In November 2015, before he left for COP-21 climate conference in Paris, Modi spoke with Hollande and convinced the French President to agree to a 50-per cent offset clause, a defence ministry official told The Indian Express. While 30 per cent offset clause is mandatory in defence contracts of the quantum of the Rafale deal, an exception of 50 per cent was made in line with the earlier Medium Multi-Role Combat Aircraft (MMRCA) deal, which was cancelled.
According to those in the know of the developments, France has offered the aircraft at a price at which its own air force buys the jets.
The Inter-Governmental Agreement (IGA) for the deal is expected to be signed during Hollande’s Republic Day visit to New Delhi, beginning January 24. Once signed, the Rafale deal could be India’s biggest offset contract till date.
Modi had announced India’s decision to buy 36 Rafale jets during his visit to France last April. The Indian and French sides subsequently created two working groups to work out the fine print of the contract. While most of the details — financials, delivery schedules, add-ons and service schedules, among others — have been agreed upon, consensus could not be reached on the 50-per cent offset clause, which India wanted to help its domestic industry as part of the Make in India programme. France, however, had been contending that there is no mechanism for offsets in inter-governmental deals such as Rafale.
Prime Minister Modi was informed at this point and he used his rapport with the French President to break the deadlock,” the source said. “The French have now agreed to the offset clause.”
Inking of the IGA will be succeeded by follow-on contracts between private entities, which involves a joint venture between Dassault, the French aircraft manufacturer, and an Indian major. Sources said the Indian side has pressed for a delivery schedule beginning three years from the date of signing of the IGA. Six aircraft are slated to be delivered each year.
The Indian Air Force will raise two squadrons of the fighters, the first one being in Ambala.