Suspense continues over Rafale deal ahead of Francois Hollande’s India visit

By: | Published: January 23, 2016 12:54 AM

Just two days ahead of Francois Hollande visit, all agencies involved in the multi-billion dollar Rafale fighter jet deal are hoping for the best.

Just two days ahead of Francois Hollande visit, all agencies involved in the multi-billion dollar Rafale fighter jet deal are hoping for the best. However, it’s not clear if India and France can reach an agreement on the nearly $8-billion combat  plane deal during the French President’s visit.

The French ambassador to India, Francois Richier, told newsmen on Friday that  “complex negotiation” is going on. “The discussions are taking place at present. So I cannot say what will be the outcome of this,” Richier said.

An inter-government framework agreement is expected to be signed during the visit of Hollande but a final contract will take time as the cost negotiations are still on.

“There will be an inter-government agreement because it is a government to government negotiation. Everything will be within this IGA and its annexure. I can confirm this because it is no surprise,” Richier said. Later, the French envoy clarified that he did not mean that the IGA will be signed for sure during the visit.

On Thursday, MEA spokesperson Vikas Swarup said, “I would not like to comment specifically on the Rafale deal. Negotiations are at an advanced stage and basically it is for the ministry of defence really to comment on that particular aspect.”

At a DAC meeting headed by defence minister Manohar Parrikar held on January 11, progress on the negotiations for a final government-to-government agreement for Dassault Aviation’s Rafale jets were reviewed, but nothing was cleared.

While sources have indicated that the final cost has come to about 2-3 % more as it will be a government-to-government deal, Parrikar has expressed hope that the price of one Rafale will be 25% less. The deal could cost India close to $8 billion, which includes the cost of 36 fighter jets in fly-away condition.

“We are still in the process of deciding whether there is a need to order of all spare parts that the aircraft will need for a period of either five or ten years. And the negotiations are still on what kind of financial penalties can be imposed on Dassault Aviation Company which is making the combat plane if the performance was unsatisfactory,” sources in the MoD told FE.

Though the draft contract, which envisages supply of the first fighter jet within 36 months of signing the deal, was finalised and shared with France last December, there have been several rounds of discussions as the end user Indian Air Force focused on weaponry and the defence ministry on offsets.

It is more than nine months since Prime Minister Narendra Modi announced the government’s decision to buy 36 Rafale aircraft.

The MoD had constituted a committee headed by Air Marshal SBP Sinha to hold negotiations with the French team and Air Marshal Rakesh Kumar Singh Bhadauria is heading the price negotiations from the Indian side.  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 (R1,350 crore) a piece. This price is, of course, inclusive of all the support and maintenance infrastructure,” revealed officials.

According to the recent changes made to the Defence Procurement Procedures, defence deals over Rs 300 crore must be accompanied by investing 30% of the value of the contract in manufacturing in India. France has reportedly agreed in-principle to that stipulation “in the future”, a move that has helped both sides side-step this potentially contentious requirement for the moment.

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