Rafale verdict may hit ‘make in India’

The offset agreement does not have any transfer of technology clause, which could have significantly improved Modi’s pet campaign

By Author Prof V Balakista Reddy   |   Published: 15th Nov 2019   12:13 am

On November 14, 2019, the Supreme Court (SC) pronounced the judgment on the most anticipated review petition on the Rafale deal, which the Indian and French governments had entered into in 2016. The Supreme Court bench, headed by Chief Justice of India Ranjan Gogoi and consisting of Justice SK Kaul and Justice KM Joseph, dismissed the review petition filed by Prashant Bhushan for Yashwant Sinha and others. The apex court upheld its judgment passed in December 2018, in which it rejected probe into the contract issue.

In the review petition, the SC had admitted the documents produced by the petitioners, which were published in certain print and electronic media. The review petition was dismissed on the grounds that there was no apparent error on the face of it and the petitioners lacked merit in the case. It had held that the requirement of aircraft is not disputed and the pricing and offset contracts are within the purview of the officials concerned.

Hence, basing on the suspicion of a person, it cannot delve into the pricing of the aircraft. It also said that it cannot embark on a roving and fishing enquiry under Article 32 of the Constitution, through which the petitioners approached the court. It held that the registration of FIR is not required and investigation will not be ordered by this court as it had examined the case on merits. With respect to the offset partner, it held that the matter is left open to the suppliers and it cannot delve into it.

With these observations, it can be deduced that “the mother of Indian Defence Deals” got clearance from the highest judicial organ of the country. But does this mean a death blow to our own ‘Make in India’ campaign? This is a debatable question. Let us first see the history and the analysis of the deal before arriving at any conclusion.

Tracing Background

Rafale is a twin-jet combat aircraft, which can carry out ground and sea attacks. It can undertake both air-to-ground attacks and air-to-air strikes and interceptions at the same time. The proposal to acquire more aircraft for the Indian Air Force (IAF) started in 2001 and pursuant to this demand, in 2007, Request for Information for Procurement (RFP) was requested by the then government for 126 medium multirole combat aircraft (MMRCA). Six fighter jets were selected and only two were found technically feasible. Out of Rafale from France and Eurofighter Typhoon, manufactured by a consortium of British, German, Spanish and Italian companies, Rafale was chosen as it submitted the lowest bid.

From then, negotiations started and initially, 126 Rafale fighter jets were requested, of which 18 were to be bought off the shelf and 108 to be manufactured in India in collaboration with HAL (Hindustan Aeronautics Ltd). However, the contract hit a roadblock when Dassault Aviation refused to guarantee the aircraft built by HAL. As the negotiations failed, in 2015, the contract for 126 aircraft was withdrawn. However, the deal for 36 fighter jets was initiated with modifications and improvised specifications, and in 2016, a memorandum of understanding was signed by both the Indian and French governments.

The Controversies

There had been many controversies related to price, procedure for choosing the suppliers, offset contractor, etc. However, our major concern is that this deal will impact the “make in India” campaign. India is the largest importer of defence equipment and arms in the world. The Modi government increased the foreign direct investment in the defence sector from 26% to 49% to give a fillip to this campaign and provide opportunities to the domestic small and big companies. Several doubts were raised when the Rafale deal was signed. The controversy related to the question in issue is the offset clause. Usually, offset clause enables domestic companies to get involved in the production and mandates the foreign supplier to invest in our own defence sector companies.

When the Rafale deal was signed, initially for 126 fighter jets, Dassault did not agree to guarantee the products manufactured by HAL, leading to the deadlock. However, in the latest deal between the governments (inter-government agreement), Dassault agreed to retrieve the Kaveri fighter jet engine used in Tejas aircraft. It, however, chose Reliance Defence and established a joint project in India. This had become controversial as it is claimed that there was favouritism to choose the offset contractor.

Who Benefits

The Supreme Court in its judgment felt that it is the choice of the supplier and the government authority concerned. This offset agreement, however, did not have any transfer of technology clause, but can we consider this to be advantageous when the IAF has some urgency for the aircraft? This is left to the opinions of the people to choose. However, the apex court felt that the need of IAF is to be answered first and the rest should be handled by the government.
Therefore, if one considers that the collaborative establishment would help ‘make in India’ campaign as it helps the Kaveri engine, then it is advantageous. But if one thinks, the transfer of technology should have been made, to improve our campaign in future, then the government should have prolonged the negotiations for more years to enter the agreement.

(The author is Professor of Law, Registrar & Head, Centre for Aerospace and Defence Laws, NALSAR University of Law)


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