Asia Defense

AgustaWestland Graft Scandal Poised to Delay Conclusion of India-France Rafale Deal

With renewed scrutiny of defense deals awarded under India’s previous government, the India-France Rafale deal might be delayed again.

AgustaWestland Graft Scandal Poised to Delay Conclusion of India-France Rafale Deal
Credit: wikimedia commons/Tim Felce

The pending $8.9 billion deal between India and France for the purchase of 36 Dassault Rafale multi-role fighters could be delayed due to a separate 2013 bribery scandal involving Italian helicopter manufacturer AgustaWestland. Speaking before India’s parliament last week, Indian Defense Minister Manohar Parrikar said that the pending talks with the French government would come under renewed scrutiny, likely due to renewed attention in India on the AgustaWestland scandal given recent verdicts handed down in the case in Italy.

“The Ministry of Law and Justice has made certain observations [regarding the ongoing Rafale talks] and the same will be taken into account while finalizing the Inter-Governmental Agreement (IGA), which is still under negotiation,” Parrikar told India’s parliament last week. As The Diplomat has reported recently, government-to-government talks between India and France over the Rafale have been stuck in protracted negotiations over offset clauses, which would require Dassault to invest at least 50 percent of the contract value of the deal within India, and, more critically in recent weeks, the per-unit price of the fighters.

The domestic politics of the AgustaWestland scandal are once again heating up, as well. India’s former government, headed by the Congress Party-led United Progressive Alliance (UPA) alliance, oversaw both the AgustaWestland deal and the award of the Medium Multi-Role Combat Aircraft (MMRCA) tender to Dassault, which was the precursor to the currently pending 36-jet deal. (In March 2015, India and France announced a government-to-government deal, scrapping the MMRCA process altogether.)

As Akhilesh Pillalamarri discussed in these pages recently, India’s Congress Party, now in opposition to the Bharatiya Janata Party-led government, is under scrutiny in the AgustaWestland scandal. Parrikar, for his part, has thrust himself into the ongoing domestic debate. Speaking last week, he noted that  “Many people who had some links with Agusta, I am not saying illegitimate links, but some links with Agusta procurement and supply, were given good positions.”

While stopping short of levying accusations, the minister’s remarks mesh with broader accusations that opposition leaders, including Sonia Gandhi, the president of the Congress Party herself, may have been involved in the scandal. Moreover, recent reports citing Indian Defense Ministry sources note that the Modi government is probing the MMRCA process, probing for evidence of corruption in the award of the now-defunct tender to Dassault.

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The deal between France and India for these 36 fighters was just weeks ago expected to be concluded in May 2016, after hard-fought negotiations over price, but the politicization of defense procurement may add more delays. Meanwhile, with 35 active fighter squadrons, the Indian Air Force (IAF) remains far short of its sanctioned squadron strength of 42. The 36 Rafale will help reduce the shortfall, but will stop far short of what’s necessary for the IAF to meet its requirements.