 offer of 2007 had a basic 2007 price plus escalation plus currency variation. In 2015 or 16, this would have been 9 per cent costlier than what the basic aircraft price of 2016 negotiated was. My second question is, are they aware of this fact, or have their ministers who dealt with it and know the file, told them that if it was a fully weaponised loaded aircraft? Loaded to unloaded, you compare the price again. The 2016 price is 20 per cent cheaper than the 2007 offer. So we got it cheaper.
What is lack of educated debate on this subject is -- take my basic price of 2007, forget the escalation clause, currency variations, loading of all weaponry and compare it with a loaded weapon in 2016. The difference in the two escalation clauses were -- 2007 had a fixed escalation clause, 2016 had an escalation clause linked only to the European rate of inflation, which is just a little over 1 per cent. Therefore, every term, as per the 2015 arrangement, is a more favourable term than what was in 2007. Not only that, aircraft are required to be serviced. If there is something temporarily out of order that has to be replaced.
There are a series of terms, which I am not in a position to disclose, each one of them is more favourable than the 2007 offer. Without knowing any of these facts, you simply start comparing apples and oranges, compare the cost of a loaded aircraft with a basic aircraft, it doesn’t happen in this manner. So my first set of questions is -- you compromised national security, you have not given any reason why you delayed it for 10 years. The combat ability of our forces had to be increased; we live in a troubled zone. My second set of questions is, are you aware before raking up this controversy and hurting India’s defence that all the pricing criteria in the 2015 offer is more favourable at every stage than the 2007 offer?
When you did this deal the allegation against your government is that the deal was done bypassing the Cabinet Committee on Security and all kinds of defence and acquisition.
That is the third lie. The charge is, there was no price negotiation committee, no contract negotiation committee, no Cabinet Committee on Security; it was top driven. You see, the government doesn’t function like this.
Their allegation is that your government functions like this.
The allegation, as I said, every word is false. Every word is reported and let me ask them the question. When the Prime Minister has a negotiation with France, obviously he gets briefed by the forces and Defence Ministry. This is required, this was almost about to be completed, and it is not done. Therefore, we need these aircraft. Therefore, you enter into a preliminary arrangement that we are willing to buy on terms which will be agreed on 36 aircraft. Manufactured there and supplied here, not to be manufactured here, so no private party has any role in manufacturing here.
Wasn’t HAL supposed to manufacture, as per the earlier deal?
The earlier L1 offer was that 18 will be supplied and rest will be manufactured. I am not getting into HAL issue at the moment as there is a retail correspondence on why that did not happen. Probably that was one of the considerations that weighed with the UPA in the abandoned deal, because they had serious doubts about manufacturing abilities in India.
Once this preliminary arrangement is entered, we decided, let us negotiate better terms than 2007. The price negotiation committee of India and France meets for 14 months. The contract negotiation committee goes on for 14 months. So the next lie, is Mr Rahul Gandhi
and his party aware that the PNC and CNC went on for 14 months and finally produced a contract with terms more favourable than 2007?
The CCS was aware of these negotiations?
Once the contract is finalised, before it is executed, it goes to the CCS. Is Mr Rahul Gandhi aware that the CCS approves it? It is only then that the contract is signed. Every allegation on PNC, CNC, CCS is false.
The Congress is levelling charges that your party, when it was the offset deal that you were talking about, there is crony capitalism involved. There is the Anil Ambani factor and his closeness to the members of your party.
The Congress Party must remember that it can’t fool people all the time. Let us be clear, this is a government to government arrangement. Offset has nothing to do with this contract. There are 100s of offsets in India. The Government will purchase 36 fully-loaded aircraft coming all the way from France, manufactured in France, no private party involved. The Government of India’s role ends. Under a policy devised by the UPA, every defence supplier (original equipment manufacturer or OEM) has to undertake some offsets. About 30 per cent of the total contract value, he has to in future start making purchases from India. Who will he make purchases from? He selects his own partners. Those purchases have nothing to do with Rafale or these aircraft. He could be buying guns, pistols, binoculars or some spare parts. For this purpose, not only Rafale but every defence manufacturer has to enter into offset contracts.
They enter into offset contracts in India’s private sector or public sector. Dassault can also enter into contracts with whoever they want and the Government of India has nothing to do with it. They won’t enter into with only one. They may enter into offsets with several companies in both the private and the public sectors. In fact, Dassault has also entered into one contract for offset with public sector in India.
