The NDA governments 2016 purchase of 36 Rafale fighter aircraft has turned into a political controversy and generated sound and fury in the monsoon session of Parliament, with the Congress questioning the price of the aircraft and alleging crony capitalism. The government has refused to disclose the price of the deal, citing a confidentiality clause with France and reasons of national security. The impasse continues. The full facts of the case should be known when the Comptroller and Auditor General of India (CAG) tables its report before Parliament sometime this year. Until then, here are the big questions raised about the deal and the answers, based on the best obtainable version of the truth.

NDA paid higher price for Rafale, UPA's Rafale was cheaper

The crux of the entire controversy are allegations that the Narendra Modi government paid a higher price for the 36 Rafale fighter jets than what the UPA had agreed to pay for 126 Rafales in 2012.

The comparison is unfounded because while the NDA actually signed the deal, the UPA hadn't. What doesn't help is the fact that neither government has released the exact cost break-ups of both deals so far. The NDA hinted it had got a better deal when Prime Minister Modi sprung a surprise by announcing it during a state visit to France in April 2015. The MoU signed by Prime Minister Modi and then French president Francois Hollande in 2015 referred to the MMRCA (Medium Multi-Role Combat Aircraft) contract initiated by the Manmohan Singh government in 2004, by agreeing to conclude an inter-governmental agreement (IGA) for supply of aircraft on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway.

The UPA did not reveal the price quoted by Dassault Aviation in 2011 due to which the French warplane maker made it as L-1 or lowest bidder in January 2012. The deal was subsequently logjammed for over two years because the Ministry of Defence (MoD) and Dassault Aviation could not decide on who would take responsibility for the 108 Rafales that would be manufactured under licence in India-HAL or Dassault.

The mammoth price tag possibly also induced a certain amount of purchase anxiety. When the Cabinet Committee on Security (CCS) had approved the deal in 2007, the MoD envisaged an outgo of $10 billion (Rs 39,000 crore) for the 126 aircraft. This figure was clearly unrealistic as the contract progressed.

Defence analyst Nitin Gokhale's book Securing India the Modi Way mentions that the MoD had, in 2011, benchmarked the total cost of acquisition at Rs 163,403 crore (approximately 23 billion the MoD's entire defence budget for that year).

Going by this figure, the 126 Rafales would have a flyaway cost of Rs 1,296 crore per aircraft. But this total cost of acquisition, as Gokhale adds, was different from the total cost of deliverables in the 126 MMRCA contract, which was benchmarked by the MoD at Rs 69,456 crore, excluding the offset loading cost, estimated to be anywhere between Rs 2,530 crore and Rs 5,060 crore.

The HAL-MoD-Dassault impasse continued even as the NDA assumed office in 2014. In 2015, the government decided to scrap the deal and go for a fresh government-to-government or G2G deal, opting for a smaller number of aircraft because of budgetary reasons. We asked the IAF what was the minimum number of Rafales they needed to meet their combat requirement; 36 is the number they came back to us with, says a senior government official. The Modi government went in for a G2G deal as an emergency procurement. G2G deals are inherently favoured for a variety of reasons because they shorten procurement cycles and cement strategic partnerships. The NDA-1 government signed the massive Su-30MKI deal to import and licence-produce 140 Su-30MKIs from Russia for Rs 22,000 crore in 2000. The UPA signed G2G deals worth over $10 billion with the US for maritime patrol aircraft and heavy lift aircraft between 2006 and 2012.

Off-the-record briefings by the MoD soon after the contract for 36 Rafales was inked in 2016 indicated that a price of 7.8 billion (Rs 59,000 crore) was agreed upon for the 36 aircraft5 billion for the aircraft and 2.85 billion for its weapons and certain India-specific enhancements.

The weapons included Meteor air-to-air missiles and SCALP air-to-ground cruise missiles worth 700 million that were not part of the original MMRCA contract. These India-specific enhancements, one senior government official said in another off-the-record briefing, came at the request of the IAF and were meant to ensure optimal utilisation of a lesser number of Rafales. They included spare parts and performance-based logistics under which the Original Equipment Manufacturer (OEM) would ensure that the aircraft would be available 75 per cent of the time, and hence able to generate more sorties. It would mean the two Rafale squadrons would be equal to 3.5 squadrons of the IAF's current mainstay, the Su-30MKIs (which have an availability of only 55 per cent). On March 12 this year, minister of state for defence Subhash Bhamre mentioned a ballpark figure of Rs 670 crore for each Rafale minus the associated equipment, weapons, India-specific enhancements, maintenance support and services. The full facts would be revealed only in the CAG report.

Confidentiality clause prevents disclosure of price of the aircraft deal

At a press conference on November 17 last year, defence minister Nirmala Sitharaman said that the price negotiated by the NDA was much lower than the price negotiated by the UPA when Rafale was found to be L-1. She said that her office would reveal the price later.

