NEW DELHI: India signed an MoU with France on Monday on the purchase of 36 Rafale fighter jets. But the much-talked about deal, announced last April by Prime Minister Narendra Modi during his visit to Paris, has failed to take off as cost negotiations between the two sides have not been concluded.
The deal, estimated at $12 billion, has been stuck due to price issues, despite it being the centerpiece of French President Francois Hollande’s visit as the Guest of Honour for the Republic Day Parade.
“...Leaving out the financial aspect, India and France have signed Inter-Governmental Agreement (IGA) on purchase of 36 Rafale fighter jets. We expect that even the financial aspects...will be resolved as soon as possible,” Modi said at a joint press event with Hollande. In response, Hollande termed the deal “a decisive step”, adding, “there remain financial issues, which will be sorted out in a couple of days.”
Dassault Aviation, maker of Rafale warplanes, said in a statement it expected a complete agreement in four weeks. Foreign Secretary S Jaishankar explained, “What was signed today was an MoU and, when the financial part of it is settled, the IGA will be concluded”. However, officials said IGA will be signed only once prices are finalised.
Sources said the price for 36 Rafales, as per the UPA tender, keeping the cost escalation and dollar rate in mind, comes close to Rs 80,000 crore, including the cost involved in making changes India has sought, including Israeli helmet mounted display and some specific weaponry, among others. “The effort is to bring down the price to less than Euros 8 billion (Rs 59,000 crore),” sources said, adding that actual price negotiations only started on January 21. Another point under discussion is the payment of advance. “At least 50 per cent advance will have to be made including 15 per cent immediate payment,” sources said, adding the French government would stand guarantee. France has now apparently agreed to 30 per cent offsets in the Rafale deal, which means French companies like Dassault will have to plough 30 per cent of the contract value back into India as offsets.
