Rafale deal in final stage, India to purchase 36 fighter jets from France

Deal to be closed by May-end

The negotiations over the purchase of 36 Rafale fighter aircraft by India from France have reportedly entered the “final stages” as both India and France have managed to narrow down their differences over the pricing. Speculation was rife that India and France are narrowing down on euro 7.8 billion as the final price. Government sources said that the deal has not been concluded yet but it is in the “final stages”. The final deal could be clinched by the end of May this year.

India has been negotiating hard to bring down the price in the Rafale deal. The Rafales are manufactured by French firm Dassault which had emerged as the lowest bidder and had almost bagged a global tender floated by the ministry of defence (MoD) in 2007 for acquisition of 126 medium multi-role combat aircraft (MMRCA). But after protracted negotiations between the MoD and Dassault made no headway, India scrapped the tender and decided instead to buy 36 Rafales off the shelf directly from France in a government-to-government deal. But the two sides once again hit the price roadblock.

The price for 36 Rafales, as per the earlier tender, keeping cost escalation and the dollar rate in mind, reportedly comes to a little over Rs 65,000 crore. This includes the cost involved in making changes India has sought in the aircraft, including Israeli helmet-mounted displays and some specific weaponry.

“The effort is to bring down the price to less than euro 8 billion (Rs 59,000 crore),” sources were quoted by news agencies as saying, adding that the French have more or less agreed to Indian terms. The proposed deal reportedly comes with the clause of delivering 50 per cent offsets, creating business worth at least 3 billion euros for smaller Indian companies and creating thousands of new jobs in India through the offsets.

The proposed deal for acquisition of 36 Rafale fighter with France had just recently hit a roadblock with India insisting that France offer a lower price that is acceptable to it. Defence minister Manohar Parrikar had said a few weeks ago that he was a “tough negotiator” and wanted the “best price” for Rafale fighter jets from France. Stating that he was aware that the IAF needs the aircraft, the minister added, “I think a good buyer does not put his weakness in front. He always keeps his cards close to his chest. Please don’t ask me to disclose my cards in national interest.”

During French President Francois Hollande’s visit to India in January, India and France had inked an MoU for the purchase of 36 French Rafale aircraft but persisting differences over the pricing of the fighter jet came in the way of the multi-billion-euro deal being wrapped up. The deal is estimated to cost a little lower than Rs 59,000 crore.

Speculation was rife earlier that France had wanted about 11.5 billion euros while India wanted the cost lowered to a little less than 8 billion euros. France had earlier apparently lowered the price — for 36 Rafale aircraft below the earlier per aircraft price that Dassault had originally offered when India was negotiating acquisition of 126 Rafales — but India had wanted the price to be lowered further. Any inking of the deal soon will be good news for the IAF which desperately wants new fighter aircraft to boost the number of its fighter squadrons.

According to news agency reports, the toughest phase in the negotiations, which began in July 2015 — three months after Mr Modi announced in Paris India’s plan to purchase 36 Rafale jets — was to get the French to agree to 50 per cent offsets in the deal and that initially Dassault Aviation was willing to agree to reinvest only 30 per cent of the value of its contract in Indian entities to meet the offset obligations.

The French side reportedly agreed finally to invest 50 per cent of the value following a phone conversation between Mr Modi and Mr Hollande late last year. The commercial negotiations, as in the pricing of the planes, equipment and other issues, is said to have begun only in mid-January this year.

Under the proposed deal, French companies, apart from Dassault Aviation, will provide several aeronautics, electronics and micro-electronics technologies to comply with the offset obligation.

Companies like Safran and Thales will join Dassault in providing state-of-the-art technologies in stealth, radar, thrust vectoring for missiles, and materials for electronics and micro-electronics.