 Hello and welcome to NewsClick. I'm Paranjoy Gohar Thakurtha and with me here in the studio I have Ajay Shukla. Ajay Shukla is a security analyst. He's a consulting editor strategic affairs with business standard newspaper. He's earlier worked with NDTV and between 1976 and 2001 he was in the Indian Army. He left the Indian Army. He took retirement from the Indian Army as a colonel. We're going to today try and demystify the whole Rafale deal which has become incredibly complicated controversial. And I'll tell Ajay that to explain in a simple language what is the biggest mistake? Is it more than before? And why is it so controversial? And behind this is the lawyer's letter. He also has a letter of a lawyer, a Reliance ADAG Anil Dhiromayamani group company's lawyer's letter. We'll talk about all these issues. Ajay, if you can explain in a simple language why is this deal become so controversial? And my first question is that the original idea was to buy 126 aircraft, Rafale aircraft from Dassault in France. And out of these 18 fighters were to be purchased in a what they say fly away condition. And the rest of the 108 aircraft which are for the Air Force will be made in our country, Hindustan aeronautics limited on the basis of the transfer of technology. And today this contract, which was the deal, ended. And Narendra Modi, after going to France, we bought 36, 36 Rafale aircraft. And it's worth 3 times more than that. If you can explain in a simple language why did all these happen? Look, to fully understand this matter, it is important to go back in time. It is important to understand that the requirement for 126 aircraft has come up since around 2000, 2001. And what the Indian Air Force said was that our MiG-21 or MiG-27 aircraft, the old Russian aircraft, are now going to retire. And instead of them, we need 126 more cheap, single-engine, strong, reliable aircraft. And they proposed to the government, while George Fernandez was the minister, that we will buy the entire Mirage 2000 production line from France, transferred to India, and we will make it in India. India aeronautics limited? No. That's the point. The entire line will come here in India. And cheaply and reliably, we can build all the aircraft that we want. 126 aircraft, Mirage 2000 was already in service with the Indian Air Force. This aircraft, the Indian Air Force, loves it very much. And they said, we will do this. But George Fernandez, who was stuck in the security ministry at that time, said that this will be a single-end vendor procurement. And people will apply this in 2001. People will apply this, that you are with the Mirage company or Dassault company. So we will not do this. You go to an international tender and get a 106 aircraft tender. So that was the start of the whole thing. Now move ahead. In August 2007, there was a tender. And in August 2007, the Indian government at that time said, we are giving a request for a 211 page proposal. Medium multi-role combat. MMRC. So that was the tender was put out in 2007. Replies came in from six global vendors. And four years, the Indian Air Force did flight testing. They went into a lot of depth and evaluated. And in April 2011, the Indian Air Force said, Dassault's Rafale aircraft or Eurofighter's Typhoon, they are the final contenders. They meet the requirements of the Indian Air Force. And whichever is the cheaper one of the two, we will buy that. This is the selection procedure of the procurement procedure. And in 2012, it was decided and it was announced that the Rafale, which has been offered by Dassault, is the cheapest. We are on track for buying 18 of those aircraft in flyaway condition and building 108 in Hindustan. And at that time, UPA 2 was the defense minister of Anthony Bharatvish. Absolutely. Move ahead. Now the new government comes in 2014. No, not the new government. From 2012 to 2014, big negotiations went between India and France, between Dassault and the company. But no decision was made. And when this new government came, they continued these negotiations and there was no decision for 17 months. So there was obviously some difficulty in concluding that 126. So the negotiations were going on. The negotiations were going on. And around about the time just before Prime Minister Modi was going to Paris, Dassault's chairman, Eric Trappier, is a Frenchman. He announced that we have concluded 95% of the negotiations and it is going to be finalized very soon. But what happened in state? What happened in state? After 50 days, Narendra Modi goes to France and the whole old deal was cancelled. The most surprising thing is whether it is true or not, that the cabinet committee for our security, the cabinet committee on security, and at that time the defense minister of India, Manohar Parikar ji, didn't know that suddenly Modi ji went to France and this old contract, which is a deal, suddenly said that it is over, we will do something new. Didn't Indian Air Force know? Didn't the defense minister know? It was told to the defense minister three days ago. I believe the foreign secretary too. Two days ago the foreign secretary announced that nothing is going to happen. He is the chairman of the state. Absolutely. This was something that took everybody completely by surprise. And the question that comes to mind is why did Modi do it? Everyone was surprised. Everybody was surprised because you know at that stage Prime Minister Modi was on a role in foreign policy. He went to New York, to Madison Square Gardens. He had done his job. In tens of thousands of Indians came in front of him. He was a big figure internationally. And the speculation is that he wanted something to make his visit to France a success. And this was the deal. And you also tell me that at that time Anil Ambani was with him. And this deal was signed with Anil Ambani. So how is it possible that suddenly this is the company of the French government? It's a government of France. It's owned by the government of France. No, it's a private company. But in France, the government of France owns the policy. I stand correct. Policy is very important for the working of Dassault. So to that extent there is a great deal of French government influence on Dassault. But it's a private company. So it's a private company which the government lays down the defense policy. How is it that suddenly they decide that we don't want to take anything with the Indian aeronautics. And now with Anil Ambani and Reliance Group. How did this happen? All of a sudden, why did Dassault change