Rafale G2G Deal, Pricing Matter Between Governments of India, France: Dassault Aviation CEO


'I am in India to reinforce partnership between India-France,' CEO of Dassault aviation. Dassault is manufacturing Rafale fighters sought by Indian Air Force. The CEO of Dassault aviation came to India as part of French President's delegation
by Sandeep Unnithan
In his most exhaustive interview yet on the Indo-French Rafale deal, Dassault Aviation CEO Eric Trappier, who is part of visiting French President Emmanuel Macron's trade delegation, talks to Executive Editor Sandeep Unnithan about the confidentiality clause within the contract and why the deal is a win-win for both countries.
Mr Trappier, what brings you to India?
I am here with the President to reinforce the partnership between India and France. I am also here to support the economic forum between the Indian and French industries. I head the French Aeronautical Association which is Dassault and 500 other companies.
We want to reinforce the partnership of French aerospace and Indian aerospace, so this is why I am here. And, obviously, I am here because we sold 36 Rafale and we are processing the performance of the contract to see that everything is going well. I am also here because we are supporting the Make in India policy as per the contract.
As you know, the last time I was in Nagpur (October 2017) to start our facilities part of our joint venture with Reliance. But it is not only this joint venture. We are also working in Bengaluru. We are working in Delhi, Mumbai, Pune and Hyderabad. We are still looking for new partners, not only us at Dassault. We are working with Rafale who are working in aerospace. So this process is underway. It is not only what we do in Nagpur (with Reliance).
I am happy in Nagpur because it is a city that is welcoming us with facilities and we have been able to discuss smart cities. Nagpur is going to become a smart city. So it is important for us to have this environment where we are going to set up these facilities starting with producing the Falcon in India.
Yesterday, your company released a document mentioning 7.4 billion Euros as the price for the Rafale deal.
What was despatched yesterday was an old document as company results in 2016. Those are the figures about our defence exports. And in defence exports, you have the Rafale deal. Just as the year before, in 2015, was the deal with Egypt and Qatar. But in this deal (2016), you also have the deal for the Mirage-2000, (upgrade of IAF's 47 Mirage-2000s signed in 2011) which we are supporting.
The figure you saw is not the figure for the Rafale but for the Rafale and the Mirage (upgrade). The deal was a Government to Government (G2G) deal between the governments of France and India. So the figures given at that time were checked by the government of France.
The price of the Rafale is about the same for every customer. What is different is the scope of the contract, the number of aircrafts, the definition of the aircraft, the bases, the type of support you are buying, and the support and spares.
I can confirm to you that the contract for India is different from the contract for the government of Egypt which is different from the government of Qatar. So there is no comparision of the price. The contracts are different in terms of scope but the price of the aircraft remains the same.
We don't understand the problem. We don't mind so much about it. We mind how our customer, the Ministry of Defence and the Indian Air Force are talking to us. And we are in confidence. But with the Indian Air Force, and we are honored and proud to be chosen by the Indian Air Force, officially, two times — one was the winner of the 126 contract and the second one was when the Indian government decided to proceed with the 36 deal. So everybody is convinced that it is the best aircraft for India. The pricing is a matter of the French government to the Indian government, G2G.
Are you saying that because it was a G2G deal, there have been certain additions to the price, other ancillary and other details?
This is our pricing. In the pricing that we are performing for India, it is roughly the same for Egypt and Qatar.
Then why the confidentiality around the price?
Most of the time, defence deals are confidential in order to not give the price to our competitors and it is the responsibility of the government which is buying the fighters to say whether it wants it to be confidential or not. Both governments have said it is confidential.
Has there been any change in the price of the aircraft?
The order came into our book in 2016. So we had to say "our figure for 2016, as a financial asset, takes into account the order for India". But we are not saying the order for India is worth 7.9 (billion Euros). We are despatching the book of our finances to the market. It is a market obligation. So I am the only one who knows how much it is with the Mirage, how much for the Rafale, and we do not disclose this information. Not to India, not to the public. This is part of the company.
There is talk of a deal for additional Rafales, between 36 and 90. Is this just speculation?
At this stage, I don't know. We are working on the first of the 36. We are working to show that the Rafale is meeting the requirements of the Indian Air Force while at the same time, we are setting up the facilities to prepare for more orders. But that will be later on. We hope that but it is not any deal under preparation at this stage.
Has the IAF shown any interest for additional Rafales?
