Despite a June deadline set by defence minister Manohar Parrikar to close negotiations on the purchase of 36 Rafale
combat aircraft from France, the deal continues to get delayed over some issues, including price.
Highly-placed sources told FE on Wednesday: “During various rounds of negotiations, the Indian side has been seeking price reduction of euro 150 million from the French company for the 36 aircraft.”
Admitting that the negotiations are still on, Parrikar, in a written response to the Rajya Sabha on Tuesday, said, “As per the India-France joint statement issued by the two countries during the Prime Minister’s visit to France, the government of India conveyed to the government of France that in view of the critical operational necessity for multirole combat aircraft for Indian Air Force, the government of India would like to acquire 36 Rafale jets in fly-away condition.”
Both the sides also agreed to conclude an inter-governmental agreement (IGA) for the supply of the aircraft. A negotiating team has been constituted to negotiate the terms and conditions for the procurement of 36 Rafale jets and recommend a draft agreement. The negotiations are underway and IGA & offset contract are yet to be finalised.
The details, including transfer of technology through offsets, will emerge after the negotiations are completed.”
The Rafale aircraft will have advanced features like advanced electronically scanned array radar, mid-air refuelling and advanced electronic warfare equipment as part of its design. Though the final cost of the deal for 36 aircraft has not yet been finalised, India has asked France to discharge a 50% offset liability of the overall contract cost.
It emerges now through sources, who did not want to be named, that Parrikar has not been meeting officials from France at the level of India’s director general (acquisitions), ministry of defence, but the negotiations are going on at the level of ambassador in New Delhi.
The deal has also been delayed as the French side has not been able to address the concerns raised by the ministry of law. As reported by FE in May, the deal ran into legal troubles when the French manufacturer Dassault Aviation offered a ‘diluted’ liability clause, which has been rejected by the Indian side since the law ministry felt that it ‘adversely’ compromised India’s interests.
The law ministry also rejected Geneva as the arbitration destination in the event of any dispute, and proposed Delhi, which the French side has opposed. Parrikar at that time, in a written reply to Rajya Sabha, had said, “Ministry of Law & Justice has made certain observations and the same will be adequately taken into account while finalising the IGA (inter-governmental agreement), which is still under negotiations”.
This is not the first time that the liability clause has come up as a hurdle. Even when discussions were going on for the purchase of 126 MMRCA, the liability clause was opposed by the French side, said sources.