Nitya Chakraborty

| @ | November 16,2018

The cat is finally out of the bag. The French Government did not agree to give any sovereign guarantee to the Rafale deal and its offer of a Letter of Comfort (LoC) does not in any way help in meeting the obligations of the French company Dassault to its manufacturing programme for India. The admission by the Attorney General K K Venugopal at the hearing of the Supreme Court on November 14 gives a lie to the main component of any credible Inter-Governmental Agreement.

The opponents of the current Rafale deal like the petitioners including former ministers Arun Shourie and Yashwant Sinha have been continuously mentioning that the deal compromised the interests of India and the Prime Minister unilaterally entered into the new agreement without taking care of all the provisions that should be a part of the inter-government agreement on such an expensive manufacturing programme by a French company for India. The allegation has come to be now officially confirmed and this erodes the very basis of the Government’s claim on the viability of the deal.

The French Government did not agree to give any sovereign guarantee to the Rafale deal and its offer of a Letter of Comfort (LoC) does not in any way help in meeting the obligations of the French company Dassault to its manufacturing programme for India. This is the admission by the Attorney General of India K K Venugopal at the hearing of the Supreme Court on November 14

According to the experts, the LoC given by the French Government means that the Dassault has no legal obligations to fulfill its part of the contract. Either party can break the promise and go their different ways and with impunity although the moral aspects will stick. But in business, who cares for the moral aspects if it is not legally binding. As Sudhansu Mohanty, former comptroller general of defence accounts and financial adviser of defence services explained to a business daily, loosely, the letter of comfort can be said to be like letter of intent used in international contracts — may be morally binding but not legally binding and enforceable-somewhat like Indian sagaai before the marriage. There are so many cases where after sagaai, marriages finally did not take place. Nobody can do anything on this and there are no legal consequences for the same.

As Mohanty sees it, the Rafale deal agreement provisions, in matters of buying nation India’s commitment based on public funds, such a letter of comfort by the French government, can cause harm to the country. He elaborates by saying that if there are voices raised over a problem in a contract, for example, the successor government may or may not honour what has been promised in a letter. On the other hand, the cost of the contract with bank guarantees would be different as the vendor would have to guarantee the deliverables as per the contract till the time it is deliverable to the buyer and other terms are fulfilled.

According to the experts, the LoC given by the French Government means that the Dassault has no legal obligations to fulfill its part of the contract. Either party can break the promise and go their different ways and with impunity although the moral aspects will stick. But in business, who cares for the moral aspects if it is not legally binding?

The Supreme Court has reserved its verdict on the Rafale deal after the conclusion of the hearing. The trends of the arguments on November 14 sent shockwaves to the Modi government as  one after another, the irregularities in the decision making process, came to light and the government’s highest law officer also could not mar shall enough facts to deny the allegations. New facts have come to light in the recent days through the French media reports which show that Dassault’s manufacturing programme was in a big mess and Prime Minister in a way bailed them out to some extent by making use of a clause of contract to order aircraft that will be built in France.

 

A political protest against Rafale deal by the Indian National Congress and other members of the Opposition | Photo credit: Getty Images

 

Even the French paper Le Figaro, owned by the Dassault group reported on April 11, 2015, the day after the Indian Prime Minister’s announcement about the new agreement, that Indian PM’s visit to France has spurred a last minute acceleration and change in direction with respect to the sale of Rafale aircraft to India. It was at the Elysse. Alongside Francois Hollande that the head of the Indian government announced on Friday (April 10, 2015) night his intention to acquire 36 Rafale jets. “I asked the President to supply 36 ready to fly jets to India”, he said. Then Le Figaro wrote: “The surprise of the day. It was not the contract for the purchase of 126 aircraft, 108 of which are expected to be assembled in India and being negotiated for three years.” So even the French daily owned by the French company Dassault, was surprised at the April 10 announcement since the journalists all along were told by Dassault officials that the agreement with HAL was nearly ready and the draft of the work sharing contract, was already done. Thus, all evidence show that PM Modi took the unilateral decision to deny HAL the contract for the manufacture of Rafale jets.

The manner in which the contract has been changed and pushed through by the Prime Minister himself, violates every safeguard mentioned in the 2013 policy. None of the eventualities contemplated for acquisition under an IGA are applicable in this Rafale deal as there is no sovereign guarantee from the French government

According to French media reports, as per the Military Planning Law of the French Government, during 2014-19, Dassault must produce 66 Rafale jets at the rate of 11 aircraft per year. Apart from the production meant for France, the other 40 must be bought from foreign countries failing which Paris must acquire them. With the 24 jets ordered by Egypt and those that were ordered by India, the goal relating to the production for foreign countries, will be attained. India agreeing to produce jets in France came as a big relief to Dassault though it was contrary to the Prime Minister’s Make in India programme.

The 2013 policy on defence acquisition has set clear guidelines on large acquisitions and defence experts point out that there is no dispute about the quality of the Rafale jets but the manner in which the contract has been changed and pushed through by the Prime Minister himself, violates every safeguard mentioned in the 2013 policy. None of the eventualities contemplated for acquisition under an IGA are applicable in this Rafale deal as there is no sovereign guarantee from the French government.

Prime Minister’s decision making process is in the dock. The Supreme Court has heard all sides. It seems that there is little escape route for the Modi government to come out unscathed on the Rafale deal. (IPA)

[Banner image courtesy: NDTV]

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