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Business News/ Opinion / Rafale numbers don’t add up
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Rafale numbers don’t add up

Clarity is required on the deal's India-specific technologies and their industrial viability plan

Photo: ReutersPremium
Photo: Reuters

The Rafale deal is back in the news. This past Thursday, Swaraj Abhiyan founder Prashant Bhushan alleged that the Union government had paid double the price for individual aircraft units. Defence minister Manohar Parrikar responded that this was the “best deal" and one that had not been offered to any other country. On Sunday, Bhushan shot back. He said that the Rafale deal will prove to be another “Bofors" for the Narendra Modi government. The truth, as is usually the case, lies somewhere in the middle.

The Rafale is a great plane and its induction will do a lot for the air force. However, as the dust settles on the excitement over the Indian Air Force’s purchase of the plane, it is becoming increasingly evident that the numbers are very complex and throw up more questions than answers.

As of now the deal for 36 aircraft is valued at a total of $8.9 billion. This translates into a per-unit price of $247 million. The actual planes are valued at $3.78 billion or $105 million per plane. By itself this does not seem like a particularly large blowout of the initial Rafale offer in the 2007 MMRCA tender, where the cost hovered around the $90 million mark.

What’s interesting, however, is how the rest of the money is allocated. A full $1.9 billion will be spent on customizing the aircraft to Indian specifications. Publicly this has included speculation about an Israeli-manufactured helmet-mounted display (HMD). An HMD shows flight and combat-critical information that is displayed on the pilot’s helmet visor. This allows the pilot to cue a missile on to an enemy fighter by simply looking at it.

The Rafale has had a troubled history with this technology. As far back as 2011 some Rafale models were tested with unidentified versions of the HMD. However, till date no HMD has been integrated with the Rafale in French service. This is a particularly glaring omission given that HMDs are considered the sine qua non of modern fighters. Also, $1.9 billion seems far too much money for the purchase and integration of a mere helmet which by no stretch of the imagination can cost almost 50% of the plane itself. This leads one to conclude that there may be several technologies being developed for the Rafale.

The most logical options for this include other major sub-systems that the Rafale currently lacks. The obvious technology choice will be an infrared search and track (IRST) system that allows the plane to carry out a completely passive search of the airspace, checking for the heat exhaust of opposing fighters or missiles. In the modern battlefield, thick with jamming across the electromagnetic spectrum, something as simple as an infrared tracker makes all the difference between life and death.

The other obvious target for improvement in the Rafale is the radar. The current radar of the Rafale—the RBE2—only has a one-way data link to its long-range air-to-air missile, the Meteor. This is a huge disadvantage that effectively squanders the range advantage of the Meteor. What would happen in combat is that the Rafale will fire a Meteor from a great distance at a target; in the case of fighters like the Eurofighter Typhoon and Gripen, which have a two-way data link to the Meteor, they can immediately break off the attack and retreat to a safe place. The missile then acts as eyes at the back of the proverbial head-allowing the pilot to see his target through the missile’s own radar. This is not the case with the Rafale as it will have to continue trailing the Meteors it fires right up to the point of impact to ensure the target is actually destroyed.

If it is in fact these three critical technologies that are being modified to make the Rafale India-specific, then it will be money well spent depending, of course, on who owns the intellectual property rights to these improvements. If this ends up being another case of subsidizing the improvement of other people’s technology at the expense of the Indian taxpayer, then it is safe to conclude that the deal was badly negotiated.

Adding to the apprehension is the defence ministry’s curious usage of the term “offset" as opposed to “industrial participation". “Offset" implies India may not own the technologies it pays to develop and will receive unrelated contracts. On the other hand, “industrial participation" would have implied that the commercial benefits of the technologies could have been exploited in the short to medium term. Realistically speaking, all three technologies are extremely complex, rendering indigenization impossible in the short to medium term. By the time such technologies are transferred, their market viability would be at an end.

It must, however, be noted that the total offset stipulated by the defence ministry stands at 50% or around $4.5 billion, leaving another $2.7 billion unaccounted for. Sadly, Dassault’s choice of local industrial partners does not inspire confidence. In the past, the normal practice has been for companies to pay their “local partner" a fraction of the cost of the offset to simply claim that they had received orders, inflating bills, or double and triple invoicing.

Clearly, greater transparency is required since much of the deal does not add up. The most basic steps must include clarity on the India-specific technologies, their ownership and their industrial viability plan, and the institution of annual third-party audits to ensure that Dassault’s local partners are in fact receiving and executing orders for the full value of the $4.5 billion offset. Till then we can only cross our fingers and hope that this is not a case of history repeating itself.

Abhijit Iyer-Mitra is senior fellow at the Institute of Peace and Conflict Studies.

Comments are welcome at

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Published: 25 Oct 2016, 11:33 PM IST
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