COCK­PIT CRI­SIS

Former French pres­i­dent Fran­cois Hol­lande’s hint of crony cap­i­tal­ism in the Rs 59,000 crore Rafale deal sparks a fresh po­lit­i­cal con­tro­versy over sug­ges­tions that Anil Am­bani was favoured. Will the deal prove costly for the Modi govern­ment?

India Today - - INSIDE - By San­deep Un­nithan

Al­le­ga­tions that Anil Am­bani’s com­pany was favoured in the Rs 59,000 crore Rafale deal have the Modi govern­ment in a spot

FORMER FRENCH PRES­I­DENT FRAN­COIS HOL­LANDE TOSSED A STUN GRENADE INTO AN ON­GO­ING CON­TRO­VERSY OVER IN­DIA’S 2016 PUR­CHASE OF 36 RAFALE FIGHTER AIR­CRAFT. ON SEPTEM­BER 21, HOL­LANDE TOLD FRENCH NEWS POR­TAL ME­DI­A­PART THAT THE IN­DIAN GOVERN­MENT HAD PRO­POSED THE NAME OF THE ANIL AM­BANI GROUP AS AN IN­DUS­TRIAL PART­NER. HIS STATE­MENTS CON­TRA­DICTED WHAT THE NAREN­DRA MODI GOVERN­MENT HAS MAIN­TAINED SINCE THE CON­TRO­VERSY BROKE LAST NOVEM­BER.

Hol­lande’s state­ment seemed to f ly in the face of the govern­ment’s as­ser­tions that it had noth­ing to do with Anil Am­bani’s pres­ence in the deal. “I’ve not put his name or any­one in the In­ter Gov­ern­men­tal Agree­ment nor can I tell a com­mer­cial firm to en­ter into an agree­ment,” de­fence min­is­ter Nir­mala Sitharaman had told the me­dia just three days ear­lier, re­it­er­at­ing the line the govern­ment’s taken since the Congress seized upon Rafale as an is­sue in Novem­ber 2017.

The deal now has se­ri­ous po­ten­tial for em­bar­rass­ing both govern­ments. Asked about Hol­lande’s state­ment on the side­lines of the UN Gen­eral As­sem­bly, Pres­i­dent Em­manuel Macron spoke of the ‘clear rules’ in ‘a govern­ment-to-govern­ment dis­cus­sion’ and of the con­tract be­com­ing part of a broader mil­i­tary and de­fence coali­tion frame­work be­tween the two coun­tries. Yet, his pre­de­ces­sor’s state­ment will echo on in what prom­ises to be an un­end­ing episodic con­tro­versy un­til the 2019 Lok Sabha polls. With the op­po­si­tion Congress fir­ing away at the govern­ment, al­leg­ing cor­rup­tion, nepo­tism, crony cap­i­tal­ism and price in­fla­tion and de­mand­ing a Joint Par­lia­men­tary Com­mit­tee (JPC) for a probe, the Rafale con­tro­versy has be­come a po­lit­i­cal hot potato. Like most po­lit­i­cal polemic, there are sev­eral mis­per­cep­tions in­volved but few facts.

AT WHAT PRICE WERE THE RAFALE JETS BOUGHT?

By now, the util­ity and lethal­ity of the Das­sault Rafale are be­yond ques­tion. The In­dian Air Force it­self gave the Rafale’s ca­pa­bil­i­ties a thumbs up in an un­usual pub­lic en­dorse­ment.

On Septem­ber 13, Air Chief Mar­shal B.S. Dhanoa de­fended the pur­chase of only two squadrons of the air­craft as op­posed to the seven squadrons the IAF had pro­jected in 2005, cit­ing past prece­dent of emer­gency pur­chases of Mi­rage 2000s and MiG­23s. A week later, Air Force Deputy Chief Raghu­nath Nam­biar flew a Rafale at a French air base to show that the IAF was on board and in the front seat when it came to the pur­chase. The Cost Ne­go­ti­a­tion Com­mit­tee (CNC), which ac­tu­ally worked out the price of the deal, was headed by Deputy Chief Air Mar­shal R.K. Singh Bhadau­ria in 2016 and not the Joint Sec­re­tary (Air), an IAS of­fi­cer, as is the norm. Cru­cial CNC meet­ings were held in Vayu Bha­van, not in the de­fence min­istry head­quar­ters in South Block a kilo­me­tre away.

