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Sunday, April 18, 2021

Why did Rafale maker Dassault pay 1 mn euros to Indian contractor Defsys?

French anti-corruption agency Agence Française Anticorruption (AFA) has reportedly raised concerns about a payment made by Dassault Aviation to Indian defence company Defsys Solutions in 2017-18. Paris-based investigative news website Mediapart has published a report on the findings of the agency that has put the Rafale deal under scrutiny once again. But the major question remains – Why did Rafale maker Dassault pay 1 mn euros to Indian contractor Defsys? The Indian National Congress has called for a probe on the matter as well.

What really happened?

The Mediapart report said that Dassault Aviation — the company that makes Rafale jets — could not provide proper documents for the 2017 transition in question. This led the anti-corruption agency’s inspectors to suspect that it was a “bogus purchase” — a transition that is essentially a bribe for the middleman. “As they combed through the 2017 accounts the AFA inspectors raised an eyebrow when they came across an item of expenditure costing 508,925 euros and entered under the heading “gifts to clients”. This amount ‘seemed disproportionate in relation to all the other entries’ under the same heading, said the subsequent confidential report of the AFA audit…,” the Mediapart reported.

The anti-corruption agency inspectors who unearthed the transaction asked Dassault for a few explanations but the Dassault Group could not provide the AFA officials with a “single document showing that these models existed and were delivered”.

The French aviation giant had reportedly asked its Indian sub-contractor, Defsys Solutions to build the jets for 20,000 euros each. The transition was listed as a”gift to client”. “To justify this larger than usual ‘gift’ Dassault supplied the AFA with a ‘proforma invoice’ dated March 30th 2017 which was supplied by an Indian company called Defsys Solutions. This invoice, which related to 50% of the total order (€1,017,850), was for the manufacture of 50 models of the Rafale C, with a price per unit of €20,357,” the report quoted the AFA report. It brings us back to the same question – Why did Rafale maker Dassault pay 1 mn euros to Indian contractor Defsys?

Why did Rafale maker Dassault pay 1 mn euros to Indian contractor Defsys?

What has stirred controversy in India is the involvement of Defsys Solutions, owned by the Gupta family who has helped India’s aeronautical and defence deals for generations. But it’s a particular member of the family whose involvement has raised eyebrows of the Indian media. “Defsys belongs to the Gupta family, whose members have acted as middlemen in the aeronautical and defence industries for three generations.  In January 2019 the Indian media – first Cobrapost and then the Economic Times – revealed that one family member, Sushen Gupta, operated as an agent for Dassault, had worked on the Rafale contract and had allegedly obtained confidential documents from India’s Ministry of Defence,” read the Mediapart report.

Talking about Sushen Gupta’s involvement, the French media organisation said, “By coincidence, it was this middleman who sent the one-million-euro invoice for the jet fighter models to Dassault six months after the September 2016 signing of the Rafale deal by the French defence minister Jean-Yves Le Drian and his Indian counterpart Manohar Parrikar. In March 2019 Sushen Gupta was arrested by agents from the Enforcement Directorate… He was later freed on bail facing charges of “money laundering” over the so-called ‘Choppergate’ corruption scandal involving the sale of helicopters to India by the Italian-British group AgustaWestland.”

What happens next?

The audit, which was closed last year, never referred the matter for prosecution. The Director of the AFA, Charles Duchaine did not comment on the issue. But the Medipart said that the AFA’s final report only consists of two short paragraphs on the entire aircraft models issue. So, if there is no recommendation for prosecution there are no actions to be taken unless there is a fresh case filed on the matter.

What does India want?

Back in India, the Opposition, Indian National Congress have jumped at the “opportunity”. The Rafale deal and the alleged corruption surrounding the deal was Congress’s major issue for the Lok Sabha Elections 2019. While the issue did not connect with the public at that time, the opposition party would understandably not let the issue go. Congress’s General Secretary and Chief Spokesperson Randeep Surjewala said that the report has verified former Congress chief Rahul Gandhi’s poll-time allegations.

“Does it now not require a full and independent investigation into India’s biggest defence deal to find out how much bribery and commission in reality, if any, was paid and to whom in the Indian government? Will Prime Minister Narendra Modi answer to the nation now?” asked the Congress spokesperson. “How can middleman and payment of commission be permitted in a “government-to-government Defence Contract” or in any defence procurement in violation of the mandatory Defence Procurement Procedure [DPP],” Surjewala told the media at the press meet.

Surjewala also added, “Has it not vitiated the Rafale deal entailing imposition of heavy financial penalties on Dassault, banning of the company, registration of an FIR and other penal consequences.”

What did India find?

Earlier, in 2019, The Hindu’s former Editor-in-chief and Senior Journalist N Ram, in a series of investigative reports said that a major chunk of the increase in the price of the Rafale transaction is due to the fact that the deal had bypassed a chunk of mandated procedures. “The French side took advantage of parallel parleys by the PMO that weakened the Indian team’s position. The government overruled Financial Advisers’ recommendation for an escrow account, and the deal was not on better terms than the UPA-era offer,” reads an introduction to his series of reports.

It is upon the Narendra Modi-led BJP government now to either make a move and order an enquiry if the public demand rises or just keep mum and let the issue play out on its own. What they will choose to do is anybody’s guess.

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