Mohan Guruswamy
Apr 08, 2015
From 2000 onwards the total FDI in India was close to $900 billion. France’s contribution was below $15 billion or about 2% during this period. Clearly the economic relationship could do better.
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Prime Minister Narendra Modi will visit Paris later this week, reciprocating French President Francois Hollande’s visit to India in February 2014. Despite the frequent high-level interactions there has been little traction on substantive issues.
There are several long-pending deals such as six new nuclear power plants by Areva and Nuclear Power Corporation of India (NPCIL), a government-owned entity, and the order for the Dassault Aviations Rafale fighter, that have long-term implications for India and France. In both these deals pricing has become a major bone of contention and it seems unlikely that these agreements will be formalised any time soon, apart from a reiteration of determination to iron out differences.
In the case of the nuclear power project envisaged for Jaitapur on the west coast state of Maharashtra, Areva has sought a tariff of `9.18 per unit. This has been challenged by prominent sections of civil society as being too expensive. Besides, the ruling Bharatiya Janata Party’s ally in Maharashtra, the Shiv Sena, is opposed to the project because of local objections on environmental grounds. The area around Jaitapur is politically significant to the Shiv Sena and overruling it may have political consequences for the BJP.
The Rafale fighter deal is stalled not only due to the high costs involved, but also due to disagreement on how the local component of fighters to be produced in India will be aggregated. Dassault has taken the position that it cannot guarantee the quality of the Hindustan Aeronautics Limited (HAL) built 108 Rafale fighters after the first 18 are imported. But many experts here say that this is merely a fig leaf to cover Dassault’s financial inadequacy. According to them, Dassault wants another local partner, like the private-sector giant Reliance Industries Limited (RIL), to complete the deal. RIL, with its $10 billion cash hoard, has already set up a defence sector business unit, Reliance Aerospace Technologies Pvt Ltd (RATPL), in anticipation of this.
Defence minister Manohar Parrikar has, however, made his position clear. The terms of the Indian Air Force tender require the French company to guarantee the 108 fighters that HAL would build in India.
Mr Parrikar said, “I have told Dassault to send a person to work out the differences. You have to be clear that, irrespective of anything, the tender’s terms have to be met. They cannot be diluted.”
Then there is the question of money. The initial estimation of $12 billion has now escalated to over $22 billion. The defence minister has publicly questioned the high cost of the Rafale by rhetorically asking as to how he can justify the purchase of a fighter that costs twice as much as the Russian Sukhoi Su-30MKI fighter being produced in India.
To add to Dassault’s discomfiture, Mr Parrikar has also disclosed that the highly rated Su-30MKI costs Rs 358 crore each compared to the `700 crore price tag for the Rafale. This means two Su-30s could be secured for the price of a single Rafale. Many knowledgeable people in the military tend to believe that the Su-30 is a more capable aircraft and certainly represents better value for money. The IAF has an order of 272 of these fighter planes and they are now manufactured by HAL and the Russians have already offered an upgrade to make Su-30 even more potent.
There are others in the influential bureaucracy who are not entirely enamoured of French partnerships given the manner in which the project to manufacture six Scorpene-class submarines has meandered along with huge implicit price escalations.
The Scorpene deal is with the DCNS, a French-law public limited company in which the French state holds a 64 per cent stake, private weapons maker Thales 35 per cent and the personnel a 1 per cent stake. It is the heir to Direction des Constructions et Armes Navales (DCAN).
In 2005, the Indian Navy ordered six Scorpene submarines, all to be built at the ministry of defence- owned Mazagon dock and elsewhere, with the last two to be fitted with an Indian air-independent propulsion (AIP) module.
The first India-made Scorpene has just been floated, 12 (?) years behind schedule. There is also a follow-on requirement of six submarines, for which DCNS plans to offer a larger version of the submarine to the Indian Navy.
India has just floated a requirement for six new submarines to replenish its depleting fleet, but other companies too will be in the fray.
India and France entered a strategic partnership in 1998 to ensure bilateral cooperation through regular high-level exchanges at the head of state level, and growing commercial exchanges, including in strategic areas such as defence, nuclear energy and space.
The number of “strategic partnerships” India has with other countries causes some hiccups, but even so the relationship with France is a highly valued one — France ranks just below Russia and the US as India’s third most preferred partner, higher than Britain and Japan.
A high-ranking official recently summed this up as France being preferred even though “it has time and again proved to be more mercenary than we like.”
On the economic front France is still not much of a partner with bilateral trade of about eight billion euros. This is less than India’s trade with all of France’s neighbours such as Germany, Belgium, the United Kingdom, Netherlands and Italy. From 2000 onwards, the total foreign direct investment in India amounted to close to $900 billion.
France’s contribution has been below $15 billion or about 2 per cent during this period. Clearly the economic relationship with France could do with much improvement and the political relationship, based more on arms transfers, is something neither country should be comfortable with.
Sadly, there are few expectations of a Modi-Hollande breakthrough on this score. But, as the French would say, c’est la vie (this is life).
The writer held senior positions in government and industry, and is a policy analyst studying economic and security issues. He also specialises in the Chinese economy.
India Prime Minister to Discuss Rafale Fighter Jet Deal During France Visit
Published April 8, 2015 | By
admin
SOURCE : Sputnik
Indian Prime Minister Narendra Modi is set to discuss a long-disputed deal to buy Rafale fighter jets during his visit to France scheduled for April 10-11, France’s Ambassador to India Francois Richier told Sputnik Tuesday.
“Only thing I can say on Rafale is that the deal is on. Rafale deal will be on the agenda of talks during Indian Prime Minister Modi’s visit to France,” Richier said.
The diplomat declined to give any further details.
Earlier, Indian media reported that New Delhi might pull out of the $20-billion deal with the French Dassault Aviation Company on an acquisition of 126 Rafale fighters.
In 2012 the Dassault Aviation won a bid to supply 126 Rafale fighter jets to India but the purchase was delayed over high costs and the company’s refusal to guarantee the performance of Rafales produced in India.
Russian and British fighter jets have been tipped as a possible replacement for the Rafale jets if the deal should be scrapped.