The crux of the is­sue, how­ever, re­mains the price that the Rafales were bought for. This es­sen­tially is the thrust of the “my deal ver­sus your deal” bat­tle be­tween the Congress and NDA even though it is clearly the lat­ter who ac­tu­ally bit the bul­let and bought the air­craft. The Congress says they ne­go­ti­ated a cost of Rs 526 crore per air­craft on De­cem­ber 12, 2012, whereas the price of the offthe­shelf Rafale the NDA was buy­ing

I THINK HE (RAHUL GANDHI) IS IN SOME KIND OF RE­VENGE MODE. I WON’T BE SUR­PRISED IF THE WHOLE THING IS BE­ING OR­CHES­TRATED. ON 30 AU­GUST, WHY DID HE (RAHUL) TWEET ‘JUST WAIT FOR A WHILE, SOME BOMBS ARE GO­ING TO BE BURST IN PARIS’” SEPT. 23, 2018, FI­NANCE MIN­IS­TER ARUN JAIT­LEY TO NEWS AGENCY ANI

works out to Rs 1,671 crore per air­craft, go­ing by the fig­ures in the 2016 com­pany re­port of Das­sault Avi­a­tion. This, the Congress says, amounts to an al­most 300 per cent es­ca­la­tion in the price of the deal.

The NDA says it paid Rs 670 crore for the Rafales, though this price was, as MoS for de­fence Sub­hash Bhamre told the Lok Sabha on Novem­ber 18, 2016, mi­nus the ‘as­so­ci­ated equip­ment, weapons, In­dia­spe­cific en­hance­ments, main­te­nance sup­port and ser­vices’. The Congress al­leges their price (for a deal that wasn’t signed) in­cluded these In­dia­spe­cific en­hance­ments, main­te­nance sup­port and ser­vices. The govern­ment is un­will­ing to dis­close the fully­loaded price of the jets, cit­ing na­tional se­cu­rity con­cerns as fi­nance min­is­ter Arun Jait­ley re­em­pha­sised in a Septem­ber 23 in­ter­view to news agency ANI. “If you take a weaponised air­craft as of 2007, add the same two things to it again and bring it to the 2016 level, it is 20 per cent cheaper,” he said. This is an is­sue the CAG is go­ing through, Jait­ley pointed out—adding, per­haps more prophet­i­cally than he re­alised, “the truth will come out”.

WERE STAN­DARD PRO­CE­DURES OVER­LOOKED IN THE DEAL?

The Rafale pur­chase came as a bolt from the blue when it was pro­posed by Prime Min­is­ter Modi in Paris on April 10, 2015. Very few peo­ple knew it was com­ing and top Das­sault of­fi­cials claim even Pres­i­dent Hol­lande was sur­prised by the In­dian PM’s of­fer of a govern­ment to govern­ment deal. “France never does G2G deals and does not have a For­eign Mil­i­tary Sales route like the US has,” says a Das­sault of­fi­cial. It took France three months to set up a team headed by an Air Mar­shal from the Di­rec­torate Gen­eral of Ar­ma­ments (DGA), the govern­ment body that pro­cures ar­ma­ments for France’s mil­i­tary.

Mean­while, in In­dia, the Congress has charged the PM with vi­o­lat­ing the De­fence Pro­cure­ment Pro­ce­dure (DPP) by by­pass­ing the manda­tory prior ap­proval of the Cab­i­net Com­mit­tee on Se­cu­rity (CCS) be­fore an­nounc­ing the pur­chase of the air­craft. The manda­tory Price Ne­go­ti­a­tion Com­mit­tee and CNC were also dis­pensed with. The govern­ment’s de­fence has been to stick to the ar­gu­ment that the joint state­ment in Paris on April 10 was only an ex­pres­sion of in­ter­est and not a for­mal sign­ing of con­tract. The De­fence Ac­qui­si­tion Coun­cil (DAC) ap­proval was taken on May 13, 2015, over a month after the joint state­ment. The govern­ment could be on shaky ground here. There is still no clar­ity on how the govern­ment ar­rived at the fig­ure of 36 air­craft or whether the IAF was con­sulted be­fore ar­riv­ing at this fig­ure.

