Negotiations for defence capital procurement in India do not provide, let alone foresee, for any 'Sherpa' help

by Sudhansu Mohanty

One of the most intriguing aspects of the Rafale deal that defies understanding is the proactive role played by Ajit Doval, the National Security Adviser (NSA), in the finalisation of the terms and conditions of the contractual details.

The puzzle stays, because Doval had no locus to negotiate the Rafale deal. He was not a part of the officially-appointed and legitimately-anointed Contract Negotiation Committee (CNC) under DPP 2013, notwithstanding his high office of National Security Adviser. Nor was he a co-opted member nominated to the CNC (or INT, as christened on official records put out in the media) by the Raksha Mantri (RM), who, given the NSA status, rank and position, wasn’t within his right to do so.

The DPP 2013 grants the NSA no role whatsoever in the negotiation and finalisation of defence contracts. This is what Para 47 of DPP 2013 says about the Contract Negotiating Committee:

“The process of commercial negotiations will commence, wherever necessary, after Staff Evaluation Report has been accepted by the Director General (Acquisition) and the TOC Report has been accepted by the Defence Secretary, as applicable. The standard composition of the CNC shall be as indicated at Appendix B to this procedure. Any change in the composition of the CNC may be effected with the approval of Director General (Acquisition).

Where considered necessary, a Service officer or any officer other than from the Acquisition Wing of the MoD may be nominated as Chairman of the CNC with the prior approval of Raksha Mantri. The concerned organisations/ agencies should ensure that their representatives in the CNC have adequate background and authority to take a decision without any need to refer back to their organisation/ agency. The CNC would carry out all processes from opening of commercial bids till conclusion of contract. The sealed commercial offers of the technically accepted vendors shall be opened by the CNC at a predetermined date and time under intimation to vendors, permitting such vendors or their authorised representatives to be present. The bids of the competing firms shall be read out to all present and signed by all members of the CNC.”

The standard CNC composition as per Appendix B alluded to in para 47 of the DPP 2013 is reproduced below:

A. FOR SERVICES & COAST GUARD –ABOVE ` 200 CRORE
Acquisition Manager – Chairman.
Technical Manager.
Finance Manager.
Advisor (Cost).
DGQA/DGAQA/DGNAI Representative.
Procurement Agency Representative.
User Representative.
Representative of Contract Management Branch at SHQ.
Repair Agency Representative.
Under Secretary concerned.
Member Secretary to be nominated by the Chairman.

Notes:

(i) If with ToT – rep of DDP, DRDO and Production Agency to be included as member.
(ii) Participation of Adviser (Cost) is not required in every CNC and it has to be on actual requirement basis, as determined by the Chairman.
(iii) If the CNC is chaired by a Service Officer in category A above, then reps may be nominated in place of officers mentioned at Serial no. 1,2,3 of A above.
(iv) If Offset included, then rep of Defence Offset Management Wing (DOMW) to be included as member.
(v) In the absence of the designated member, the authorised representative would be deemed to be suitably empowered to take decisions.
(vi) Approval of Director General (Acquisition) to be solicited for any change in the compositions mentioned above.”

For the sake of absolute certitude, go search the DPP 2013 with the words “National Security Adviser” or “NSA”. It throws up no result, a confirmation that the DPP 2013 (even DPP 2016) envisions no role for the NSA in defence capital procurement. This is what makes the active participation of the NSA all the more problematic.

A model of the Rafale fighter, outside the French ambassador’s office at the Embassy of France in New Delhi. Credit: The Wire

The ‘SHERPA’ Role

Unless, of course, unbeknownst to the citizens of this country, Doval played the ‘Sherpa’ (emissary) to act on behalf of Prime Minister Narendra Modi. The term ‘Sherpa’ was originally used informally by the states of the European Union, where personal representatives prepare work for the Intergovernmental Conference (IGC) meetings.

While the position of a chief negotiator can be traced back under varying names to the first days of the European Union process, the name has caught on as an official reference since 2005 on the designation of a high-profile group on competition regulation in the European chemistry that names officially a “Sherpa-Subgroup”.

Negotiations for defence capital procurement in India do not provide, let alone foresee, for any Sherpa help. Nor does it even envisage or assign any role to him in the IGA-based contractual matter. The reason is clear. The negotiations – both technical and commercial – are done by domain experts. And in the case of Indo-French IGA, the Indian PM himself had already made the pronouncement in Paris on April 10, 2015, and there was no need or likelihood of another summit meeting between the Indian PM and the French president.

