Rafale MoU with France, but price still unresolved

14 pacts inked, including on 6 Jaitapur N-units

Despite hectic last-minute negotiations between the two countries during French President Francois Hollande’s ongoing visit, India and France on Monday failed to agree on the cost of the crucial deal for acquisition of 36 Rafale fighters, as the two sides expressed optimism, and signed an MoU on the Inter-Governnmental Agreement, that cost issues will be resolved soon. The IGA will be concluded “in its entirety” once the cost issues are agreed on, foreign secretary S. Jaishankar said.

In another key development on civil nuclear energy front, the two nations decided on the construction of six nuclear power reactors at Jaitapur in Maharashtra, instead of the two units agreed earlier. The two nations signed a total of 14 agreements in different areas, from defence and space to culture. France will also take part in Isro’s next mission to Mars. The agreements followed hour-long talks between Prime Minister Narendra Modi and the French President, and the delegation-level talks for 90 minutes.

Dassault, Rafale’s manufacturers, issued a statement that it was actively supporting the French authorities in efforts to finalise a complete agreement in the next four weeks. Speculation is rife that France wants to sell 36 Rafales including weapon systems for about 11.5 billion euros, while India wants the price lowered to around eight billion euros (Rs 59,000 crores).

A joint statement said Prime Minister Modi and President Hollande “welcomed the conclusion of the Inter-Governmental Agreement (IGA) on the acquisition of 36 Rafale fighter aircraft in flyaway condition, except for some financial issues... which they agreed must be resolved as soon as possible”. Referring to this later, Mr Modi said: “It is a matter of joy that except for the financial aspects, the IGA has been concluded. There is a consensus (between India and France) that the financial aspects will be resolved.” French President Hollande was quoted by news agencies as saying the signing of the IGA was a “decisive” step and that the financial issues will be sorted out in a “couple of days”.

“We did not reach an agreement on the financial aspect (of the Rafale deal) ... An MoU on the IGA has been signed. The IGA in its entirety will be concluded once the financial aspects are agreed on. We have reached an agreement on the non-financial side (of the deal),” foreign secretary S. Jaishankar told reporters, saying the financial aspects of the deal were a “complicated” issue. Mr Modi, during his visit to France last year, had said India would acquire 36 Rafale MMRCA, citing operational necessities of the IAF which desperately needs more fighter aircraft.

On the civil nuclear energy front, Mr Jaishankar said it was decided by the two countries that “six nuclear power reactor units would be constructed at Jaitapur instead of the earlier agreed two”. The joint statement went: “In pursuance of the 2008 Agreement on the Development of Peaceful Uses of Nuclear Energy between India and France, the two leaders encouraged their industrial companies to conclude techno-commercial negotiations by the end of 2016 for the construction of six nuclear power reactor units at Jaitapur, with due consideration to cost viability of the project, economical financing from the French side, collaboration on transfer of technology and cost-effective localisation of manufacturing in India for large and critical components.”

Other agreements signed on Monday included an “Isro and CNES Implementation Arrangement on hosting Argos-4 Payload onboard India’s Oceansat-3 satellite”, an “Isro and CNES Implementation Arrangement on a future joint thermal infrared earth observation mission”, France’s participation in Isro’s next Mars Mission, a “Shareholding Agreement on JV between Alstom and Indian Railways for production of 800 electric locomotives in Madhepura, Bihar”, an agreement between Indian Railways and SNCF, French Railways, for a joint feasibility study for the renovation of Ludhiana and Ambala stations”, a “Declaration of intent for conducting the next round of Namaste France (Indian festival) in 2016 and Bonjour India (French festival) 2017”, and an “MoU for Industry-Sponsored Ph.D. Fellowships between IIT Mumbai and Thales Systemes Aeroportes”.