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HAL experts worried about Rafale’s impact on its existence

Most experts in the defence PSU Hindustan Aeronautics Limited (HAL) which is in news for the past two months are worried over the impact of Rafale defence deal and its consequences on its existence. The present disposition and the Defence Minister along with the Indian Air Force are blaming HAL’s capability as the reason for the failure of 2007 Rafale deal.

A HAL senior executive told The Pioneer on the condition anonymity that they have roped in the uniformed officers of IAF to clarify and justify the deal blaming the HAL for delays.

He said “ It is understood that the serving officers can reveal what is permitted ( approved under an internal note-on-file cleared by Secretary of the Ministry of Defence and the Defence minister), while the general public, the parliament and media is not privy to price data of the Rafale deal.

A selective release of data is carried out on Rafale deal and a well-orchestrated defamation campaign against HAL is under way simultaneously”.

“Four operations are simultaneously underway in terms of Rafale deal, “Operation Clarification”, “Operation Justification”, “Operation Diversion of the subject” and “Operation smear campaign against HAL. At the outset let it be known that Rafale is a good aircraft and there is no doubt about that. It is conceded again, at the outset, that current senior officers of IAF were in no way connected to the deal, neither they participated in the negotiations and at best they have inherited the deal and asked to do ‘Operation Justification”, he added.

Air Marshal Raghunath Nambiar, Deputy Chief Air Staff (Plans), in an interview to the press recently has clarified the misinformation being spread about the size of offset business. Air Marshall Nambiar said that IAF has been part of the commercial negotiation for the purchase of MMRCAs. He clarifies that Rafale deal is around Rs 58,000 crore and hence the offset obligation should ideally be Rs 29,000 crore (corresponding to 50% offset). And no single party is getting business of that much amount, not even Dassault. However, the deputy chief says that the deal with Dassault is worth Rs 13,000 Crore and the offset obligations of Dassault is Rs 6,500 crore only.

The executive said. IAF also clarified that DRDO gets a major portion of the offsets. In order to understand this puzzle, it is clarified that aircrafts are not bought as one piece like a car, but the major components are bought separately from respective manufacturers which are fitted into the plane by the manufacturer of the plane. In the case of fighter jets, the number of components and their supplier is much more, and buyers deal directly with them.

Apart from the main airframe, a fighter plane has an engine, weapon systems, missiles, radar systems, electronic warfare systems, evasion systems, ejection seats etc, all of which are made by different companies.

He said “In case of the Rafale deal, there are four main suppliers, Dassault, Safran which makes the engine, Thales which makes several electrical, electronic systems and sensors, and MBDA which will supply missiles. What is not understood is how IAF now understands and sermonises about the need for separate contracts. But in 2007, MMRCA RFP, IAF included a clause that a single contract to be signed by the OEM and guarantees to be given by OEM , even for HAL manufactured aircrafts”.

“It is sad that If IAF insists on guarantees by the OEM, for the machines produced by licenced manufactured by Indian firm, that will sound death knell for the ToT and licence manufacturing in India”, he added.

Amid political slugfest between BJP and Congress, the cause of self-reliance has been side lined. When it is to be manufactured in India, driving factor for making decisions should not be cost alone, it should be coupled with strategic consideration and self-reliance, he insists.

Another officer privy to the entire episode said “In Defence Procurement Procedure document (DPP), the preamble states “Self-reliance is a major corner-stone on which the military capability of any nation must rest. There is also immense potential to leverage the manpower and engineering capability within the country for attaining self-reliance in design, development and manufacturing in defence sector. It is therefore of utmost importance that the concept of ‘Make in India’ remains the focal point of the defence acquisition policy/procedure “.

“ It does not make sense to go into the details of costs involved, since the actual numbers are not available, except stating that, to the price quoted in 2007, it is a standard norm to add escalation (3% or less or as per quoted formula, which depends on LIBOR indices etc.) and catering to Exchange rate variation (ERV)”, he added.

It is debatable whether the DPP 2013, Fast Track Procedure (Chapter IV, page 338-351) is followed for 36 Rafale Contract. The procedure demands an Acceptance of Necessity (AoN) clearance and within seven days a special DAC (Defence Acquisition Council) meeting headed by Defence Minister. It is only after the approval of special DAC, further steps are permitted. DAC should approve as per para 6b, an “option of procuring from friendly countries ex-stock or through lease,” he quotes.

“ Alternatively, “Additional Provisions”, permit (as per paras 22-24, page 344, Chapter IV of DPP 2016,) for Government-to Government Agreements at Appropriate levels. A preliminary reading indicates that the prior approval of DAC is mandatory in the Fast Track procedure, before any Government-to Government Agreements are taken up.

A retired head of a division at HAL on the condition of anonymity says there is no point in going into offsets and offset partners, since HAL has nothing to do with offsets. “In the current mood, HAL would not have recruited more man power, instead would have gone in for substantial subcontracting of the assemblies to Indian vendors. Let us not forget that HAL is the only company in India capable of absorbing Transfer of Technologies,” he justifies his stand.

If This argument is accepted this deal would have created a vibrant eco system of suppliers, which would have eventually led to creation of strong private players in the field.

The make in India of 108 Aircrafts would have generated huge employment. That would be a better option, instead of giving into penchant of IAF to have “Imported toys’ and listening to their favourite pastime of blaming HAL.

As Prime Minister Narendra Modi said It is high time India moves towards the doctrine “Defend the nation with indigenous machines” and the “doctrine of self reliance”.

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