India and France on Monday drew the blueprint for reinforcing their economic and strategic ties with an inter-government deal to buy 36 French-built Rafale fighter planes at an estimated cost of around $9 billion, which Paris pledged to offset by doubling new investments in India to $10 billion over the next five years.

While exact pricing for the combat jets sale would be sorted out in “a couple of days”, visiting French President Francois Hollande and Prime Minister Narendra Modi also witnessed the signing of more commercial deals: France’s Alstom inked an agreement with Indian Railways to produce 800 locomotives for the latter, and the two sides resolved that an agreement with French nuclear major Areva to build six nuclear reactors in India would be concluded within a year.

Besides, SNFC, France’s state-owned rail company, has partnered with Indian Railways to undertake a six-month pilot study to understand the areas of improvement and renovation the Ambala and Ludhiana stations. Both countries have also decided to conduct a one-year feasibility study to run semi high-speed trains on the Chandigarh-Delhi route with the use of French technology and investment.

“France is a special friend. Eighteen years ago, France was the first country we signed a strategic partnership with. We are now here to take it higher,” Modi said at a joint press conference following his talks with Hollande, invited as guest of honour for Tuesday’s Republic Day celebrations. On his part, Hollande said: “There is no better trust than sharing civil nuclear technology,” and hoped that the issues pertaining to the six reactors at the Jaitapur plant “will be settled in one year”.

Separately, France’s finance minister Michel Sapin, who is part of the visiting delegation, said French companies will invest $10 billion in India over the next five years, chiefly in the industrial sector. “Over the last five years, French companies have invested more than $1 billion per year in India,” Sapin said in a speech at Ficci.

Last year, it was the Hollande-Modi talks in Paris that led to the salvaging of the Rafale deal after commercial negotiations with Dassault Aviation, which builds the aircraft, had collapsed.

The two leaders resolved to scale back the original plan for 126 Rafale planes to just 36 in flyaway condition.
Official sources told FE on condition of anonymity that “there was immense pressure from France to increase the price of the fighter jet”. The Modi government, these sources said, was negotiating for a much lower price for machines which includes 36 fighter jets in flyaway condition, weapon systems, a support maintenance package, training of pilots and technicians and spares. Dassault Aviation is not willing to accept the Indian Air Force’s demand to modify the fighters to carry the indigenous Astra air-to-air missile, citing the associated cost increases, the sources indicated.

While the French have expressed concerns over India’s proposals for a 50% offset arrangement in the Rafale contract negotiations, the country has offered to manufacture aircraft in India through future contracts, in what could give a fillip to New Delhi’s Make in India programme.

“On Monday, 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,” a joint statement issued at the end of talks here said. France had inked a nuclear deal with India in 2008 allowing French supplier Areva to sell reactors to India. This was after New Delhi had won a waiver from the Nuclear Suppliers Group, a club of nations trading in nuclear technology.

“The two leaders agreed on a roadmap of cooperation to speed up discussions on the Jaitapur Nuclear Power Project in 2016. Their shared aim is to start the implementation of the project in early 2017. Both countries reaffirmed their commitment to responsible and sustainable development of civil nuclear energy with highest consideration to safety, security, non-proliferation and environmental protection,” according to the joint statement.

French connection

* India signs deal with France to buy 36 Rafale planes; talks on prices to be over in two days
* French companies to invest $10 bn in India, mainly in industrial sector, over five years
* France’s Alstom signed an agreement with Indian Railways to produce 800 locomotives
* Agreement for Areva to build six nuclear reactors in India may be concluded in a year’s time