Why the Government of India Does Not Disclose the Actual Price of Rafale Jets

Rationale Behind the Non-Disclosure of the Actual Price of Rafale Jets

The purchase of Rafale jets, or any other defense equipment in general, is not a linear transaction. It involves extensive negotiations and complexities, especially when dealing with billions of dollars. Here’s a detailed look at why the price is not disclosed and the strategic reasoning behind it.

Key Points Explaining the Non-Disclosure

Point 1: Complex Negotiations and Multiple Agreements

Buying defense equipment is not a straightforward process, often marked by extensive negotiations. Bilateral agreements and monetary transactions are substantial, leading to reciprocal benefits between the negotiating parties. In the case of the Rafale jet deal, an offset agreement was signed between India and France. This agreement implies that while the price of the jet itself might not be the full cost, there are additional components involved. These can include service costs, performance guarantees, and weaponry support.

Therefore, the actual cost of the jet includes a wider range of expenses and benefits beyond the sticker price, making a direct value comparison impractical and misleading.

Inter-Governmental Contract and Restrictions

Point 2: Inter-Governmental Contract Obligations

France is providing Rafale jets to India under an inter-governmental contract. This type of contract is legally binding and restricts both nations from disclosing the price due to non-disclosure agreements. The rationale for this is two-fold: ensuring national security and avoiding potential exploitation by other countries seeking similar deals at reduced prices.

Why France Doesn't Reveal the Price

Point 3: Security and National Interests

A key reason for not revealing the price is to maintain national security. If the price were disclosed, other countries might base their purchase prices on it, asking for similar deals at the same or reduced rates. This could jeopardize France's and Dassault's commercial interests, potentially leading to price wars that harm all parties involved.

Furthermore, the purchase is not just a simple cash transaction. It involves a host of other agreements and deals that are crucial for national security and cannot be openly shared. Revealing these elements would expose vulnerabilities and put the defense capabilities of both nations at risk.

Price Discovery and Market Dynamics

Market Dynamics and Price Discovery

Without price discovery, the negotiations with only one vendor knowing the exact details can lead to discrepancies in pricing. Even if there is no embezzlement, the costs may be higher due to the lack of competitive bidding and transparency.

Also, non-disclosure helps in avoiding unwarranted obstruction from those who do not fully understand the complexities of the agreement. Some stakeholders may exploit the situation for political gain or media hype, which is understandable given the history of similar controversies.

Corruption and Oversight

Role of Oversight Institutions

One might wonder if this non-disclosure can lead to corruption. While it does introduce a risk, it is essential to remember that institutions like the Supreme Court and the Central Auditing Officer (CAG) can review such purchases. These bodies are equipped to ensure transparency and accountability in defense procurement.

For example, the purchase might appear higher due to the need for priority delivery, which might not be easily justified to the public. Yet, without knowing the full agreement and the justifiable reasons for such a deal, armchair experts can misinterpret the higher price.

Conclusion

The government of India's decision to not disclose the actual price of the Rafale jets is driven by strategic, economic, and security concerns. While there is a risk of non-transparency, the safeguards and oversight mechanisms in place are crucial for maintaining the integrity of the procurement process and ensuring national security.