Rafale deal alleged to be crony capitalism worth ‘₹1,30,000 crore’

The Congress party on Friday, July 27, accused the Modi Government of deceiving India in the “mother of all Defence deals”—referring to the Modi Government’s decision to purchase 36 Rafale fighter aircrafts in April, 2015—and termed it a ₹1,30,000 crore scam.

Congress President Rahul Gandhi tweeted: “Dear Trolls, I apologise for my earlier tweet in which I stated Mr 56’s friend’s JV, received 4 Billion US$’s of “off set” contracts. I forgot to add the 16 Billion US$ RAFALE “lifecycle” contract. 20 BILLION US$, is the actual benefit. So Sorry!!”

In a press release on the Rafale deal issued on Friday by All India Congress Committee Communications in-charge Randeep Singh Surjewala and MPs Amee Yajnik and Naseer Husain, Congress made the following allegations:

1. Public Sector Undertaking HAL denied biggest ever ‘Defence Offset Contract’
2. Private company with zero experience in manufacturing fighter aircrafts bags contract instead
3. A company with zero experience in manufacturing fighter aircrafts, which did not own any land or building, granted industrial license for defence production by then Commerce Minister Nirmala Sitharaman
4. Violation of Defence Ministry’s own guidelines in awarding ₹30,000 crore ‘Defence Offset Contract’ to Reliance Defence Ltd

1. Public Sector Undertaking HAL denied biggest ever ‘Defence Offset Contract’

That Public Sector Undertaking Hindustan Aeronautics Limited (HAL) had signed a ₹36,000 crore offset contract with Dassault Aviation in shape of a ‘Workshare Agreement’ dated March 13, 2014, but once Narendra Modi became Prime Minister, he “unilaterally” announced an ‘off-the-shelf’ purchase of 36 Rafale aircrafts on April 10, 2015, said Congress. The main Opposition party said that PSU HAL was suddenly denied the biggest ever ‘Defence Offset Contract’.

2. Private company with zero experience in manufacturing fighter aircrafts bags contract instead

The ‘Defence Offset Contract’, said Congress, instead went to a private company, Reliance Defence Ltd, which the party said had zero experience in manufacturing fighter aircrafts. Reliance Defence Ltd had been constituted just 12 days—March 28, 2015—before the announcement of purchase of 36 Rafale aircrafts by PM Modi in France on April 10, 2015. Reliance Defence Ltd did not have the license to manufacture fighter aircrafts, claimed Congress.

3. A company with zero experience in manufacturing fighter aircrafts and which did not own any land or building, granted license for defence production by then Commerce Minister Nirmala Sitharaman

Citing the The Industries (Development and Regulation) Act, 1951, The Registration and Licensing of Industrial Undertaking Rules, 1952 and New Arms Rules, 2016, under which a license for defence production in India is granted, Congress alleged:

• that Reliance Aerostructure Ltd was incorporated on April 24, 2015—ie just 14 days after the announcement of purchase of 36 Rafale aircrafts by PM Modi in France on April 10, 2015.
• Reliance Aerostructure Ltd granted industrial license to manufacture fighter aircrafts in 2015 by the Commerce Ministry then headed by Commerce Minister Nirmala Sitharaman (see image below), but it did not own any land or building on the date of the license—February 22, 2016,
• the license was granted despite the fact that Reliance Infrastructure Ltd and its subsidiary companies—Reliance Defence Ltd and Reliance Aerostructure Ltd—have zero experience in manufacturing fighter aircrafts

Who is lying, asks Congress: Defence Minister Nirmala Sitharaman or Reliance/Dassault Aviation?

The Congress cited a Reliance Defence Limited press release dated February 16, 2017 to show the company claimed to have secured the ‘offset contract’ from ‘Dassault Aviation’ for ₹30,000 crore and a RInfra Investors’ Presentation (see excerpt below) to show it claimed a consequent ‘Lifecycle Cost Contract’ of ₹1,00,000 crore.

