A year after Prime Minister Narendra Modi announced during his visit to Paris that New Delhi was ready to buy 36 Rafale fighter jets off the shelf, India and France have now agreed to seal the contract for Rs60,000 crore (7.8 billion Euros) aircraft purchase. The two countries are likely to ink the much-awaited deal within the next three to four weeks.
The deal is a Government-to-Government one in which France will stand guarantee for the contract and its other obligations for the jet manufactured by French aviation conglomerate Dassault. France has also agreed to ink the 50 per cent offset clause. It means that France will plough half of the contract amount back into the Indian Defence industry.
India will buy the 36 jets off the shelf and this first lot is expected to land here after two years after the deal is signed, sources said on Friday.
As regards, the protracted negotiations, sources said France initially asked for 11 billion Euros for 36 jets equipped with weapon systems. However, India insisted on a more realistic figure as it was unable to cater for such a huge amount. After several rounds of negotiations, the two sides finally came to the final figure of 7.8 billion Euros, officials said.
Modi during a visit to Paris last year confirmed India’s order of 36 read-to-fly jets. Before that, the Defence Ministry had sanctioned the purchase of 126 planes, but the Medium Multi-role Combat Aircraft (MMRCA) deal was scaled down dramatically after both sides were unable for years to agree on the unit price and the assembling of the planes in India by Hindustan Aeronautics limited (HAl). The MMRCA proposal entailed buying 18 jets off the shelf and rest to be manufactured here by HAl.
Rafale was shortlisted as the lowest bidder as per the initial MMRCA proposal for 126 jets floated more than eight years back. At that point of time when Rafale was selected four years back the total price was nearly Rs45,000 crore with 2007 as the base year. The Indian tender also insisted on 50 per cent offset.
Matters came to a standstill as Dassault and the Indian Government were unable to arrive at a final price for more than two years for the deal thereby seriously affecting the operational capability of IAF.
It has an outdated fighter fleet strength and desperately needed MMRCA to replace the ageing Mig-21 and MIG-27s.
The IAF also stressed the need to start replacing its ageing jet fleet from 2017 to effectively check the capabilities of Pakistan and China and fight a two-front war if need be.
Sources said as part of the Government’s effort to develop and support military manufacturing at home as part of Make in India, in exchange for selling India off-the-shelf Rafales, French companies, including Dassault will have to invest three billion dollars in India to help firms here with stealth-capability and radar technologies. Initially, France was reluctant for 50 per cent off set but India insisted on the original MMRCA term and finally the two sides agreed to the figure, they said.