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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 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 Express.
Sources added that after the CNC submits its report, the deal will require clearance from the Ministry of Finance 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 were 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 Rafale — will have to plough 30 per cent of the contract value back into India as offsets.
“During earlier 126 MMRCA deal with Dassult 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.
Negotiation Gap, Money Constraints Prevent Rafale Deal From Taking Off -The New Indian Express
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 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 Express.
Sources added that after the CNC submits its report, the deal will require clearance from the Ministry of Finance 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 were 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 Rafale — will have to plough 30 per cent of the contract value back into India as offsets.
“During earlier 126 MMRCA deal with Dassult 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.
Negotiation Gap, Money Constraints Prevent Rafale Deal From Taking Off -The New Indian Express
. Better we should leave this Refale deal behind. Other options are open for India. This is enough yaar.