HOW DID RE­LIANCE, A COM­PANY WITH NO PRE­VI­OUS EX­PE­RI­ENCE IN DE­FENCE, EN­TER THE DEAL? The op­po­si­tion’s charge of crony cap­i­tal­ism and nepo­tism against the govern­ment have to do with the en­try of in­dus­tri­al­ist Anil Am­bani. The Congress ar­gues that the Re­liance Anil Dhirub­hai Am­bani Group (ADAG) chair­man was a rel­a­tively new en­trant into the de­fence busi­ness with ‘no pre­vi­ous ex­pe­ri­ence of build­ing air­craft’ and that he was given a con­tract by­pass­ing the ven­er­a­ble pub­lic sec­tor en­ter­prise Hin­dus­tan Aero­nau­tics Lim­ited (HAL).

For the Congress, Anil Am­bani’s im­age res­onates rightly with Rahul Gandhi’s 2015 ‘suit boot sarkar’ jibe— that the Modi govern­ment favoured rich busi­ness­men. In this case, for off­sets as­so­ci­ated with the deal. A Septem­ber 24 me­moran­dum sub­mit­ted by the Congress to the Cen­tral Vig­i­lance Com­mis­sioner (CVC) K.V. Chowdary enu­mer­ates the party’s charges. ‘The de­lib­er­ate en­rich­ment of a pri­vate en­tity, Re­liance De­fence, at the cost of HAL by award of Rs 30,000 crore off­set con­tract’ as also Rs 1,00,000 crore ‘life cy­cle con­tract’ with­out any ten­der and with­out fol­low­ing any ‘manda­tory re­quire­ment of the De­fence Pro­cure­ment Pro­ce­dure’.

That his com­pany was reg­is­tered only 12 days be­fore the prime min­is­ter an­nounced the 36 air­craft deal in Paris adds fuel to the fire stoked by Hol­lande’s Septem­ber 21 state­ment. “We did not have any say in this mat­ter,” he told Me­di­a­part about the choice of the Re­liance group as off­set part­ner. “It is the In­dian govern­ment which pro­posed this group and Das­sault who ne­go­ti­ated with Am­bani. We did not have a choice, we took the in­ter­locu­tor who was given to us.”

The French pres­i­dent seemed to back­track in a sub­se­quent in­ter­view to news agency AFP later that day, but

THE HAS PRIME GIVEN A MIN­IS­TER CON­TRACT HIM­SELF OF Rs 30,000 CRORE TO ANIL AM­BANI. ANIL AM­BANI HAD A DEBT OF Rs 45,000 CRORE AND WAS BAILED OUT BY PM MODI” RAHUL GANDHI Congress pres­i­dent

I HAVE NOT PUT ANIL AM­BANI’S NAME IN THE IGA. I CAN­NOT TELL A COM­MER­CIAL EN­TER­PRISE WHO TO GO WITH. THAT’S A COM­MER­CIAL DE­CI­SION” NIR­MALA SITHARAMAN Min­is­ter for De­fence

an­other ver­sion of the same AFP re­port car­ried by French news­pa­per Le Monde saw him re­peat his as­ser­tion. The Re­liance group had ap­peared as part of the ‘new for­mula’ of ne­go­ti­a­tions on the Rafale pur­chase, ‘de­cided by the Modi govern­ment after tak­ing of­fice’, he said.

AReliance De­fence of­fi­cial says there was no link be­tween the in­cor­po­ra­tion of the com­pany in March 2015 and the PM’s visit. “The air­craft con­tract was signed in Septem­ber 2016, 21 months after Re­liance’s de­ci­sion to get into the de­fence busi­ness and 18 months post the in­cor­po­ra­tion of Re­liance De­fence,” he says. The deal’s off­sets of ap­prox­i­mately Rs 30,000 crore were the largest since the pol­icy was in­tro­duced in 2005. As such, a de­fence OEM (orig­i­nal equip­ment man­u­fac­turer) has to source be­tween 30 and 50 per cent of the value of all con­tracts over Rs 2,000 crore from the cus­tomer’s do­mes­tic in­dus­try. Un­der the Rafale deal, French air­craft-maker Das­sault and its part­ners, en­gine-maker Safran and radar-maker Thales, are to source Rs 30,000 crore worth of pur­chases from In­dia’s lo­cal in­dus­try. The key ob­jec­tives of off­sets are to lever­age cap­i­tal ac­qui­si­tions to de­velop In­dian de­fence R&D and en­cour­age the aerospace and in­ter­nal se­cu­rity sec­tors.