their opinion? Look, when you are negotiating a contract of 126, at that contract mandates that 108 aircraft are to be made in Hindustan aeronautics limited. But when you throw out that contract and you move instead to a contract for buying 36 Rafales over the counter in flyaway condition as they say, then in that contract, there is nothing to manufacture these aircraft in India. So for Hindustan aeronautics, there is no place for manufacturing. Look, at that time, the CEO of Dassault whose name was Eric Trappier, he said that this deal is 95%, 95% done, the rest is 5% done, some negotiations are going on here and there. And in 15 days, our work will be over. All of a sudden, everything has changed. All of this has made everyone very upset. And the company with Dassault's new contract, this company, two weeks ago, that is the question that is hanging over this entire contract. Some may believe that the French government gave the Indian government money or bribe, or some inducement to buy this aircraft. But the question that comes in is, why has this company, which is known to be close to the government, suddenly benefitted from the... And the biggest issue that the opposition is talking about, is the Reliance Defense Limited, they have no experience. Forget the defense aircraft in aviation, why is it possible? Aviation manufacture is the most demanding manufacture that there is. Starting from the raw material, to the different small, tiny components that go into an assembly, to the various assemblies that go into the aircraft itself, everything has to be specially certified by a certification agency as fit for aerospace usage. And when you have a company that has never manufactured even one aerospace component, going into aerospace manufacture, the first question that comes to mind is, my God, that is incredibly ambitious. So let's assume Hindustan Aeronautics is an inefficient public sector company, but it has many decades of experience in this particular area. Hindustan Aeronautics Limited is much maligned. It is also the company that has played a major role in building the Tejas Light Fighter aircraft. It is also the company that has built a whole line of Jaguar aircraft, Hawk aircraft, MiG aircraft, the Sukhoi 30, it has built 212 Sukhoi 30s. It is a company with significant pedigree in aerospace manufacture. So to compare Hindustan Aeronautics Limited with any other Indian company is 2 weeks earlier Reliance Defence far be it from a company, even the Tatas in L&T cannot compare with Hindustan Aeronautics when it comes to aerospace manufacture. So leave alone this company that has just been incorporated, the company that has a shipyard that is years overdue on delivering 5 offshore patrol vessels to the Navy, there is really no comparison over here. Look, this is what the Indian government and Prime Minister Narendra Modi repeatedly say about making India, that companies will come from abroad, corporations and enterprises will come from abroad, and whatever is to be made in our country will be made. And it seems that it is just the opposite. And just like this deal with Rafale, this deal with Dassault, it seems to be turning this whole make in India policy upside down. You have made a very deep point. The protection of the Prime Minister's make in India policy was going to be a huge failure. And instead to take this 126 aircraft deal, which was going to be the turning point, the inflection point for Indian aerospace manufacture, that is going to build up a whole ecosystem of manufacturing within India and to just cancel it and to go in instead for 36, you know, fully built in France aircraft where not even one little bit of benefit would come to Indian manufacturing, it defies description. It means that Prime Minister Modi completely turned his back on the make in India policy. Ajay, one more question. One is this make in India. The other thing is that the company with which this new deal is, people are saying that not only do you not have experience, because a lot of the companies, they didn't get a loan from the bank or couldn't give it back, or they are not really, not just not qualified, they are financially not so stable, because the companies in the Anil Ambani, Anil Dhirubhai Ambani Group, ADAG, have huge non-performing assets running into thousands of crores of rupees. So, what do you have to say about this? You see, even if one argues that those are in power, those are in different sectors, you just look at the defense, manufacturing capability, you look at Peepawab Shipyard, which is Reliance Naval Engineering Limited. Both of them have turned sick. They are not being able to deliver naval offshore patrol vessel orders to the navy. They don't have, let me put it very simply, without the risk of getting sued. They do not have a track record that inspires confidence. So, it is hard to justify selecting this company by Dassault. If you were to ask Dassault, bring him in the chairman and put him in my place over here, and ask him, why did you select Anil Ambani? I would love to hear the answer to that. When you spoke about the suing, look at the reason for the humiliation against you. The lawyer of the Reliance group has sent you. There are many leaders of Congress against you. And the day you had a press conference, which was held by Yashman Sinha, Arun Shuri and Prashant Bhushan, August 8th, a few days ago, all the media organizations, there is a news leak, and you have a reason for it. Seize and desist. So, all these people were shocked. Why? Why don't you want people, there should be transparency, there should be transparency, because this is your money, my money, this is the money of the Indian government. Look, the companies, the governments, they welcome the questions. When the answers to the questions are with them, when the answers to a question are not with a country or a company, then they don't send the cease and desist notices. It's a threat. It's a threat. It's a pressure to stay quiet. Ajay Shukla's mouth should be closed. And after this, the rest of the people... Look, my mouth is completely closed. I don't have the courage to say anything. You have one more reason to write. The notice will come after this interview. Ajay, I want to ask you a question. The Indian Express wrote an article a few days ago, that the current state of France, before that... France and Holland. France and Holland. Their partner is an actress. And their film, The Reliance Company, produced it. And everyone seems to think that there is something black