But in March, Sitharaman told the Rajya Sabha that as per Article 10 of the IGA between the Government of India and Government of France on the purchase of Rafale aircraft, the protection of the classified information and material exchanged under IGA is governed by the provisions of the security agreement signed between the two nations in 2008. On July 20, Congress president Rahul Gandhi alleged that Sitharaman had lied to Parliament at PM Modi's behest and that the president of France had told him there was no secrecy pact with France.

Defence Minister Nirmala Sitharaman and Rahul Gandhi during the no-confidence motion debate in Lok Sabha on July 20

His statement drew an unusual response from Frances foreign ministry, drawing attention to the 2008 security agreement which legally binds the two states to protect the classified information provided by the partner, that could impact security and operational capabilities of the defence equipment of India or France, the ministry said.

The deal has two aspects, commercial and technical, weapons and the capabilities of the aircraft and what it cost the nation. While technical capabilities of the aircraft could be deemed classified from the point of national security, there is nothing that prevents the government from disclosing the commercial aspects of the contract to Parliament. The Parliamentary Standing Committee on Defence, which comprises representatives of all political parties, routinely receives briefings on sensitive matters of national security from the armed forces, government agencies and the defence ministry. This, in fact, was hinted at by French President Emmanuel Macron in an interview to India today on March 7, 2018. There are some discussions to be organised by the Indian government and they will have to consider which details they will want to be revealed to the opposition and to the Parliament, he said. In other words, it was up to the Indian government to decide what it wanted to discuss with Parliament.

Reliance got to make the aircraft instead of public sector HAL

In his statement in the Lok Sabha on July 20, Congress president Rahul Gandhi said that the Rafale deal has been taken away from HAL and given to a businessman who has benefitted Rs 45,000 crore. The gentleman has never built an aeroplane in his whole life. There is no proposal for Rafale to build the aircraft locally as these are being procured off-the-shelf. What the Congress president was referring to is the offset plan under which Dassault Aviation is to partner with Anil Ambani's Reliance Defence to reinvest 50 per cent of the 36 Rafale deal from partners in Indian industry.

Introduced in 2007, defence offsets are where an OEM has to source between 30 and 50 per cent of the value of a defence contract from the Indian market. In the case of the 36 Rafales, Dassault Aviation has to procure nearly Rs 30,000 crore worth of components and services from Indian industry.

Documents provided by Dassault Aviation indicate the Dassault-Reliance JV is one of the 72 partnerships Dassault has forged with Indian industry. Others on the list include Snecma-HAL Aerospace for engine components, Samtel for multi-function cockpit displays, Godrej, Larsen & Toubro and Tata Advanced Systems.

On October 27, 2017, Anil Ambani and Dassault CEO Eric Trappier laid the foundation stone for a new facility to produce parts of the Falcon business jets under Dassault Reliance Aerospace Limited (DRAL), a 51:49 joint venture between Dassault and Reliance Defence. The facility started commercial production of Dassault's Falcon business jet cockpits in April this year.

The MoDs Defence Procurement Policy leaves the choice of offset partner to the OEM. No offset agreements in the Rafale deal have so far been communicated to the MoD. This is not unusual because under the offset policy, vendors or OEMs are permitted to provide details of their Indian Offset Partners (IOP) either at the time of seeking offset credits or one year prior to discharge of offset obligations, Bhamre told Parliament in March this year.

Procedures bypassed, CCS approval not taken

The Defence Procurement Procedure, which governs all MoD capital acquisitions, mandates that all deals over Rs 3,000 crore be approved by the CCS. The CCS is chaired by the prime minister and includes the cabinet ministers for home, defence, finance and external affairs. It is India's topmost decision-making body for national security. In the case of the 36 Rafales, the deal was announced by Prime Minister Modi in France and inked in an MoU in April 2015. CCS approval for the deal came only on August 24, 2016, or 16 months after the MoU in Paris and exactly a month before the deal was finally signed by French defence minister Jean-Yves Le Drian and his counterpart Manohar Parrikar in New Delhi on September 23, 2016.

However, Paragraph 71 of the DPP, which covers IGA's, mentions occasions when procurements would have to be done from friendly foreign countries, which may be necessitated due to geostrategic advantages that are likely to accrue to our country. Such procurements would not classically follow the Standard Procurement Procedure and the Standard Contract Document, but would be based on mutually agreed provisions by the governments of both the countries. Such procurements will be done based on an IGA after clearance from the CFA (Competent Financial Authority). The CFA in this case is the CCS. But here again, the government seems to be in the clear.

What was announced in April 2015 was only an intent to buy an aircraft. Intentions to buy do not require a formal clearance by the CCS. It is only an IGA, which needs to be cleared and in this case, it was approved a month before the deal was signed in September 2016, says Amit Cowshish, former financial advisor (acquisitions) in the MoD. For how much, we don't know for yet. With the government now hardening its stance and dogged about not revealing this price, it is left to the CAG to reveal the truth about the Rafale deal.