Das­sault, on its part, clar­i­fied that they had in­deed cho­sen Re­liance as a part­ner as per the de­fence min­istry’s off­set pol­icy which al­lows OEMs to choose their In­dian de­fence part­ner.

In­ter­est­ingly, it was Mukesh Am­bani’s Re­liance Aerospace Tech­nolo­gies Ltd (RATL) which was Das­sault’s main off­set part­ner in the 126 air­craft deal un­der the UPA in 2012. RATL had been in­cor­po­rated in Septem­ber 2008 when the IAF was yet to select an air­craft. The Das­sault Avi­a­tion and RATL MoU was an­nounced in Jan­uary 2012, days after Rafale won the bid for the 126 jets. As per the con­tract, 18 jets were to come in a fly­away con­di­tion while the re­main­ing 108 would be built in In­dia by HAL un­der a trans­fer of tech­nol­ogy agree­ment. Sub­se­quently, the MMRCA (Medium Multi-Role Com­bat Air­craft) ne­go­ti­a­tions were stalled for three years. Mean­while, a rap­proche­ment be­tween the Am­bani broth­ers saw Mukesh ex­it­ing the de­fence busi­ness. (RIL did not re­spond to an e-mail ques­tion­naire seek­ing com­ment on their foray into de­fence.)

Anil an­nounced his en­try into the de­fence busi­ness in March 2015 with the buy­out of the debt-rid­den Pi­pavav Ship­yard in Gu­jarat. By April of the same year, he had al­ready reg­is­tered 14 dif­fer­ent com­pa­nies for build­ing land sys­tems, war­ships and air­craft. Former de­fence min­is­ter Manohar Par­rikar, who was him­self an en­tre­pre­neur once, sup­ply­ing com­po­nents to the de­fence min­istry, also pri­vately ex­pressed his sur­prise at the dizzy­ing spread of the younger Am­bani’s busi­ness and won­dered if the in­dus­tri­al­ist

was spread­ing him­self too thin.

The In­dian mil­i­tary, the world’s largest arms im­porter with pro­jected buys of over Rs 15 lakh crore of de­fence hard­ware over a decade, of­fered end­less po­ten­tial. What the Pow­erpoint pre­sen­ta­tions don’t men­tion, how­ever, was the bu­reau­cratic maze of the monop­sony, where the govern­ment is the sole buyer with an in­ter­est in pre­serv­ing the mo­nop­oly of its gi­gan­tic de­fence PSUs and ord­nance fac­to­ries.

Time and cost over­runs are rou­tine and, con­trary to pop­u­lar per­cep­tion, con­tracts are in­tensely process-driven and sub­jected to such rig­or­ous scru­tiny that sev­eral of them are scrapped and re­tendered at the last leg, even at the cost of na­tional se­cu­rity. It is a busi­ness that, as one CEO puts it, re­quires “tremen­dous stamina, very deep pock­ets and enor­mous pa­tience”.

Anil Am­bani’s en­try raised eye­brows be­cause by 2015, his group com­pa­nies were bleed­ing be­cause of com­pe­ti­tion and in­di­gestible ex­pan­sions post 2010 (see Shrink­ing Star). Am­bani pos­si­bly saw the de­fence sec­tor as a life­line, par­tic­u­larly since the ‘Make in In­dia’ pro­gramme an­nounced by PM Modi on Septem­ber 25, 2014, aimed to make In­dia a global man­u­fac­tur­ing hub, in­clud­ing for ar­ma­ments.

