Now, this newspaper has learnt that the “cost escalation” maybe as much due to an Indian “self-goal” as to the French trying to milk the deal for all it’s worth after having quoted the lowest price among six competitors.
The original Indian Request for Proposal (RFP) for the IAF’s Medium Multi-Role Combat Aircraft (MMRCA) contract did not take into account over 60 items, the costs of which added up as contract negotiations proceeded, knowledgeable sources who have observed the origins and the trajectory of the told this newspaper. The MMRCA contract is the first time the defence ministry is attempting to do life-cycle costing for a large acquisition, in addition to writing in the costs for technology transfer and working in offsets. Given the complexity, that exercise has been botched up, the sources said.
The initial estimate for 126 fighters was $10.4 billion. Now, it’s more like $18-20 billion officially, but as high as $27-30 billion, if sources are to be believed. The $18-20 billion figure would probably be reached just by taking currency value changes and inflation into account. At those rates, we are talking about paying anywhere from Rs 800 crore to Rs 1,000 crore per aircraft.
With perhaps more to shell out for mid-life upgrades that would be due for the Rafale less than a decade from the time deliveries start.
But the price by itself astronomical though it maybe is not the biggest obstacle to signing the deal, sources said. It is the government’s insistence that Dassault take responsibility for the quality and timeline of the 108 fighters that HAL would produce under the deal, and not just for the 18 that the French company will supply in flyaway condition (Dassault is also said to be insisting that India agree to a 42 direct supply-84 by HAL mix).
“I cannot see how this can be resolved. No Indian government can sign a deal that absolves the vendor of all responsibility, that too after having paid such a humongous sum of money. And Dassault cannot agree to take responsibility for what HAL does, especially given that doubts have been expressed over HAL’s ability to do the project”, said a retired Air Marshal of the IAF.