A good deal

Prime Minister Narendra Modi’s request last week to Paris to provide 36 Rafale fighter aircraft was a highlight of his bilateral visit to France. India had already chosen the Rafale fighter for the Indian Air Force, following a stringent technical evaluation process after a multi-billion dollar tender for 126 medium multi-role combat aircraft. In the deal being negotiated by the defence ministry with Dasault Aviation, 108 of those aircraft were to be made in India under a transfer of technology clause. That deal has been held up over procurement procedures and pricing negotiations, putting pressure on the IAF’s depleting combat power. Modi’s decision will meet the IAF’s immediate operational needs. India will get the fighters on a much tighter timeline than under the original tender.

But there is a downside to the deal. During his overseas tours, the PM has made a strong pitch to foreign manufacturers under his signature Make in India campaign. Defence manufacturing is one of the key areas for Make in India. Buying 36 fighters without any provision to manufacture them in India goes against the PM’s major thrust area. There is thus a danger of this deal — sans a Make in India component — setting a precedent for future defence procurements. The government should be careful to not go down that road. It should, instead, identify the reasons for India’s long-winded defence procurement process, where foreign suppliers either end up getting blacklisted or get entangled in protracted negotiations. Defence Minister Manohar Parrikar has already promised a streamlining of the defence procurement process in line with the Make in India programme. The earlier he does it, the better.

The future of the 126 fighter deal is mired in uncertainty and a decision needs to be taken quickly. Whether India chooses to go with the original deal with Dasault or signs a follow-up inter-government order with France, it must include a clause for transfer of technology and manufacturing in India. In this current 36 aircraft deal, there is still an opportunity to promote defence manufacturing, particularly in the private sector. Under the provisions of the Defence Procurement Procedure (2013 revised), the maintenance transfer of technology contract for these 36 Rafale fighters must be given to a private-sector vendor instead of the public-sector HAL. Dealing with a modern fighter will expose the chosen vendor to R&D and advanced technology. The infrastructure, training, processes and equipment developed by the vendor will generate bigger spin-offs in the future for India’s defence manufacturing sector.