'France is more mercenary than we like'

Despite frequent high-level interactions there has been little traction on substantive issues between India and France, says Mohan Guruswamy.

Prime Minister Narendra Modi is in Paris, reciprocating French President Francois Hollande's visit to India in February last year.

Despite the frequent high-level interactions there has been little traction on substantive issues between the two nations. There are several long-pending issues like six new nuclear power plants by Areva and the Nuclear Power Corporation of India Limited, a government-owned entity, and order for the Dassault Avions Rafale fighter.

These are huge deals with many long-term implications for India and France. In both cases pricing issues have become a major bone of contention. They have also become contentious and it seems unlikely that agreements will be formalised, apart from a reiteration of determination to iron out differences.

In the case of the nuclear power project envisaged for Jaitapur in Maharashtra, Areva has sought a tariff of Rs 9.18 per unit. This has been challenged by prominent sections of civil society as being too expensive.

Besides the ruling Bharatiya Janata Party ally in the Maharashtra, the Shiv Sena, is opposed to the project because of local objections on environmental grounds. The area around Jaitapur is politically significant to the Shiv Sena and overruling it may have political consequences for the BJP.

The Rafale fighter deal is stalled not only due to the high costs involved, but also due to disagreement on how the local component of fighters to be produced in India will be aggregated.

Dassault has taken the position that it cannot guarantee the quality of the Hindustan Aeronautics Limited built 108 Rafale fighters after the first 18 are imported. But many experts here say that that is merely a fig leaf to cover Dassault's financial inadequacy.

According to them, that is why Dassault wants another local partner like the private sector giant, Reliance Industries Limited, to complete the deal. RIL with its $10 billion cash hoard has already set up a defence sector business unit, Reliance Aerospace Technologies Pvt Ltd, in anticipation of this.

Defence Minister Manohar Parrikar, however, has made his position clear. The terms of the Indian Air Force tender requires the French company to guarantee the 108 fighters that HAL would build in India. Parrikar has said: 'I have told Dassault to send a person to work out the differences. You have to be clear that, irrespective of anything, the tender's terms have to be met. They cannot be diluted.'

Then there is the question of money. The initial estimation of $12 billion has now escalated to over $22 billion. The defence minister has publicly questioned the high cost of the Rafale by rhetorically asking as to how he can justify purchase of a fighter that costs twice as much as the Russian Sukhoi 30MKI fighter being produced in India.

To add to Dassault's discomfiture, Parrikar has also disclosed that the highly rated Su-30MKI costs Rs 358 crores (Rs 3.58 billion) each compared to the Rs 700 crore (Rs 7 billion) price tag for the Rafale. This means two Su-30s could be secured for the price of a single Rafale.

Many knowledgeable people in the military tend to believe that even as it is the SU30MKI is a more capable aircraft and certainly represents better value for money. The IAF has an order of 272 of these fighters and they are now manufactured by HAL. The Russians have already offered a SU30 MKI upgrade to make it even more potent. The arithmetic and simple logic makes this a difficult hurdle to surmount.

There are others in the influential bureaucracy who are not entirely too enamoured of French partnerships given the manner in which the project to manufacture six Scorpene class submarines with has meandered along with huge implicit price escalations.

The Scorpene deal is with the Direction des Constructions et Armes Navales, a private law company in which the French State holds a 64% stake with the private weapons maker Thales 35% holding the rest.

In 2005, the Indian Navy ordered six Scorpene submarines all the to be built at the ministry of defence-owned Mazgaon Dock and elsewhere, with the last two to be fitted with an Indian AIP module. The first India-made Scorpene was floated this week, half a dozen years late.

There is also a follow-on requirement of six submarines, for which DCNS plans to offer a larger version of the submarine to the Indian Navy. India has just floated a requirement for six new submarines to replenish its depleting fleet, but other companies too will be in the fray.

India and France entered a strategic partnership in 1998 to ensure bilateral cooperation through regular high-level exchanges at the head of State/head of government levels and growing commercial exchanges including in strategic areas such as defence, nuclear energy and space.

The number of 'strategic partnerships' India has with other countries causes some mirth, but even so the relationship with France is still a highly valued one with France ranking just below Russia and the USA as India's third most preferred partner.

This is saying lot considering that despite all the obvious associations it ranks considerably higher than Britain or Japan.

A high-ranking official recently summed this up as France being preferred even though "it has time and again proved to be more mercenary than we like."

On the economic front France is still not much of a partner with bilateral trade of about Euros 8 billion. But this is smaller than India's trade with all of France's neighbours like Germany, Belgium, the UK, Netherlands and Italy.

From 2000 onwards the total Foreign Direct Investment in India amounted to close to $900 billion. France's contribution has been below $15 billion or about 2% during this period.

Clearly the economic relationship with France could do with much improvement and the political relationship is based more on arms transfers, something either country should be comfortable with this.

Sadly, there are few expectations of a Modi-Hollande breakthrough on this score. But that's life. As the French would say, c’est la vie.