Explained: Taking off

Pranav Kulkarni, explains the ongoing negotiations with French defence major Dassault Aviation.

Written by Pranav Kulkarni | Updated: April 11, 2015 8:36 am
aviation Prima facie, it also marks a success for India which has been negotiating hard for lower price and maintenance besides other aspects of the contract.

Deviating from the ongoing negotiations with French defence major Dassault Aviation, India on Friday directly asked France to supply 36 Rafale fighter jets instead of 18 in fly-away condition. While the announcement during Prime Minister Narendra Modi’s ongoing visit to France set the ball rolling for IAF, which has been in desperate need of fighter jets, ambiguity continues over the legalities and the number of aircraft in the multi-billion deal. Pranav Kulkarni explains

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What does this announcement mean?

Going by the statement, India and France have now agreed to sign an inter-governmental agreement for supply of aircraft on terms that would be “better than conveyed by Dassault Aviation” as part of the separate process underway. This indicates that India and France will now be dealing with the contract on a government-to-government (G-to-G) basis. Prima facie, it also marks a success for India which has been negotiating hard for lower price and maintenance besides other aspects of the contract.

How is this different from the original proposal?

The original proposal involved buying 18 aircraft from Dassault in fly-away condition while the rest 108 were to be manufactured in India under transfer of technology by state-owned Hindustan Aeronautics Limited (HAL). According to the statement, the number of aircraft to be purchased in fly-away condition has increased to 36. The cost of the 36 aircraft is now pegged at nearly 4 billion Euros. What has also changed is that instead of negotiating with Dassault, the project is now a G-to-G deal.

What happens to the role of HAL?

As per the defence procurement procedure, every contract costing more than Rs 300 crore has an offset obligation of 30 per cent. This means that the manufacturer has to dispose of contracts worth 30 per cent of the cost of the contract to Indian industry. In case of MMRCA, the government had increased offset obligation to 50 per cent which benefitted the Indian industry. Going just by the statement, ambiguity continues over the offset obligation. The role of HAL is also not clear. The contract, in its earlier form, fitted well in the government’s Make in India slogan but now it remains to be seen as to how the government involves Indian industry in the deal.

When will the aircraft be delivered?

The government has clearly told France that the aircraft will have to be delivered in “time frame compatible with the operational requirement of IAF”. India has also asked the French government to deliver “the same configuration” that has been tested and approved by IAF. Ideally, as per the original terms, the first 18 aircraft were to be delivered within three years of signing the contract. With changed numbers, the timeframe may change.

How critical is the contract for IAF?

Very important. The IAF first expressed interest in the MMRCA in 2001. The Request for Proposal was issued in 2007 and from among six contenders-the Russian MiG-35, American F/A-18 Super Hornet, Swedish Saab Gripen, Eurofighter Typhoon and French Dassault Rafale, the final two contenders — Rafale and Typhoon were shortlisted and Rafale was declared lowest bidder in January 2012. From stipulated strength of 42, the IAF is now down to 34 operational squadrons. While a few of its legacy aircraft such as Mirage 2000, Jaguars have been upgraded, others need immediate replacement. The Rafales will thus fill the gap between the yet-to-be inducted LCA Tejas and the frontline Sukhoi fighter jets.

But why the delay? Is 36 sufficient to fill the number of squadrons?

No, 36 will be sufficient to create just two squadrons, whereas 126 were to create nearly six squadrons. The clarity on the further agreement will unveil how the IAF plans to meet its operational squadron strength. Meanwhile, Reuters quoted Modi as saying in France that, “the civil servants will discuss the contract in more detail and continue negotiations.” The delay in the contract in the recent past was primarily due to disagreement between Indian Ministry of Defence and Dassault over the guarantee of aircraft manufactured by HAL. While Dassault was reluctant to take responsibility of aircraft manufactured by HAL, India wanted Dassault to take guarantee of the 108 aircraft to be manufactured by HAL. In February, the two sides clarified that all differences have been sorted out.

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