The of­fi­cial at Re­liance De­fence says the com­pany ze­roed in on Rus­sia and Is­rael for joint ven­tures. They signed MoUs to make Rus­sian heli­copters and frigates in In­dia. “Europe was never our fo­cus,” he says. It be­came one when PM Modi went to Paris in April 2015 and Anil was there as part of 24-mem­ber del­e­ga­tion on the Indo-French CEOs’ Fo­rum. He is be­lieved to have al­ready been in talks with Das­sault. In Au­gust 2015, Re­liance Aerostruc­ture Ltd had been al­lot­ted 289 acres in the MIHAN (Multi Modal In­ter­na­tional Hub at Nag­pur) SEZ, where the group agreed to un­der­take the de­fence and aerospace project named Dhirub­hai Am­bani Aerospace Park (DAAP).

Ma­ha­rash­tra chief min­is­ter Deven­dra Fad­navis had handed over the land al­lot­ment let­ter to Anil at a func­tion at the MIHAN SEZ, in the pres­ence of Union trans­port min­is­ter Nitin Gad­kari. The group an­nounced an in­vest­ment of Rs 6,500 crore to set up a green­field aerospace project. “The project at MIHAN will be the largest green­field project not only in In­dia but in South­east Asia,” Anil had said at the func­tion.

The Am­bani firm planned to ac­quire the first land par­cel of 104 acres for Rs 63 crore. It paid Rs 25 crore when the project was al­lot­ted to them, but missed the pay­ment of the next in­stal­ment of Rs 17 crore in mid-2016. The project was a non-starter as the fi­nan­cial dues to Ma­ha­rash­tra Air­port De­vel­op­ment Com­pany (MADC) bal­looned to Rs 38 crore at the end of the fi­nan­cial year 2017. The deal with Das­sault Avi­a­tion came as a life­line for a firm strug­gling to pay its land dues. Das­sault Re­liance Aerospace Lim­ited (DRAL) was in­cor­po­rated in early 2017 and an­nounced at Aero In­dia in Bengaluru on Fe­bru­ary 14, 2017, where Anil posed for the press be­fore tak­ing a sor­tie in a Rafale air­craft.

Eric Trap­pier, chair­man of Das­sault Avi­a­tion France, was des­ig­nated chair­man, and Anil Am­bani co-chair­man of DRAL, in which RAL holds 51 per cent stake and Das­sault 49 per cent. In Oc­to­ber 2017, Anil and Trap­pier laid the foun­da­tion stone for the fa­cil­ity to pro­duce parts for the Fal­con busi­ness jets. A se­nior Das­sault of­fi­cial ex­plains why they chose Anil Am­bani’s com­pany for the JV de­spite his firm’s fi­nan­cial woes. “He was the only busi­ness house who had land read­ily avail­able, and an SEZ near an air­port from where air­craft could be built and rolled out for test­ing in fu­ture,” he says.

On Fe­bru­ary 21, 2017, Anil Am­bani had met with Hol­lande at the Élysée Palace in Paris. Pho­to­graphs of the meet­ing the Pres­i­dent’s of­fice re­leased of­fi­cially showed Hol­lande giv­ing Anil a warm two-handed hand­shake. A Re­liance of­fi­cial de­scribes it as a brief meet­ing and one in which var­i­ous ini­tia­tives by Re­liance in the field of en­ergy and de­fence in­volv­ing French com­pa­nies were dis­cussed. “No other dis­cus­sions what­so­ever, in­clud­ing Re­liance En­ter­tain­ment, took place dur­ing this meet­ing,” he says.

By 2018, with cred­i­tors knock­ing on the doors of their debt-rid­den ship­yard, and the govern­ment choos­ing HAL for a JV part­ner to make Rus­sian heli­copters and state-owned Goa Ship­yard Ltd to build frigates, DRAL re­mains one of the last aces in Anil Am­bani’s pack of com­pa­nies. It’s still an at­trac­tive bet for fu­ture or­ders for ad­di­tional Rafales, an­other con­tract for 57 fighter jets for the In­dian Navy where the Rafale is a con­tender or even for as­sem­bling Fal­con busi­ness jets.