Even Dassault Aviation in its Annual Report 2016-17 (see below), said Congress, had claimed that ‘offset contract’ is being executed by ‘Reliance’.

Yet, said Congress, Sitharaman had claimed in a PIB press release dated February 7, 2018, that ‘no Indian Offset Partner for the 2016 deal for 36 Rafale Aircraft has been so far selected by the vendor’ (Dassault Aviation).

Who is lying, asked Congress: Defence Minister Nirmala Sitharaman or Reliance/Dassault Aviation?

Congress questions grant of Industrial Licence for Category A, High Security Defence Production to Reliance in absence of even land or building

In its license application for manufacturing fighter aircrafts, said Congress, Reliance Aerostructure Ltd. had given its address and location as ‘Survey No. 589, Taluka Jafrabad, Village Lunsapur, District Amreli, Gujarat’. At that time, said Congress, “these premises were not owned by Reliance Aerostructure Ltd. The aforesaid address belonged to ‘Pipavav Defence and Offshore Engineering Co. Ltd.’” Even on the date of license, February 22 2016, Reliance Aerostructure Ltd did not own the land or building at the aforesaid address. It was Reliance Defence Ltd. that acquired the company only on January 18, 2016 and name was then changed to Reliance Defence and Engineering Limited. This is established from the Annual Report 2015-16 (see below), said Congress.

Reliance Aerostructure Limited was allotted 104 acres in Mihan SEZ, Nagpur, Maharashtra on August 28, 2015 for ₹63 crore approximately, but even this amount was eventually paid in July, 2017, added the party.

4. Congress: Violation of Defence Ministry’s own guidelines in awarding ₹30,000 crore ‘Defence Offset Contract’ to Reliance Defence Ltd

Citing the Defence Ministry’s own ‘Defence Offset Contract Guidelines’ for all ‘offset contracts’ and setting up of a permanent ‘Defence Offset Management Wing’ (DOMW), Congress alleged violation of these guidelines in awarding ₹30,000 crore ‘Defence Offset Contract’ to Reliance Defence Ltd and accused Defence Minister Nirmala Sitharaman of being untruthful on lack of knowledge regarding the award of the ₹30,000 crore contract. Specifically, the party alleged “absence of approval for ‘Defence Offset Contract’ to Reliance Defence Ltd from ‘Defence Minister’ and ‘Acquisition Manager’ of Defence Ministry and ‘Defence Acquisition Council’ in complete violation of ‘Defence Offset Contract’ guidelines”.

Congress asked the following questions:

1. Can Reliance and Dassault Aviation sign an ‘offset contract’ of ₹30,000 crore without the approval of the Defence Minister?
2. Has the ‘offset contract’ been countersigned by the ‘Acquisition Manager’ of Defence Ministry?
3. Why have the six monthly audits by DOMW not been conducted?
4. Has the ‘Acquisition Wing’ submitted an Annual Report to ‘Defence Acquisition Council’? If not, reasons thereof?
5. Can a private corporate entity and supplier of the Defence equipment in the largest defence deal of the country be permitted to wholly gloss over the ‘Defence Offset Contract Guidelines/Instructions’?

Congress demanded that Prime Minister Narendra Modi answer the following questions on Rafale:

• Is it a fact that Reliance Defence Ltd was incorporated a mere 12 days before and Reliance Aerostructure Ltd was incorporated a mere 14 days after the unilateral announcement of purchase of 36 Rafale aircrafts in France by PM Modi on April 10, 2015?
• Is it a fact that Reliance Aerostructure Ltd did not own the premises at Village Lunsapur (Amreli), Gujarat at that time of submission of application for license for manufacturing fighter aircrafts?
• Is it a fact that even at that time of grant of industrial license on February 22, 2016, premises at Amreli, Gujarat were not owned by Reliance Aerostructure Ltd. and the said premises were acquired by Reliance Defence on January 18, 2016?
• Could an industrial license be granted by the Defence Ministry without this verification?