So at no point did the NDA recommend to Dassault to take Anil Ambani or HAL?
This is not the first defence purchase. There have been dozens, if not hundreds of defence purchases. Every OEM does his offset purchases.
But the quantum in this is so large, hence, the query.
Quantum in defence is always large. Therefore, quantum doesn’t mean anything. Please produce a shred of evidence that the Government of India has anything to do with any of the offset suppliers for any contract, whether under UPA or NDA. That is an independent right of a supplier that since you have made it obligatory for me to make such purchases and take supplies from India, I will take it from whoever I want.
Another question is, since we are talking about offsets, HAL gets nothing. Now, in the new deal, they neither get to make the aircraft, and they don’t even get in the sense of offsets because they are competing with private.
I am afraid HAL has a sufficient order line to keep themselves reasonably busy. Therefore, there are other PSUs that are getting it. Question is, if IAF needs the aircraft immediately, do they wait for an Indian company to acquire expertise to then start manufacturing without knowing the ability of how good an aircraft they can manufacture and wait till the cows come home before you get the aircraft in hand? Or is it that you need urgently. UPA wasted 10 years, NDA was not willing for this kind of policy paralysis in decision making. So, the fully loaded aircraft will come, we will pay for them, that is our only deal. Who they purchase their aircraft from is Dassault’s prerogative.
The purchase of the aircraft, it took 10 years. You had an issue with the way purchases were done, and you shelved that. Why did you have to continue with the offset mechanism? Why not shelve that also and change the offset mechanism to help the PSUs under Make in India.
There is a larger public interest, and policies are not changed regularly. The object of offsets is also that India had no defence manufacturing potential. Firstly, PSUs came up, some potential came up. Now the private sector has started coming in. Today we changed the policy to allow even the private sector to start manufacturing in collaboration with foreign principles. Public sector can also enter into those collaborations. HAL can still enter into a re-collaboration. HAL is, in fact, entering into collaborations with foreign principles to start manufacturing in various areas. Now the sky is the limit. The question is that the object behind the offset policy of the UPA was that you must augment domestic capacities and the foreign supplier must buy 30 per cent equivalent from Indian manufacturers so that some capacity building takes place. Why should we abandon that?
You don’t want to get into protectionism?
What was the priority? We couldn’t mistake chalk for cheese. Priority was the Air Force combat requirement. For that we can’t say this must wait till a training session of Indian companies, private and public, takes place.
You have been Defence Minister too. I would want to ask you this question -- you raised this part about national security being compromised. Can you elaborate a little bit about how our combat strength and squadrons were affected?
Because of age, a number of squadrons were being depleted. If you delay a transaction by 12, 15 years, the depletion is all the more. The Kargil experience taught our forces, and similarly, seeing the competitive strength of other forces, you needed this combat strength immediately. You could not afford to wait any longer and say we will wait for 10-20 years till we are technologically savvy to undertake manufacturing ourselves.
Therefore, the government decided that the best interest is to get 36 fully loaded aircraft so that the IAF has the capacity and let us get it on terms better than the 2007 offer. Once we negotiated the deal, it is in perfect national interest.
If you look at the big picture, you have a Congress party which had a scandalous past in defence deals, the kickbacks of the 1980s. You had a Congress party which delayed for over a decade the Rafale purchase, which for some unknown reason abandoned the purchase after short-listing it. And then, after compromising national security, my next question is, without knowing the facts you raise a red herring on pricing. When the 2016 price for both bare and loaded aircraft is more favourable than the 2007 pricing, you raise a question on private parties. It is a government to government deal; there is no private party in it. Rafale may have a dozen private and public sector companies supplying to offsets, we are not concerned.
You raised the fact that both Pakistan and China have the MMRCA and Pakistan, in fact, is manufacturing. We are buying. One, our Make in India gets a question mark that we are buying not making. Two, that a country like Pakistan is going to be making aircraft. Why is it that India has not been able to get into any kind of deal with any country to help us make?
For some reason, the Congress party’s approach when it was in power for a long time was extremely retrograde. We will buy 100 per cent from foreign governments and companies but we will not allow India’s private sector to manufacture, and, therefore, defence, for a long time, remained a prerogative of the public sector. Public sector did some good role, therefore, high exclusive technologies were only available with some of the most important foreign companies which were manufacturing in Russia, France, Germany or the United States. You have to enter into collaborations with them.
