The ministry of defence is busy finalising the contours of the agreement to be inked for the Indian Air Force’s purchase of 36 multi-medium-role Rafale combat aircraft from France’s Dassault on the eve of French President Francois Hollande’s visit to India for the Republic Day celebrations later this month.
Sources in the ministry have told FE that hectic discussions were going on over the technical and contractual details of the intergovernmental agreement (IGA). Once these details are worked out, the commercial negotiations will start. “This commercial negotiation is the toughest as it is pertaining to the price of the aircraft and the life-cycle costs. This would take at least a couple of weeks before it goes for approval to the MoD and the ministry of finance,” explained a senior official.
The talks are in an advanced stage and the government is satisfied with the way deliberations are going ahead. “Inviting the French president as the chief guest at the RD and not completing the Rafale issue will most certainly be not only inefficiency, but very bad diplomacy as well. No one is more aware of this than the PMO and the MEA.
Hence, one can be certain that the deal will be completed and announced. The pressure to complete the negotiations will be equally high on the French side, and it is almost certain that the French government would be breathing fire on Dassault to be more flexible,” said an officer associated with the talks.
While sources have indicated that the final cost have come to about 2-3% more as it will be a government-to-government deal, as in the case of all such contracts, defence minister Manohar Parrikar has expressed the hope that the price of one Rafale will be 25% less. The previous cost for one plane was 105 million euro, which the government is hoping will come down to 75 million euros inclusive of the life cycle cost. The supply of a full consignment of 36 fighters to the Indian Air Force will be completed within seven years of signing the deal.
The draft contract, which envisages supply of the first fighter within 36 months of signing the deal, has been finalised. It is more than nine months since the Prime Minister Narendra Modi announced the 36 aircraft deal. The ministry will have a lot of explaining to do for not completing the negotiations in this period.
The defence ministry had constituted a committee headed by air marshal S B P Sinha to hold negotiations with the French team. The deal is expected to be around $7 billion to $9 billion. “If we take the lower figure of $7 billion for 36 aircraft, the average price works out in excess of $200 million (Rs 1,350 crore) a piece. This price is, of course, inclusive of all the support and maintenance infrastructure,” revealed officials.