India, France busy in hard-nosed bargaining over cost of Rafale

NEW DELHI: India and France are yet to resolve their major differences over the cost for 36 Rafale fighters even nine months after the Modi-Hollande summit in Paris on April 10 last year gave the go-ahead for the negotiations. This, as expected, ensured the Inter-Governmental Agreement (IGA) and the actual multi-billion dollar contract could not be inked during President Francois Hollande’s visit to India.
Sources said it will take “some hard-nosed bargaining” for at least another month to arrive at a mutually agreed price for the 36 fighters in “a flyaway condition” directly from France, which will also include annual inflation costs with the deliveries slated to begin after three years.“The differences are still to be bridged,” said a source.
TOI had reported on January 13 that the mega deal for the 36 Rafales was “unlikely” to be inked during Hollande’s visit since the commercial negotiations were nowhere near being finalized, even though the technical and contractual issues had been sorted out to the last detail.
Knowing that India is desperate to induct new fighters and is committed to the deal, France apparently began the commercial negotiations with a figure of over Rs 80,000 crore (11 billion euros) for the 36 Rafales, which included the entire weapons package, training and the 30% offsets clause.
India, however, is pushing for an overall price of around Rs 60,000 crore (8 billion euros). Though the final price will depend on the support and spares package that is finalized, it could settle somewhere around Rs 65,000 crore, sources said.
The ongoing tussle is reminiscent of the deadlocked price negotiations for the original $20 billion MMRCA (medium multi-role combat aircraft) project for 126 fighters after Rafale was selected over five other contenders in January 2012. Under the MMRCA project, the first 18 fighters were to be imported from France with the remaining 108 being made by defence PSU Hindustan Aeronautics after transfer of technology.
Citing the IAF’s “critical operational necessity” and the need to cut time and costs, the NDA government had last April scrapped the entire MMRCA project and decided to go in for direct purchase of 36 Rafales through a government-to-government contract.
While the current negotiation is only for 36 Rafales, less than one-third of the 126 envisaged under the MMRCA project, the new contract will have the mandatory clause for acquisition of another 18 jets under the 50% follow-on order option at the same price. The 36 jets are to be delivered in the same configuration as were tested and approved by the IAF during extensive field trials in the MMRCA project.
Rafale-manufacturer Dassault Aviation said it was “very pleased with the progress” in the negotiations. “We are actively supporting the French authorities in their efforts to finalize a complete agreement within the next four weeks,” it said.