HOW MUCH DOES RE­LIANCE MAKE FROM THE OFF­SET PART­NER­SHIP? In March this year, the French govern­ment sub­mit­ted a six-page doc­u­ment list of 72 off­set part­ners for the Rafale deal to the In­dian govern­ment dur­ing Presi-

dent Macron’s of­fi­cial visit, show­cas­ing its com­mit­ment to the govern­ment’s f lag­ship

Make in In­dia pro­gramme. Re­liance was one of the firms. Das­sault is still ne­go­ti­at­ing the con­tracts along with its part­ners Safran and Thales. The es­ti­mated Rs 30,000 crore off­set pie will be carved up be­tween Das­sault, Safran and Thales, with Das­sault get­ting 40 per cent and Safran and Thales 30 per cent each (see How the Rs 30,000 cr Off­sets Will Be Spent). The DRAL JV could ac­count for be­tween 15 and 17 per cent of Das­sault’s share of the off­set pie or roughly be­tween Rs 1,260 and

Rs 1,428 crore.

The firm started as­sem­bling its first aerospac­ere­lated com­po­nents—nose cones for the Fal­con 2000 busi­ness jets—this April.

A French team will come in to cer­tify their qual­ity be­fore they can be ex­ported. Once the com­po­nents are ex­ported, Das­sault will take the ex­port doc­u­ments to the de­fence min­istry’s De­fence Off­sets Man­u­fac­tur­ing Wing (DOMW) set up to vet off­set cred­its. The fac­tory turnover will then be ad­justed against Das­sault’s off­set cred­its. This process be­gins by Septem­ber 2019, three years from the sign­ing of the con­tract. As far as prof­its are con­cerned, Das­sault es­ti­mates DRAL will take at least a decade to break even. “The aerospace busi­ness is a slow grind. Re­liance will get 51 per cent of the share of prof­its, but only if the com­pany makes prof­its.”

WHO IS THE BIG­GEST BEN­E­FI­CIARY OF THE RAFALE OFF­SETS?

The De­fence Re­search and De­vel­op­ment Or­gan­i­sa­tion (DRDO), which po­ten­tially stands to gain the most from the Rafale off­sets. Das­sault of­fi­cials say nearly 30 per cent of the Rafale off­sets have been set aside for the DRDO. This could even go up to 50 per cent. For over two years, de­fence min­istry of­fi­cials and sci­en­tists ag­o­nised over what to do with the off­set wind­fall brought in by the Rafale deal. The DRDO saw in the Rafale’s M88 en­gine a chance to revive In­dia’s own flag­ging Kaveri en­gine pro­gramme. A re­li­able high-per­for­mance air­craft fighter jet en­gine is a com­plex piece of tech­nol­ogy and its man­u­fac­tur­ers can be counted on the fin­gers of one hand. Even China has been un­able to per­fect one de­spite try­ing for decades. Early this year, DRDO labs GTRE (Gas Tur­bine Re­search Es­tab­lish­ment) and air­craft de­signer ADA (Aero­nau­ti­cal De­vel­op­ment Agency) be­gan fi­nal ne­go­ti­a­tions with Safran and the IAF to de­cide how Das­sault and Safran could jump­start the Kaveri en­gine. If they are in­deed able to field an up­dated Kaveri en­gine with over 90 kN thrust, they could power the in­dige­nous LCA Mark-2 air­craft and fu­ture air­craft like the Ad­vanced Medium Com­bat Air­craft (AMCA). “We want our French part­ners to not only give us the knowhow, but also the know why—to vet our de­signs and cer­tify them,” says a DRDO of­fi­cial.

WAS HAL SIDE­LINED IN THE 36 AIR­CRAFT DEAL ?

