The Rafale deal grabbed headlines last week, giving the opposition something they wanted for a long time – a potential scam that was relatively easy to understand (India bought planes from France, Anil Ambani is supposed to have benefited from it).
Did Ambani benefit legitimately? Well, who cares and who knows (and frankly we will never know). But Ambani in a defence deal, really? It is just terrible optics, no matter what the merits of the situation. And since optics matter, BJP will pay the political price for this deal.
Was there wrongdoing? Well, there’s all kind of versions. Proving legal wrongdoing is an uphill task (like any previous alleged scam). However, there are some things that happened here that don’t seem right.
Four main stakeholders were involved – the French and Indian governments, a French private company (Dassault) and an Indian private company (Reliance). Let’s call them the ‘four friends.’
But let’s step back a little. A few years ago, the Indian government created a policy to involve Indian private companies in defence. That made it necessary for any foreign defence supplier to spend at least 30% of the contract amount in India, using an Indian manufacturer to manufacture parts (called an offset partner). On paper, this policy looks great. We buy weapons from outside, but some of the money comes back to India.
However, the same policy also allows for gross misuse. A few decades ago we had middlemen in defence deals, who enabled bribes and kickbacks. After Bofors, they were banned. However, now with an Indian company involved in offsets, it is an excellent way to make the foreign company pay a kickback, through the Indian company, which then has its own ways to pay the government (or do them a favour).
I am not saying that’s what happened here. However, one should note that the policy is designed for misuse. The even bigger issue here is this: why are we so dependent on buying weapons from abroad? Why can’t we make our own weapons? We buy weapons from foreigners to defend ourselves from foreigners, does it look like the best way?
Anyway, coming back to Rafale and the four friends, we have different versions of what transpired. According to the French ex-president, Reliance was imposed on them. According to the Indian government, that is not the case. The French company agrees as well. However, the fact remains that Anil Ambani, who is seen as close to the current government, is in on the deal as an offset partner. His defence company was formed two weeks before they won the contract. Sounds shady?
Well, defence deals were shady, are shady and will remain shady – under any government. This is because nobody dares question them. The total defence expenditure, where we spend it and why – raise questions on that and you will be labelled anti-national. Owing to the ‘national security’ tag, you will not get answers. A few weeks ago, the government didn’t even want to reveal the price at which they had bought the Rafale planes – citing confidentiality. We are buying planes with taxpayer’s money, from a foreign private company. The company sells these planes across the world. And the government didn’t want to reveal what it paid for them?
Considering that anti-corruption was one of the major planks on which this government came to power, this caginess was a big disappointment. Did the four friends do something wrong given the policies in place? Frankly, we will never know. If they decide to help each other out, it is unlikely they ever exchange bags of money. There probably would be nothing illegal in the way the deal is done. There may or may not have been a bribe – there often isn’t one between powerful friends, just favours traded. However, what is wrong here is the crony capitalism, whether direct or indirect.
The crony capitalism is direct if Reliance was indeed recommended by the government (unproven yet). However, even if the government did not recommend Reliance, isn’t it true that in such deals, in India only companies like Reliance can win? Certain corporates have an unfair advantage in India, simply by virtue of their perceived closeness to the government. Even if we buy the version that Reliance was chosen independently, the question is why were they chosen? Their defence subsidiary was formed two weeks before this deal. Their experience in this field was limited.
The reason why Reliance was chosen, most likely, is because companies like Reliance can wade through the complex maze of Indian regulations and babudom and open doors at the right places. We may promote Make In India, but making in India is so darn difficult, that you better be a crony billionaire to even have a chance in certain sectors.
That the current government did nothing to change that four years after being in power is sad. That they either helped their rich friends get defence deals, or made policies that indirectly give their rich friends an advantage is sad.
Perhaps there is something wrong in the Indian value system and culture. We value relationships, family and our own friends a bit too much. For that, we are ready to kill merit, talent, fairness and the greater good. Why don’t we make policies that enable a new breed of entrepreneurs to emerge? Moreover we still don’t have a good system in place to secure the equipment our forces want, and now all such deals will be viewed with scepticism.