Rafale scam: Loot of public exchequer in the name of national security

Charges of corruption at the highest level in India’s decision to purchase Rafale fighter jets from a French company have once again exposed the cut-throat rivalry, huge bribes and kickbacks that characterize the global arms market.

Global arms trade is dominated by giant monopoly corporations in every sphere. The market for fighter jets is dominated by six major arms manufacturers, namely: Boeing (USA), Lockheed Martin (USA), Dassault Aviation (France), Eurofighter (Germany, Britain, Italy and Spain), Saab (Sweden) and United Aircraft Corporation (Russia).

The Indian state is the world’s biggest purchaser of high technology weapons. There is fierce contention between the biggest international arms manufacturers over the Indian market. Each of them has their agents within India, who lobby for them in the bid for every major contract.

In the cut-throat rivalry among the world’s biggest arms companies to bag lucrative Indian defence contracts, paying bribes to top officials of the government and the armed forces, as well as to the ruling party, is not an exception. It is the general rule.

Those companies which lose out try to expose the bribes paid by the company that won the contract. For example, the bribes paid by the Italian company Augusta Westland to secure an Indian helicopter deal were exposed by a rival US company. That exposure led to the UPA government cancelling that deal in 2013.

Defence procurement has always been a preferred source of funds for the Party in power. It is a convenient form of looting the public exchequer by inflating the costs of purchase. The terms of purchase are hidden under the cloak of “national security”. According to some market insiders, about one-fifth the value of every arms contract flows into the coffers of the ruling party. The opposition parties in Parliament scream about corruption so as to discredit the ruling party and take its place.

Over 30 years ago, the Congress-led government headed by Rajiv Gandhi was accused by the BJP and other opposition parties of benefiting from mega corruption in the Bofors deal. Today, the BJP-led government headed by Narendra Modi is being accused of by the Congress of benefiting from mega corruption in the Rafale deal.

Over the past decade, Indian capitalist monopolies have entered the defence production sector. They see this as a sphere for pocketing guaranteed mega profits. Indian monopoly houses want to become major arms exporters in the future. They are getting into joint ventures with foreign arms manufacturing companies. The Tata group, for instance, has an agreement to produce and supply wings for the planes made by Lockheed Martin.

The Indian state has introduced an “offset clause” in foreign military purchases above a certain value. According to this clause, the foreign company which wins a major arms contract must invest a fixed percentage of the contract value in a joint venture with an Indian company for production in India.

Capitalist monopolies that have set up companies in the arms manufacturing sector include the Tatas, Reliance (Mukesh Ambani group), Mahindra’s, L&T, Reliance (Anil Ambani group), Hero, Bharat Forge and Hindujas.

Along with the contention amongst foreign arms sellers, there is acute contention among these Indian monopoly houses for arms contracts. These companies lobby along with their foreign partners. They use every possible means, including payoffs to ministers, officials and party bigwigs, to advance their interests at the expense of their rivals.

Whenever the corrupt deals get exposed and turn into mega scandals, it is a sign that the contradictions between competing monopoly groups has become very intense.

After reducing the Rafale order 126 planes to 36, the Government has floated a new tender for 110 more fighter planes. All 6 major global manufacturers of fighter planes have expressed interest. Lockheed Martin has even announced that it will shift production of F-16 fighters to India if the Indian state would guarantee purchase of these planes. The decision to downsize the Rafale order from France appears to be the result of pressure and lobbying by American and other rivals who want a greater share of Indian defence deals.

The Rafale scam once again brings out the highly monopolistic and thoroughly corrupt nature of the imperialist arms market. It shatters any illusion that the arms purchases by the Indian state are dictated by considerations of “national security”. Far from giving primacy to the country’s security, the Indian State is giving primacy to the interests of Indian and foreign monopoly capitalists to reap guaranteed maximum profits from defence deals. The central Government is facilitating monopoly capitalist loot of the country in the name of strengthening national defence.

Facts about the Rafale deal

The tender for purchasing 126 fighter jets was floated by the UPA government in 2004. After a lengthy process, the Rafale fighter jet produced by the French Company Dassault Aviation was chosen. The plan was that 108 of the 126 fighter jets would be built in India by the public sector Hindustan Aeronautics Limited (HAL). HAL and Dassault Aviation were to respectively share 70% and 30% of the production. The remaining 18 were to be purchased in “fly away condition”.

During his visit to France in April 2015, Prime Minister Modi announced a deal for government-to-government purchase of 36 Rafale fighter aircraft, all in “fly-away condition”. The plan to manufacture Rafale jets in India was dropped.

While the government has not revealed the cost, it has been alleged that the cost per plane is likely to be around Rs 1670 crores, as opposed to Rs 526 crore as per the earlier agreement.

It has been reported that according to the terms of the new agreement, 50% of the Rs 60,000 crore deal (amounting to roughly Rs 30,000 crores) would be reinvested by Dassault in India. It has been alleged that of this amount, about Rs 21,000 crore would be invested in a partnership between Dassault and a new defence production company set up by the Anil Ambani group. Reliance Defence was created just a few days before the signing of the contract and it had no experience at all of manufacture
of defence and aerospace equipment. Two weeks after signing of the contract, another new company called Reliance Aerostructure Limited was formed, to become Dassault’s partner in the joint venture.

 

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Nov 16-30 2018    Struggle for Rights    Rights     2018   

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