October 27, 2014

No softlanding in sight for $20-bn Rafale deal

The wait for the $20-billion 126 medium multi-role combat aircraft for the Indian Air Force is going to get longer due to budgetary constraints and the delay in concluding the negotiations with the French company Dassault.
Though the talks with Dassault have been going on for two years now, IAF chief Arup Raha has admitted that it would take another three to four years before the first squadron of Rafale aircraft could be raised. This effectively means a timeframe of 2015-16 if there is no further delay in signing the agreement.
Speaking to FE on conditions of anonymity, an officer who has been part of the negotiating team, said, “While the negotiations with the French company are on track, there are several other agencies involved in this project and it will be another few months before the negotiations are complete. Which means this deal will not be done this fiscal ended March 2015.”
Also, sources have indicated that there could be budgetary issues too as the Modi government is more focused on social programmes. Hence paying the first instalment of the deal could be a problem too. When the approval for procuring the 126 aircraft was given by the previous NDA regime in 2000, the cost pegged was at around $10 billion, since then the prices have gone up.
This fiscal’s R2.24-lakh-crore interim defence budget, especially the R89,588-crore capital expenditure for new assets, has not factored in the 15% down payment that needs to be immediately made if the MMRCA deal is inked.
‘’After one-and-a-half decade of that approval, the cost of the combat machines has gone up, including inflation and the rupee-euro conversion rates. While the government has benchmarked the likely price of the machines and the cost increase factored in, the necessary approvals for budgetary provisions for the planes would need a fresh sanction,” explained a senior IAF officer.
It is uncertain if the contract would be signed within the current fiscal even if negotiations were completed by late next month and all issues relating to technology transfer from Dassault were taken care off and papers readied by December.
It has been more than two years, since Rafale beat its closest competitor Eurofighter Typhoon from the consortium — then called EADS Cassidian. When French foreign minister Laurent Fabius was in Delhi recently, the Indian response to his efforts to push the deal through was lukewarm, say officials.
One of the major reasons


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