French lower Rafale price, but India calls for further cut

In a significant development, France has lowered the price for 36 Rafale fighters below the earlier one that Dassault, the jet’s manufacturer, had originally offered when India was negotiating the acquisition of 126 Rafale aircraft, but India wants the price to be lowered further according to its expectations, top government sources said. They added that there was no reason why the cost issues could not be resolved with France in the next six to eight weeks.

India will, however, not be bound to any timeline, the sources said, indicating that all options were still open on negotiations with other sellers in case the financial aspect was not eventually clinched. Prime Minister Narendra Modi is, however, in favour of the resolution of the cost issues with France so the Inter-Governmental Agreement can be concluded in its entirety, and so New Delhi is not looking beyond France for the moment. It may be recalled that the European EADS Eurofighter was the only other vendor besides Dassault which had fulfilled the technical parameters of the IAF when India was originally acquiring 126 medium multi-role fighter aircraft.

Speculation is already rife that France wanted about 11.5 billion euros for the deal, while India wanted the cost to be lowered to about eight billion euros. But it seems the French have further lowered the cost significantly, but not yet to the extent India wants. But with the IAF desperately seeking the induction of new fighters, it will be interesting to see what happens if the cost issues are not resolved in the next two months.

“France has lowered the price below the original price (that Dassault was earlier offering), but we want it to be lowered further to meet our expectations. There is no reason why these cost issues cannot be resolved in the next six to eight weeks,” sources said on Wednesday.

The Request for Proposal (RFP) issued way back in 2007 for 126 fighter jets was ultimately won by Dassault after it was chosen as the lowest financial bidder. But after the prolonged contract negotiations between India and

Dassault. the proposed deal made no headway, after which India decided last year, during Mr Modi’s visit to France, that it would acquire 36 Rafale fighters directly from the French government by a separate process, citing the IAF’s operational necessities. India also decided to “withdraw” the earlier-issued RFP for 126 MMRCA.

But the cost negotiations for these 36 aircraft could not be clinched even after months of negotiations in time for French President Francois Hollande’s just-concluded visit to India. Dassault had already issued a statement Monday saying it was actively supporting the French authorities in their efforts to finalise a complete agreement in the next four weeks.