NEW DELHI: The much-awaited multi-billion dollar Rafale combat aircraft deal with France has once again run into rough weather. After negotiations of almost three years, it has now hit a ‘deadlock’ with both India and France refusing to concede to the other’s demands.
When Rafale was declared the lowest bidder in January 2012, all eyes were on the inking of this deal that was touted as the ‘mother of all defence deals’. But the cost negotiation committee set up in February 2012 to work out the modalities for the deal has not reached a conclusion yet.
The newly-appointed Defence Minister Manohar Parrikar and a top official of his ministry are determined to block the deal till the ministry’s demands are accepted by the French side. Though during the recent visit of French defence minister Jean-Yves Le Drian earlier this month Parrikar had assured he would do everything in his power to expedite the deal, he is firm that his ministry’s demands must be accepted first. According to defence ministry officials privy to developments, at a presentation on the Medium Multi Role Combat Aircraft (MMRCA) programme a fortnight back, Parrikar said that the government must stand its ground and not give in during negotiations. Parrikar’s opinion is seconded by the Joint Secretary and Acquisition Manager (Air) Rajeev Verma, who plays a key role in the deal. Verma, a 1992 UT-cadre IAS officer, has made it clear that till the French side agrees to ministry’s demand, which was specified in the original tender, there will be no progress on the matter. During recent meetings of the negotiations committee, Verma has been virtually hostile towards the deal, say sources.
After cost escalation, the French major Dassault Aviation, which manufactures Rafale fighter jets, has refused to take “full responsibility” for the 108 fighters to be manufactured in India by Hindustan Aeronautics (HAL) as per the original tender. Eighteen of the 126 planes will be purchased directly from Dassault, while Hindustan Aeronautics Limited will manufacture the other 108 under a licence, at an upcoming facility in Bangalore. “The ministry is in no hurry to conclude the negotiations despite what people may say. Dassault has to accept commitment mentioned in the RFP (Request for proposal),” a key defence ministry official said on the condition of anonymity.
Another ministry insider said the production sharing agreement with HAL is stuck as well. Furthermore, Dassault is not agreeing to HAL’s demand that it take responsibility for manufacture in India, regardless of French government’s pressure. It is too risky, according to a defence ministry source.
“After cost escalation, now accepting terms and conditions of the original tender have emerged as the key issue to be resolved. The RFP clearly stated that under the transfer of technology agreement, the French will have to fully comply with it and also take full responsibility of Indian manufactured fighter jets,” said a senior defence ministry official. Officials say in 2007, when the tender was floated, the cost of the programme was $12 billion (`42,000 crore). When the lowest bidder was declared in January 2012, the cost of the deal shot up to $18 billion (`90,000 crore). Now with inclusion of transfer of technology, life cycle cost and creating assembly line, the deal has virtually crossed a whopping $20 billion.
The Air Force is seeking to replace its ageing MiG-21s with a modern fighter and MMRCA fits well between India’s high-end Sukhoi-30MKIs and its low-end Tejas LCA lightweight fighter. The IAF has a sanctioned strength of 45 fighter jet squadrons. However, it only has 32 squadrons operational as old aircraft have been retired. M/s Dassault Aviation of France, the Original Equipment Manufacturer (OEM) of Rafale aircraft, emerged as L-1 bidder for procurement of Medium Multi Role Combat Aircraft (MMRCA) based on its quotation. Sources also said the Dassault India representatives have repeatedly denied meeting with the ministry officials, including Verma.