India, France scramble to ink Rafale deal during Hollande's visit

 

Indian and French defence establishments are scrambling to seal the over $4 billion deal for 36 Rafale multi-role fighter jets in time for French President Francois Hollande's visit as chief guest for the Republic Day parade down the majestic Rajpath.

But defence ministry sources said there was "still some distance to go" before the final Rafale contract -- under which delivery of 36 twin-engine fighters in a "flyaway condition" will begin after two years - could actually be inked. This comes after the Manohar Parrikar-led defence acquisitions council on Monday reviewed progress of the final negotiations for the government-to-government fighter deal.

"It's unlikely the actual contract will be inked during Hollande's visit. Though all the complex technical and contractual issues have virtually been settled now, the commercial negotiations will take at least another 2-3 weeks. Then, it will require clearance from the finance ministry, and the final nod from the Cabinet Committee on Security," a source said.

Interestingly, after some hard-nosed negotiations, France has now apparently agreed to 30% offsets in the Rafale deal. This means French companies like Dassault will have to plough 30% of the contract value back into India as offsets.India had specified 50% offsets in the original $20 billion MMRCA (medium multi-role combat aircraft) project for 126 fighters, under which the first 18 Rafales were to be imported from France, with the remaining 108 being made by defence PSU Hindustan Aeronautics after transfer of technology.

But the MMRCA project was scrapped last year after persisting deadlock over Dassault's refusal to take "full responsibility" for the 108 jets to be made by HAL as well as the stiff hike in its production costs here.Concurrently, the NDA government decided to go in for direct purchase of 36 Rafales during the Modi-Hollande summit in Paris on April 10 last year, citing the IAF's "critical operational necessity" and the need to cut time and costs.

Though France offered better terms and longer maintenance responsibility for India's direct acquisition of 36 jets, it said 50% offsets would hike the overall cost. Under the give-and-take of negotiations, both countries have now veered around to a 30% offset clause, said sources.While the negotiations are only for 36 Rafales, less than one-third of the 126 envisaged under the MMRCA project, the new contract will have a mandatory clause for acquisition of another 18 jets under the 50% follow-on order option at the same price. The 36 jets are to be delivered in the same configuration as were tested and approved by the IAF during extensive field trials in the MMRCA project.

While IAF would have been much happier with 126 Rafales, considering it's down to just 35 fighter squadrons when at least 44 are required for the "collusive threat" from China and Pakistan, it will make do with 36 jets for now. The force is trying to bolster the serviceability of its existing Sukhoi-30MKI and Jaguar fleets, which still hovers around only 55%, to maintain its required air combat ratio.

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