Even granting that there was an off-chance of such summit meeting(s), was Doval officially appointed as the PM’s Sherpa? No government notification was issued, nor does any media report attest to this fact.

For the sake of argument, were he the official Sherpa, his appointment would still be considered extra-mural and extra-procedural under the DPP 2013 (as also in the DPPs that preceded and succeeded the 2013 version) – to discuss and negotiate the terms and conditions of the contract, which is solely and wholly the CNC’s preserve, as prescribed in the DPP 2013. Of relevance here is the fact that the term INT alluding to the Indian Negotiating Team has been used as a euphemism for the CNC or Contract Negotiation Committee, quite possibly to accommodate the NSA.

Not to one’s knowledge has there been a single instance where any authority outside the MoD was so appointed to play an active role in an ongoing negotiation process. Nor do officials other than the authorised CNC members even inside the MoD have anything to do with the ongoing CNC’s negotiations, leave aside negotiating upfront with the vendor or OEM. This is disquieting. 

More disquieting is the fact that his interventions as unofficial Sherpa put paid to observing laid down procedures that didn’t help the nation’s interest. Going by information available in public domain, insistence on sovereign guarantee by the French government was done away with and the quirky tokenism of a legally unenforceable ‘Letter of Comfort’ given in exchange.

Dassault’s Financial State

Also, it needs no recalling that Dassault Aviation, given its none-too-sound financial state, was overly keen on clinching the Indian deal. India, on the other hand, had far more choices in the international arms market for fighter aircraft, as was apparent then on the basis of multi-vendor scenario that had emerged.

It may not be much of a stretch to say that the scenario was quite akin to a monopsony (though not the copybook way) where in a big ticket purchase the potential buyer (India) was in a vantage position to call the shots and dictate terms to the seller. More so, in the wake of the discount offer of Eurofighter in July 2014. Why this situation was not exploited in adding to India’s bargaining power and leveraged to India’s advantage is a matter of conjecture. But that it was a failure on India’s part to seek advantage of its buyer’s position to fashion a better deal is hard to gloss over.

It inevitably brings to the fore another concomitant issue: what’s the best time for a buyer to sign an IGA? Before or only after the negotiations are over? An announcement or conclusion of an IGA before negotiation had begun will likely push the buyer to the wall, while negotiations without the albatross of an IGA announcement gives the buyer a freer hand to extract optimal negotiating and contractual mileage. Doubtless an open-ended negotiation frees the negotiators from any baggage and grants the flexibility to protect public funds.

Adding to India’s woes is the arbitration in Geneva under the UNCITRAL, which betrays the sanctity and raison d’être of an IGA. For what’s an IGA if contractual matters have to be adjudicated not by the two IGA-signing nations but by an outside body? It assails the very foundation and morality of an IGA.

Yet, that doesn’t exhaust the weaknesses of this IGA-laden Rafale contract, adjudged as having “broadly” followed the procedures by the Supreme Court. The long shadows it will cast on Indian public governance can’t be ignored. The sanctity and purity enshrined in the extant DPP – of faithful implementation of a bespoke procedural system free from allegations of interference – has been breached. It will likely to have a telling effect on all future defence procurement, both revenue and capital.

Lingering Doubts In The Citizen’s Mind

Another fall-out is the lengthening shadow that will loom on other processes and procedures, not necessarily defence, but on the entire spectrum of government apparatus. It is well to remember that it’s easy to break a good tradition but rather hard to break a bad one. The raison d’être of DPP is to keep any extraneous pressure at bay and to insulate public spends from such influences. Each such infraction not only infringes the sanctity of DPP but also seeds the vector for future outrage.

How, then, for the government, even now, to clear the air, for as someone said, when in doubt – disclose? That will not only help scotching any lingering doubt(s) in the citizen’s mind but also add to the credibility of the government and set the tone for all future procurement cases. Let the Services’ interests too not be allowed to suffer.

Else, the case will very likely be alluded to or invoked as a precedent to justify so-called ‘minor’ deviations – that aren’t so ‘minor’ as may be made out to be – perpetrated in day-to-day functioning.

It will be open to abuse and easy for monkey tricks by citing this as an example, or by plucking some curmudgeon acts or ideas or processes out of context to negate or twirl a rightful course of action envisaged under prescribed procedures. That will be unfortunate and shall obscure a warning that may be timelier now than we would like to believe.

Sudhansu Mohanty worked as Controller General of Defence Accounts and then as Financial Adviser, Defence Services before retiring on May 31, 2016