During Mr (Atal Bihari) Vajpayee’s government, we opened up 26 per cent. When I became Defence Minister in 2014, I made it 49 per cent (FDI). Even at 49 per cent many of them said why should I pass my exclusive technology and intellectual property to a company which is 51 per cent Indian. So, we had to say, in cutting-edge technologies we are willing to go up. Now if you see that process we have started where a large number of Indian companies, whether it is the Tatas or Mahindra or L&T, have started getting into international collaborations with foreign players whether manufacturing aircraft, ships or other weaponry is concerned.
I, in fact, had two small tenures as Defence Minister. I opened it up in the first tenure, finalised a strategic partner policy in the second (Tenure). For each platform, shipping or aircraft or weaponry, the Government of India would identify one strategic partner which would be an Indian company. That company will then get a manufacturing base of that platform in India and government will have to make purchases from them, and they can enter into collaborations with technology suppliers who have huge international experience. That’s the process we are trying to encourage, which all these years has been put on the backburner.
If I was to come back to Rafale, it is not going to be delivered till next year. Is our national security vulnerable at this stage?
I won’t use the word vulnerable. But I think when it is delivered, because once you enter into a contract, the delivery process starts and there is a certain time gap and the delivery takes a certain amount of time. It is not vulnerable in the absence; we have done extremely well in our wars even before that. I think it will be further enhanced. So the object is that with the combat ability being enhanced, the situation for our forces will be much better.
Our fighter squadrons, can they do without the Rafale till 2019?
They have to do it. But I think their combat ability will be hugely strengthened once the Rafales are there.
All through this interview, you have been very critical of Mr Rahul Gandhi saying that he doesn’t know the facts. What prevented the NDA from having a one-on-one discussion with Mr Rahul Gandhi or Sonia Gandhi and discuss the specifications?
Arun Jaitley: That was not the object. We had to know their intention. Any responsible politician will know that government to government transactions are always clean. Governments don’t pay kickbacks. It’s a transaction between the Government of India and the Government of France, publically made and publically declared terms that we will give you an offer better than 2007 and then enter into. But they had already gone home. If you can go to the extent of misquoting (French) President Macron, and saying that he warned me there is no secrecy clause, the French Government denied it, the Government of India showed the secrecy cause in Parliament and then you turn around and say “hoga par main nahin manta” (it must be there but I don’t believe it). If that is the cussed approach, that you say look my party has a legacy of corruption in defence deals, let me make a faint effort to say everybody is corrupt. If that is the political strategy, then please don’t advise us to show official files.
So you are trying to say that they’re trying to whitewash the Bofors deal by making a similar kind of allegation?
They are trying to manufacture a controversy when none exists. As I said, they are guilty of compromising national security. That is a question they have to answer. They are guilty of falsehood on every count. That is a question they have to answer. Whether 2016 price, both of the bare aircraft and loaded aircraft is cheaper than the 2007 price when taken in totality? They are guilty of saying there is a private party in this contract. An offset arrangement which Rafale or somebody else may have with 10 different parties has nothing to do with the Government. They are guilty on that score, and in the process, putting the entire acquisition process which is vital for national security under a shadow.
The Congress party is set to make Rafale into an election issue. It has already begun that. In the next eight months, what is your party’s strategy?
The falsehood of Rahul Gandhi, making truth into a victim and compromising national security will well be a national issue. And that is the effort I am currently engaged in.
Are you going to be campaigning for your party or ignoring all that is being said?
Certainly, our party is always active. In fact, we are always hyperactive and, therefore, once the truth comes out, these are my questions, let them answer. If they don’t answer it or if they try to issue deflection, then I will give my next response.
You are expecting an answer from Mr Rahul Gandhi or Mr AK Antony?
Appropriately, the Congress party and its President should answer. If Mr Antony remembers the facts he could have told what the escalation clauses and currency fluctuation impact were. He would have at least told them. Both Prime Minister Manmohan Singh and Mr Antony would have known that there was a secrecy clause that they signed. Mr Antony signed it, he would have at least told Mr Gandhi before he made a speech in Parliament ‘don’t say this, there is a secrecy clause which I have signed’.
Do you think they are deliberately not telling Mr Gandhi?
That is a presumption I will leave to you and your viewers.