I think that any Air Force in the world wants more fighters. It is the responsibility of the government to say what is the operational requirement of the Armed Forces and what should be the budget available and then take the decision. It is the same everywhere in the world.
You have an inquiry for the Indian Navy's order for 57 carrier-based fighter aircraft.
Yes, there is an RFI. We are obviously a candidate and we are very serious about it. We feel that we may fit the requirement of the Indian Navy, the existing one as well as the one under construction (IAC-1, Vikrant). As you know, the Rafale has been designed from scratch to be a fighter for the Navy as well as for the Air Force. I am sure it is one of the only aircrafts worldwide which can fulfil all missions-air force, navy, air defence, strike etc.
The MoD released a statement last month — February 8, to be precise — where they said they had not received the offset partner. Whereas the Congress party says that the deal has been done to satisfy a certain industrial house, namely Reliance. Who is correct?
We are working step by step. We have an association with Reliance for Nagpur and as I said, the Nagpur facility seems to be very well because we have the land available, transportation capabilities in Nagpur, an airport, subways in the city. It is going to be a smart city so the economic environment is going to be good.
It is going to be less busy than other cities as Dassault, for our Falcon, we have selected Reliance. It is our offset partner. But it is not the only one. At the same time, we will submit a file to say 'these are our offset partners' and these are our candidates for offsets. So we are not only with this company (Reliance). We are partnering with many other companies. For example, the engine we are partnering with HAL in Bengaluru. Electronics will be mainly in Delhi with Samtel. With BEL electronics in Hyderabad, we have the display systems; we have tools. We will sub-contract tools to many companies which are in India.
Part of the joint venture is to have a 'win-win'. We will have another type of 'win-win' but others also will be filled with some work, provided they are good. As you know that offsets take time and we have some time. So the selection is not over. We are working and this is why I am leading this mission next month in order to enlarge the capability of our association between SMEs. I am also going to work with Indian SMEs.
This offset proposal has to be submitted to the MoD?
Yes, step-by-step. We are informing the MoD step by step.
Have you started the process?
The fact that the Nagpur (Reliance) facility is your offset partner has been given to the MoD?
Yes yes, it is our choice at Dassault. This is the rules of the offset. There are some rules for offsets that the work they are doing can be elected as offsets but the choice is ours. So the choice of Reliance, the choice of HAL, the choice of maybe Larsen and Toubro in some activities, some others, it is going to be a very large panel of companies which are going to be involved in this deal.
There is a component within the Rafale contract for reviving the indigenous Kaveri engine programme. At what stage is this at?
I cannot comment because at this stage, discussions are going on. We are supporting it. Safran is part of the Rafale team. That would give work to Indian agencies as well as Indian industries to support Dassault. The integration for the new engine, which will be seleted by the Indian side, is a good project but the contract is not yet decided.
What role does Dassault have in the engine program?
We have the design know-how. We will support the integration of this new engine in this new aircraft. The main actor in this, of course, is Safran which has the capability to design engines like they did with our M88 engine that is fitted on our Rafale. It is a big deal if they will join with Indian agencies or the Indian industry to develop an engine. There is a need.
There's a certain sense of disappointment in the French ministry. Lot of deals stuck for 8-10 years.
This is why I am happy and this is the reason some others are not. As far as I am concerned, Dassault has work to do. A lot of work to do, not only to satisfy the requirements of Dassault but to set up the facilities (base infrastructure). I think the key is setting up the facilities in the long term. We need to transform our long-term offset obligations into a Make in India-long term commitment between the two companies. One French company and one Indian company could share certain assets together to develop the company together for mutual benefit.
There is a perception that French equipment is as good as, if not better, than US equipment. It is very expensive.
No, I think it is something that the Americans would like it to be. If you compare Apple to Apple, you do not compare the Rafale with the F-16. The Rafale is better than the F-16. You also have to take into account the ratio of the US-Euro exchange rates. Sometimes it is high. Sometimes it is low. You have to be careful how to compare that. If you take, for example, the price of an F-18 or the price of an F-35, it is more expensive than a Rafale, even if they are not capable of all types of mission.
If, for example, you want to go on a modern aircraft carrier, you need to take a V/STOL version. If you want air defence, you have to take another aircraft, that is the F-22. So F-35 was not designed for air defence. So that's two aircrafts — the F-22 and the F-35. The Rafale does both roles. So I am not sure whether sophistication is more expensive. We have been able to make an aircraft which is not so bigger than the Mirage but capable of all types of missions.
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