In April, when Prime Minister Narendra Modi met French President Francois Hollande in Paris, India scrapped its seven-year-old tender for 126 combat aircraft and sought an immediate supply of 36 Rafale jets to strengthen its dwindling fleet of fighters.
The government-to-government deal, initiated by National Security Adviser Ajit Doval, was supposed to be wrapped up in two to three months. But the negotiations have now reached a deadlock. “The negotiating teams have held five rounds of meetings over the issue, but are now stuck mainly over the issue of pricing of the aircraft, integration of weapon and sensor systems from other countries, and disagreements over the offset programme,” a defence ministry official told THE WEEK. The two sides have not met since their last meeting in India in early July.
Modi, in his meeting with Hollande, had sought a “good price” for the 36 aircraft. In response, the French quoted $8.5 billion for the aircraft and weapons systems in a configuration that the French Air Force uses. But the Indian contract negotiation committee, headed by Air Marshal S.B.P. Sinha, calculated the price of the aircraft based on the balance sheet of the aircraft manufacturer Dassault Aviation, which has details about the cost of Rafale’s engines, weapons, sensors and various systems. The committee quoted a price of about $5 billion. The price is expected to be escalated further as India is seeking the integration of American firm Raytheon’s Python air-to-air missiles and Israeli helmet-mounted display and towed decoy systems on the Rafale. India has also requested the French to arm the aircraft with the latest generation Meteor and Mistral air-to-air missiles.
The Indian Air Force is tight-lipped about the deal getting stuck. Officers who are in the know said there were differences in how the French and the Indian sides were viewing the deal. “If the French have to integrate foreign systems on their aircraft, a lot of effort would be required, along with detailed studies and changes in the aircraft. This will definitely cost more money, which will have to be paid by India, leading to price escalation,” said Air Marshal (retd) A.K. Singh, former chief of the western air command.
After agreeing to supply 36 Rafales to India, France bagged orders from Egypt and Qatar for 24 Rafales each. For Egypt, the cost of the deal has come to $6 billion. “It would be difficult to supply aircraft to India at prices less than what Egypt and Qatar have paid for it; and that, too, when they have bought the French Air Force configuration,” said a Dassault official.
The two sides also have issues over offset obligations, under which Dassault have to invest 50 per cent of the contract value in defence, civil aviation or security sector in India. The French are willing to set up a local manufacturing line for the aircraft in collaboration with an Indian partner, likely to be the Anil Ambani-led Reliance group. They have also offered to help India in manufacturing the Light Combat Aircraft Mark II.
Even if India and France iron out their differences and sign a deal in the near future, the delivery of the aircraft would take time, as the French have cut supply to their own air force to provide aircraft to Egypt and Qatar. With the negotiations hanging fire, it seems the IAF will have to wait longer than expected to increase its falling strength. “The IAF will have to wait another three to four years for the first Rafale, which will defeat the purpose of signing a government-to-government deal for addressing an urgent requirement of the force,” said Singh.