It is a fact that HAL did not get to build or as­sem­ble the 36 Rafales—all of them are be­ing bought from Das­sault in a fly­away con­di­tion, de­liv­er­ies will start in late 2019 and will be com­pleted by 2022. MoD of­fi­cials say it was ‘un­eco­nom­i­cal’ to make just 36 Rafales in In­dia and point to the fact that talks for build­ing 108 Rafales that were un­der way be­tween HAL and Das­sault were dead­locked be­tween 2012 and 2015. Ar­eas of dis­agree­ment in­cluded work and re­spon­si­bil­ity share as well as the man-hours re­quired for mak­ing air­craft com­po­nents. The Rs 1.63 lakh crore deal was fi­nally scrapped in 2015 and the PSU, which en­joys a mo­nop­oly over air­craft man­u­fac­ture in In­dia, lost

THE ‘NEW NAME FOR­MULA’ OF RE­LIANCE OF NE­GO­TI­A­TIONS GROUP HAD ON AP­PEARED THE PUR­CHASE AS PART OF OF THE RAFALE, DE­CIDED BY THE MODI GOVERN­MENT AFTER TAK­ING OF­FICE. ASKED WHETHER IN­DIA HAD LOB­BIED FOR RE­LIANCE GROUP TO PART­NER WITH DAS­SAULT, HOL­LANDE SAID HE WAS “NOT AWARE”. “DAS­SAULT IS THE ONLY ONE ABLE TO SAY IT,” HE SAID SEPT. 21, 2018: FRAN­COIS HOL­LANDE to an AFP re­porter in Mon­treal

a big busi­ness op­por­tu­nity. They were not a con­tender for the off­sets but for the man­u­fac­ture.

How­ever, it would be in­cor­rect to sug­gest that HAL was com­pletely by­passed in off­set part­ner deals for the 36 Rafales. Snecma HAL Aerospace Pvt Ltd (SHAe), a JV be­tween HAL and the French man­u­fac­turer of the Rafale’s M88 jet en­gine, was signed in Fe­bru­ary 2015 in Bengaluru. The 50:50 JV was set up for the pro­duc­tion of en­gine parts and com­po­nents of the M88 en­gine and to fa­cil­i­tate their as­sem­bly. This JV will hence be el­i­gi­ble for off­sets dis­charged by Safran in the Rafale deal.

WHY DID RE­LIANCE EN­TER­TAIN­MENT FUND JULIE GAYET’S FILM? On Jan­uary 24, 2016, just two days be­fore Hol­lande was to visit New Delhi as a state guest for the Repub­lic Day Pa­rade, Re­liance En­ter­tain­ment cir­cu­lated a press re­lease head­lined ‘Re­liance En­ter­tain­ment, Serge Hazanavi­cius, Kev Adams, Julie Gayet and Elisa Sous­san join hands for unique Indo-French pro­duc­tion nOm­ber One’. Gayet, an ac­tor-pro­ducer, was also Hol­lande’s part­ner, and their li­ai­son was the sub­ject of con­sid­er­able tabloid gos­sip in Paris in 2014. The fact that the film was be­ing fi­nanced by an in­dus­tri­al­ist who stood to gain from the Rafale deal, even if it was as an off­set part­ner, is what Me­di­a­part caught on to in its Septem­ber 21 story. The film was re­leased in France as Tout la-haut in De­cem­ber 2017. Me­di­a­part quoted a mem­ber of the film’s pro­duc­tion team to sug­gest that had Re­liance En­ter­tain­ment not thrown in a fi­nan­cial life­line—3 mil­lion eu­ros, later re­duced to 1.6 mil­lion eu­ros—the biopic of a young snow­boarder who died on Mount Ever­est in 2002 would not have been pos­si­ble. “One day, the In­di­ans ar­rived and the film could be done,” the per­son said. It was this charge of crony cap­i­tal­ism —which pro­voked a re­sponse from Hol­lande.

“We did not have any say in this mat­ter. It is the In­dian govern­ment which pro­posed this group and Das­sault who ne­go­ti­ated with Am­bani. We did not have a choice, we took the in­ter­locu­tor who was given to us. This is why, in ad­di­tion, this group had no rea­son to make me any grace of any kind. I could not even imag­ine that there was any link with a film of Julie Gayet.”

