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IDN TAKE: Price Analysis of Rafale Fighter Deal


by Pannir Selvam K
Rafale had submitted a commercial proposal in 2008-2009, quoting price for 18 Rafale fighters 'in fly-away condition', and 108 fighters to be built in India with transfer of technology.
Now the Congress party alleges that the NDA government is buying 36 Rafales for €7.8 billion ($9.2 billion or Rs. 58,000 crore), had paid more than what Dassault had quoted in the MMRCA tender.
The initial tender was called for in 2007 and the Technical Submission by Dassault Aviation by 2008 quoted 12 billion dollars without any offset class or without any induction bases provision. It works out to 12*1000,000,000*39/128 = Rs. 365 crore.

  • Dollar rate on January 2008 was 39 Indian rupees Vs 1 Dollar
  • The commercial bid was worked based on the unit price (365*55/39 = Rs. 515 crore
  • Dollar rate on November 2012 was Rs. 55 (12-12-2012 Commercial submission)
  • Ghulam Nabi.Azad has disclosed only this price last week in Delhi.(Rs. 524 crore unit price)
  • The rate per unit was converted only for dollars and no other factors were considered by the UPA. It did nothing more than rate conversion and wasted time to decide on this tender

Former Defence Minister, Mr Parrikar is an IIT Graduate and he analyzed all the provisions in the deal and then the Rafael team visited the assembly line of HAL and after this, they changed their mind in giving guarantees to the made in India fighters. HAL was equipped with archaic jigs and tools and the French were clearly not impressed, they feared that the quality of the final product will be very below par set by Dassault. The tender was cancelled in full and IAF suffered too much because of cancellation and falling no of squadrons. Then Prime minister got into action and eventually adopted a Government to Government process to procure the fighters and a revision of price was undertaken. All the Technology advances between 2007 to 2014 are considered and the following clauses were included.
1) 50% offset class, that is 50% to be reinvested in India
2) Two operational combat squadrons induction bases creations, one at Hasimara in West Bengal and another at Ambala in Haryana
3) Maintenance Period has been extended for 12 years with an Operational efficiency of 75%
4) IAF wanted India specific Avionics and weapon systems to be modified and reconfigured to enable the eventual installation of indigenously developed and commercial off the shelf items and weapons including Astra BVR missile 80km Range and future provision
5) Provision for Brahmos Lite Air Version
6) €700 million for weaponry such as Meteor and SCALP missiles, €1.8 billion for spare parts and engines, and €350 million for 'performance-based logistics',
7) Special Delivery schedule by increasing production rate per year
All required new IAF modifications are to be developed tested and then installed which will incur additional cost to the manufacturer and increased risk.
These enhancements include a 'radar warning receiver' to detect enemy radar and 'low band jammers' to foil it; a radio altimeter, Doppler radar, extreme cold weather starting-up devices for airfields like Leh, and 'helmet mounted display sights' that let pilots aim their weapons merely by looking at a target.
Azad said that Egypt and Qatar purchased at lesser price which is not true.
16-2-2015: Egypt purchased 24 fighters at 5.9 billion dollars when the dollar was Rs. 63 and the unit price worked out to Rs. 1,548 crore
15-4-2015: Qatar purchased 24 fighters at 7 billion dollars when the dollar was Rs. 63 and the unit price worked out Rs. 1,838 crore
Around the same time India purchased with all the above said Extra provisions in 2015, (when the dollar was at Rs 63), 36 jets for 9.2 billion dollars at the unit price of Rs. 1,610 crore.
Confidential disclosure agreement will safeguard the Unit Price to varied customers and not to hide any commissions or scandals.
Who is a good negotiator? The reader can conclude this argument relatively easily.
Panir Selvam is a defence enthusiast. Views expressed are of the author and do not necessarily reflect the views of IDN. IDN does not assume any responsibility or liability for the same
Original Article

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