Rafale deal: India wants more add-ons

Defence Ministry sources indicated that the government machinery worked against time to complete the much-expected Inter-Governmental Agreement (IGA) two weeks ago.

Written by Pranav Kulkarni | New Delhi | Updated: January 26, 2016 3:44 pm

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While Prime Minister Narendra Modi and French President Francois Hollande have indicated that financial aspects of the Rafale deal are still work in progress, what has been left unsaid is that the Indian side is attempting to squeeze in more add-ons even as the price of 36 jets hangs around Rs 60,000 crore — as offered to India in April last year.

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Defence Ministry sources indicated that the government machinery worked against time to complete the much-expected Inter-Governmental Agreement (IGA) two weeks ago. The financial negotiations began only about 10 days ago, they said. The IGA was, however, not signed in light of a lack of consensus on financial aspects. Indications from within the government are that the deal would be closed within the ongoing fiscal.

“Leaving out (the) financial aspect, India and France have signed IGA on purchase of 36 fighter jets. We expect that even the financial aspects will be resolved as soon as possible,” Modi said.

Foreign Secretary S Jaishankar later corrected, saying “MoU to IGA” has been signed.

“Contrary to speculation that India is negotiating for a lower price, the fact is that the price is around $9 billion and the government is pressing for more add-ons — serviceability/maintenance, tenure for serviceability of 5/10 years, infrastructure at the airbases, among others,” a Defence Ministry source said.

The deal to buy 36 jets in a flyaway condition was announced in April 2015 during Modi’s Paris visit, and the negotiations began in May. According to sources, financial negotiations began “immediately” after the finalisation of the draft IGA, although price negotiation was held up because the IGA was incomplete.

Officials believe the MoU, although a “step in place”, does not hold significance until the IGA is signed. Unlike the US, which has the Foreign Military Sales route, France does not have a mechanism for inter-governmental defence sales to friendly foreign nations. The French side has thus made an exception by selling Rafale to India through a government-to-government deal.

The IGA, once in place, will facilitate the drafting of further contracts between the two sides and bring in private players such as Dassault, the manufacturers of Rafale, as well as the Indian offset partners. With 50 per cent offsets — meaning use of Indian component — the deal, when finalised, is set to be the biggest ever offset contract for India once and if finalised.

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First Published on: January 26, 2016 4:10 am
  1. K
    Karunakaran
    Jan 26, 2016 at 12:06 am
    The add-ons will cost another Rs 25,000 crores. But it might still be less than the Rs 100,000 crores Bullet train to Gujjuland, to be paid for by all the Indian taxpayers. It does not matter whether you live in Kerala, Mizoram or Himachal Pradesh, you have to pay for the Bullet train to Gujjuland. All thanks to the selfie-chaser Gujjubhai who cannot speak in the parliament.
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      Prasad
      Jan 26, 2016 at 12:10 am
      A quick check on the price of an F-16 says "base price, without the options, works out to more than $165 million a plane — more than the current estimated $154 million price tag on the much more modern — so-called fifth generation — F-35. (The Pentagon stopped buying F-16s back in 1995; it paid an average of $17 million per plane)" and these Rafales cost $250 million a piece!
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      1. K
        Kautilya
        Jan 26, 2016 at 11:47 am
        $250 million a piece with options, spares, services, ground facilities, offsets etc. Remember, we are no longer talking about headline costs but about 'Lifecycle' costs. And the Rafale deal will involve tech transfer, but those details should be disclosed only after the deal is wrapped up, not prematurely. About F-35, many nations that originally contributed to its development costs are exploring/have settled on other options.
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          Nityananda
          Jan 27, 2016 at 6:19 am
          France will not agree to a price of USD 7-8 BN since we have asked for offsets at 50% and a lot of add ons, but let us ume they agree to say USD 8 BN. That makes it over USD 200 million for each jet- an enormous cost to the nation. Since the Eurofighter TYphoon was also found to meet the IAF minimum criteria, why is it that the PM did not call for bids from Typhoon also on an IGA basis ? Now, since there is no compeion and pressure on Dault, they are riding the high horse and India finds itself in a corner as far as price negotiations go.
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            Nityananda
            Jan 27, 2016 at 3:40 am
            The deal agreed by the PM is just a straight purchase , absolutely no tech transfer. Also, one cannot build offsets into the price of the plane. Offsets are a commitment by France to just get the deal. In fact the price of Rafale is so high that we can ask the PM why didn't he also ask for bids from Eurofighter Typhoon . Compeion would have lowered the prices and the Typhoon also met all the IAF's technical criteria. If we question deals like 2G, coal, Bofors etc, there is enough room to question this also, though all were done with the best of intentions.
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            1. S
              Sajeev Kumar
              Jan 26, 2016 at 5:18 am
              Again and again you have displa your ignorant, probably you are not aware of proceedings in Indian Parliament, could be due to the time difference which you are facing! His speech is such which made your masters speechless for many sessions! Cant blame you since you are used to hear speeches of Sonia hi, Dr. Manmohan Singh, A.K. Anthony etc.,
              Reply
              1. S
                Shirish Mehta
                Jan 26, 2016 at 9:28 am
                It is sad that we still don't think India as one land and divide ourselves as Gujju, Mallu, Bhaiyas.... You are perhaps the only person on this planet to say that our Gujjubhai PM can not speak in Parliament!! Your mentality type people has deprived the nation from the speedy progress.
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