in the lentils. You must have read that article. Look, there is something black in the lentils. It's left behind. It has become a black lentil butter. I don't want to give much detail on this sort of issue, on film financing because I don't know the details of it. But the Indian Express report came that on the day of the Republic Day, when Mr. Francois Holland came here, two days ago or two days later, the Reliance Entertainment... The sequence of events. They signed an arrangement of co-production with their partner's film company. There was no rebuttal of it from the Reliance Company. There was no season-dissist notice. I don't know the details. I don't know the details. So it's possible that there is some truth in it. I want to ask you a question. On the pricing. And different people are saying, Jetli ji is saying that Rahul Gandhi is telling different rates. His numbers are changing every time. What is the amount involved? And in this, Manohar Parikar ji told different numbers when he was the Raksha Mantri. And Rahul Gandhi said that it will benefit 45,000 crores. On the Reliance Group. On the Anil Ambani Group. So different figures are coming to us. So what do you think, what is the amount involved? And Congress and Virudhidal are saying that the price of this aircraft has increased by three times. So please explain this in simple language. See it is like this. Figures can be made to say anything. And this becomes a especially fraught and especially complicated issue here. Because there is the question of foreign exchange. Because the deal signed was signed in Euro's. And the Euro's price was something else at that time. It has become something else today. So if you are talking in foreign exchange then figures will say one thing. If you come down to rupees. It comes as another thing. But let me simplify it for you. And there is also the aircraft in a flyaway condition and then the whole so-called offset deal which we are making in our country. And to make this even more complicated and complicated the government has divided this contract in many headings. So one is the flyaway cost of the aircraft is Rs. 626 crore rupees. Which was at the time of signing but which now has become more than Rs. 700 crore rupees. Because the rupee has changed. Yes, a little bit. A little bit. A little bit. A little bit. A little bit. A little bit. A little bit. A little bit. A little bit. A little bit. Then you add to that something called India specific enhancements. That we have put many things in it to make India's aircraft more capable. Which we cannot tell you because it is very sensitive. There is some other price for that. If you connect it then the price of the aircraft is Rs. 149 billion which is about Rs. 1100 crore rupees. And there are many other things that are included in it. Like weapons, maintenance and spare parts. If you include all of them which should not be included in my opinion because it is not a part of the aircraft. You should not share the safe with the safe. Not with Santra. So apples to apples it is 1107 crore rupees. In my calculation. And the other components like spares and maintenance and so on which are different add up to another 500 crore rupees per aircraft. Which takes it to this 15-16 crore 100 crore rupees. That the opposition elections. There should be 2 more in reality. Okay. One more thing I want to ask you is the way this issue is being said by Jaitli Nirmala Sita Raman Manohar Parikar had said something the whole thing has become politically very very very sensitive. And on August 8th when you have a relationship we should also tell you about that girl who was the Prime Minister and the Prime Minister and Prashant Bhushan She went to Press Club of India in Delhi. She issued a press release and she gave a long list of papers and she said gross misuse of office and she also said monumental criminal misconduct. See the opposition has revealed that the government is very vulnerable on this count that there is a way of completely shattering the sort of clean image that the government has sponsored. There is this businessman who is linked who has got unexplained contracts. And she also wrote a letter to Gandhi. And she wrote everything. She is also scared. This is what is going on. These letters are going to Rahul Gandhi. This clearly shows that the Reliance is also worried about this matter. And if Reliance is so worried then the Modi government will be so worried. Opposition has got a sense of this and they are likely to push on this issue further. They are likely to continue the attack and expect that. My last question to you and this is a secrecy clause. Rahul Gandhi in Parliament said that he spoke to French President Macron and he said that there is no such doubt. The technical specifications and the technical thinking should be completely open. But how much is its value? How much money is spent? How much money is spent in the dollar? What do you want to say on this issue? The two countries which have a defence relationship. Normally it is governed by a confidentiality clause which is a blanket clause. It does not talk about it. It is a blanket clause that we do not talk about the negotiations or the interests we have or I will not talk about it. But the commercial contracts which are bought and signed that is covered by the laws of the land when you have a democracy like India where you have public funds and audit of public funds and scrutiny of the control. So there to say that that is covered by confidentiality agreement between the two governments is very hard to sustain and France his position has been very nuanced on this. In fact there was an interview that India today published by President Macron to decide what to keep confidential if you are a Republican who keeps everything hidden from his people where public scrutiny is not in effect then that is your decision. That is what President Macron said. It seems that this story is not over and it will take more time and in the coming months we will have a lot of controversy on this issue and I hope that you will have it Thank you so much Ajay for giving us your time and explaining the complexities of this Rafale deal in a simple way. You just heard Ajay Shukla strategic analyst journalist a former colonel in the Indian Army explaining the complexities of the Rafale deal and he tried to put it in front of you but why did this deal with Rafale become so complicated and why it is likely to escalate because it has become hugely controversial. Thank you for being with us.