Gayet’s pro­duc­tion house Rouge In­ter­na­tional, in a com­mu­ni­ca­tion to the In­dia To­day Group, de­nied know­ing or meet­ing Anil Am­bani or Re­liance rep­re­sen­ta­tives. Like­wise, a Re­liance spokesper­son de­nied hav­ing signed any agree­ment with Gayet or Rouge In­ter­na­tional. “No pay­ment has ever been made by Re­liance En­ter­tain­ment to ei­ther of them in re­la­tion to the film, nOm­ber One,” he said. Re­liance En­ter­tain­ment had paid 1.48 mil­lion eu­ros to Visvires Cap­i­tal on De­cem­ber 5, 2017, about two weeks be­fore the re­lease of the film on De­cem­ber 20, 2017. Hol­lande had ceased to hold of­fice in May 2017, more than six months prior to the said pay­ment, the spokesper­son added. The re­la­tion­ship with Visvires Cap­i­tal re­sulted in two other French movie JVs. There was no quid pro quo for the Rafale off­sets. “This was part of its nor­mal busi­ness for Re­liance En­ter­tain­ment,” said the spokesper­son. WILL RAFALE FLY AS A POLL IS­SUE? “Gali gali mein shor hai, desh ka chowki­dar chor hai (the word in the streets is the na­tion’s watch­man is a thief),” Congress pres­i­dent Rahul Gandhi said at a Septem­ber 20 po­lit­i­cal rally in Sar­gara, Ra­jasthan. The slo­gan, di­rected at PM Modi who cap­tured power in 2014 call­ing him­self a ‘chowki­dar’—was a mod­i­fied ver­sion of the one used by the op­po­si­tion to tar­get Rahul’s father in 1988 at the height of the Bo­fors scan­dal. The Congress hopes it can pin the new con­tro­versy on Modi, even though, un­like Bo­fors, there is no smok­ing gun, no mid­dle­men and no Swiss bank ac­counts. With the bat­tle lines drawn for the 2019 Lok Sabha elec­tions, it has in­creas­ingly be­come clear that the sleek French fighter air­craft will be the Congress party’s main poll plank to tar­get the BJP even though a re­cent in­dia to­day sur­vey which polled 30,000 vot­ers in 80 Lok Sabha con­stituen­cies in Ut­tar Pradesh, a key elec­toral state, showed that only 21 per cent re­spon­dents had heard of the Rafale deal. But as the po­lit­i­cal slugfest in­ten­si­fies in the run-up to the 2019 elec­tions, no one can say with cer­tainty how the con­tro­versy will play out, par­tic­u­larly as a bit­ter no­holds-barred per­cep­tion war is fought in the pub­lic gaze, in the me­dia and so­cial me­dia.

The BJP’s me­dia ma­chine is con­fi­dent that Rahul has made a strate­gic er­ror in call­ing Modi a thief be­cause the tag won’t stick and would, in fact, help the PM once he picks up the gaunt­let. Anil Am­bani, mean­while, has been left to de­fend him­self. In 2006, he had re­signed from the Ra­jya Sabha “to avoid any pos­si­bil­ity of con­tro­versy, how­ever re­mote or un­likely” when rum­blings over his hold­ing an of­fice of profit in the UP govern­ment be­gan. This time round, he pos­si­bly finds him­self in the slip­stream of a con­tro­versy with­out an eject lever in sight.

“WE DID NOT HAVE ANY SAY IN THIS MAT­TER. IT IS THE IN­DIAN GOVERN­MENT WHICH PRO­POSED THIS GROUP AND DAS­SAULT WHO NE­GO­TI­ATED WITH AM­BANI. WE DID NOT HAVE A CHOICE, WE TOOK THE IN­TER­LOCU­TOR WHO WAS GIVEN TO US. THIS IS WHY, IN AD­DI­TION, THIS GROUP HAD NO REA­SON TO MAKE ME ANY GRACE OF ANY KIND. I COULD NOT EVEN IMAG­INE THAT THERE WAS ANY LINK WITH A FILM OF JULIE GAYET” SEPT. 21, 2018: FRAN­COIS HOL­LANDE quoted in a re­port in Me­di­a­part

AU­GUSTE COM­PAG­NIE Anil Am­bani with Pres­i­dent Fran­cois Hol­lande at the Élysée Palace in Feb. 2017

AMIT DAVE/REUTERS

SHOW OF RE­SPECT Anil Am­bani with the PM at the Vi­brant Gu­jarat sum­mit in Jan. 2017

SHEKHAR SONI

LIE OF THE LAND The Das­saultReliance fa­cil­ity at the MIHAN SEZ in Nag­pur

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