French President Hollande's visit: Is Rafale on the menu?

As India prepares to receive President Francois Hollande, the fifth French President to be honoured as the Chief Guest at India’s 67th Republic day parade, foremost in the minds of every Indian is the expectation that the Rafale deal will be part of the possible few defence deals signed during his three-day state visit.

France was the first country India signed a strategic partnership with, in 1998, and the two countries have had a close cooperation in nuclear power, defence and space. As France and India recover from major terror attacks in their nations; at Paris in November 2015 and at Pathankot on 2 January 2016; security will be an issue engaging the two sides.

Rafale was chosen as the IAF’s Medium Multi-Role Combat Aircraft (MMRCA) after a gruelling selection process and declared winner in January 2012. Ever since, the two countries were engaged in complex technical and commercial negotiations. 126 aircraft were initially planned to be contracted in a near 20 billion dollar deal, but during Prime Minister Modi’s April 2015 visit to France, the two sides announced an in-principle deal for 36 ready-to-fly Rafale aircrafts at a reportedly concessional price offer. After repeat exchange of delegations, the deal may now have been wrapped up. While the French have reportedly agreed to the reduced price and technology transfer, India has reportedly agreed to reduce offsets from 50 to 30 percent. The benchmark price has already been set in the Egypt and Qatar deals. Qatar is paying US$ 7 billion for 24 Rafale aircrafts. Can it be cheaper for India?

For security reasons, IAF wants to set up two airbases for the 36 Rafale. This means twice the facilities. This indicates that India may have more aircrafts on its mind. The all-in price is likely to be around US$9 billion (Rs 60,000 crore), which includes fly-away aircrafts, weapon systems and a support maintenance package. The IAF is also insisting for the option to use Israeli Helmet Mounted Display System and weapons from other countries. For 'Make in India', the French are also offering Falcon business jets. There is much more action that will unfold soon in this ‘mother of all deals’.

IAF had projected a requirement of 126 aircrafts way back in 2001 to replace strike aircrafts like the MiG-27 and Jaguar, which were to retire by 2015/2020. The MMRCA was to fill the gap between India’s Light Combat Aircraft and the in-service Sukhoi Su-30MKI air superiority fighter. Rafale is an agile aircraft and capable of simultaneously packaging air superiority, interdiction, reconnaissance and airborne nuclear deterrent missions. Rafale also features an advanced avionics suite including active electronically scanned array (AESA) radar. The French government has reportedly cleared full technology transfer with Rafale, including the AESA. Rafale has seen combat in Afghanistan, Libya and Mali. The aircraft will bring new levels of technology and would help India dominate the Indian Ocean region. India would also be discussing Air Independent Propulsion system for submarines, building additional French Scorpene submarines at Mazgaon Docks and a possible point defence missile system.

The Rafale deal is very important for the French defence industry in view of India’s world standing. India was thus at an advantageous position. With the Egypt and Qatar contracts sealed and talks with UAE and Malaysia, the situation has somewhat changed a little. For the IAF, 36 is too small a number to make a sizable operational fleet and will not make good the depleting numbers of IAF’s air assets. Already down to 33 fighter squadrons vis-à-vis the authorised 42, there is speculation that the IAF could procure more aircrafts. Fewer numbers would also mean no ‘Technology Transfer’ and make India dependent on Dassault Aviation for next the four decades for sustenance, upgrade and obsolescence management. For Make-in-India, Dassault was unwilling to be held liable for quality control of aircraft manufactured under license by HAL. The grapevine says that the remaining 60 to 90 aircrafts could be built in India by a private player. The defence arm of Anil Ambani group is the lead contender. Dassault had earlier offered to help Reliance create the Rs 1500 crore (US$ 240 million) factory in Bangalore to produce the wings of the aircraft. Group Company Reliance Infra announced on 5 November 2015 that they were exiting cement and road business to monetise and concentrate on defence. They had earlier acquired controlling stake in Pipavav Defence. If the private sector gets into the Rafale deal, in a single stroke of action, the Indian industry would come in a big way into aircraft building, something which has been dithering since it was opened in 2001.

Even if the contract is signed today, the initial aircraft could come only by 2019. The IAF risks a capability gap with China without these aircrafts. China has over double the number of combat aircraft than India and the gap is widening. Even if all 126 Rafale aircrafts were to be procured, the IAF would reach the sanctioned squadron strength earliest by 2025. At 33 Squadrons, IAF’s edge over Pakistan Air Force has reduced to a low of 1.5:1. The MiG-21s can’t be extended at the cost of safety. Both the FGFA with Russians and DRDO’s LCA are behind schedule. The closer to specifications LCA-2 will not come till 2022. The buildup of India’s military strength has not kept pace with the increasing threat. Of India’s defence requirements, 70% is through imports, 25% with the Defense PSUs and the remaining 5% with private partners. For India to become a global power, indigenous defence manufacturing would have to be strengthened. Rafale could be the one to make this beginning.