Money Ballast Keeps Rafales on Runway -The New Indian Express
NEW DELHI: With barely a week left for the arrival of French President Francois Hollande in the national capital, a crucial deal to buy 36 Rafale fighter jets from France has hit turbulence.
Nine months after Prime Minister Narendra Modi announced in Paris India’s plans to buy the fighter aircraft directly from the French government, officials of the finance wing of the Ministry of Defence are worried about the high costs of the warplanes, which has turned out to be the way above their calculations.
According to officials, the 36 jets will cost $12 billion and will include aircraft in fly-away condition, weapon systems and a maintenance support package.
In December, the Cost Negotiation Committee (CNC) completed other parts of the deal, but price negotiations are ongoing. “Contract cost of the 36 Rafale has reached approximately $12 billion under flyway condition with weapon systems and a maintenance support package. It is way beyond our anticipated calculations. Efforts are on to negotiate it,” a source privy to the development told The Sunday Standard.
Sources added that after the CNC submits its report, the deal will require clearance from the Ministry of Finance ministry and a final nod from the Cabinet Committee on Security before being signed by the two sides. However, sources maintained that in any Inter-Government Agreement (IGA), prices are always expected to be about 2-3 per cent higher than competitive bidding.
According to a key agreement, France has agreed to 30 per cent offsets in the Rafale deal, which means French companies like Dassault—which manufactures the Rafales—will have to plough 30 per cent of the contract value back into India as offsets.
“During the earlier 126 Rafale jets deal with Dassault of $20 billion, the defence ministry had asked for a 50 per cent offset clause. But now the offset has been reduced to 30 per cent because we are buying only 36 under fly-away condition,” a source said.
The Ministry of Defence had constituted the CNC, headed by Air Marshal SBP Sinha, to hold negotiations with the French team, which was scheduled to be completed by July. Now, the ministry is desperate to complete the negotiations as early possible, but the objection raised by the finance wing are turning out to be main hurdle. Both sides have negotiated that after finalising the deal, the fighters will be supplied to India within three years.
The depleting combat strength of the Indian Air Force (IAF) has been a cause of concern as it is down to 34 fighter squadrons against an authorised strength of 42. IAF is getting four squadrons of Su-30 and subsequently, the indigenous Light Combat Aircraft Tejas is expected to fill the critical requirement of the air force. However, the combat feasibility of Tejas is still years away.
As per an estimated calculation, IAF plans to retire four squadrons of MiG-21M, five squadrons of MiG-27M and one squadron of MiG-21 Bison aircraft in 2017, losing 10 squadrons in one year, severely shrinking its increasingly vintage fighter aircraft fleet.
NEW DELHI: With barely a week left for the arrival of French President Francois Hollande in the national capital, a crucial deal to buy 36 Rafale fighter jets from France has hit turbulence.
Nine months after Prime Minister Narendra Modi announced in Paris India’s plans to buy the fighter aircraft directly from the French government, officials of the finance wing of the Ministry of Defence are worried about the high costs of the warplanes, which has turned out to be the way above their calculations.
According to officials, the 36 jets will cost $12 billion and will include aircraft in fly-away condition, weapon systems and a maintenance support package.
In December, the Cost Negotiation Committee (CNC) completed other parts of the deal, but price negotiations are ongoing. “Contract cost of the 36 Rafale has reached approximately $12 billion under flyway condition with weapon systems and a maintenance support package. It is way beyond our anticipated calculations. Efforts are on to negotiate it,” a source privy to the development told The Sunday Standard.
Sources added that after the CNC submits its report, the deal will require clearance from the Ministry of Finance ministry and a final nod from the Cabinet Committee on Security before being signed by the two sides. However, sources maintained that in any Inter-Government Agreement (IGA), prices are always expected to be about 2-3 per cent higher than competitive bidding.
According to a key agreement, France has agreed to 30 per cent offsets in the Rafale deal, which means French companies like Dassault—which manufactures the Rafales—will have to plough 30 per cent of the contract value back into India as offsets.
“During the earlier 126 Rafale jets deal with Dassault of $20 billion, the defence ministry had asked for a 50 per cent offset clause. But now the offset has been reduced to 30 per cent because we are buying only 36 under fly-away condition,” a source said.
The Ministry of Defence had constituted the CNC, headed by Air Marshal SBP Sinha, to hold negotiations with the French team, which was scheduled to be completed by July. Now, the ministry is desperate to complete the negotiations as early possible, but the objection raised by the finance wing are turning out to be main hurdle. Both sides have negotiated that after finalising the deal, the fighters will be supplied to India within three years.
The depleting combat strength of the Indian Air Force (IAF) has been a cause of concern as it is down to 34 fighter squadrons against an authorised strength of 42. IAF is getting four squadrons of Su-30 and subsequently, the indigenous Light Combat Aircraft Tejas is expected to fill the critical requirement of the air force. However, the combat feasibility of Tejas is still years away.
As per an estimated calculation, IAF plans to retire four squadrons of MiG-21M, five squadrons of MiG-27M and one squadron of MiG-21 Bison aircraft in 2017, losing 10 squadrons in one year, severely shrinking its increasingly vintage fighter aircraft fleet.
french are very smart they took from you 12bn$ and give you only 36 rather then 126 birds 
