As expected, India and France have signed a MoU towards an Inter-governmental agreement (IGA) to purchase 36 Rafale aircraft from Dassault Aviation during the visit of French President Francois Hollande. Hollande is in Delhi as the chief guest for the Republic Day celebrations.
The procurement of Rafale fighters from France has a long, chequered history of over a decade. India had issued a tender for 126 Medium Multi Role Combat Aircraft (MMRCA) fighters in 2007, and at the end of the selection process in 2012, Rafale fighters were selected. Things got in a logjam when the price negotiations were taking place, and Defence Minister Manohar Parrikar later disclosed that his predecessor, AK Antony’s noting on the negotiations had ensured that the process gets stalled.
During Prime Minister Narendra Modi’s visit to Paris in April last year, India announced a plan to buy 36 Rafale fighters in a government-to-government deal. A few days later, Parrikar announced that the old 126 fighter deal was dead and the 36 fighter deal will be a fresh acquisition.
Since Modi’s announcement in Paris, India and France have been negotiating the terms of the sale. The two sticking points have been the price of the aircraft – a fact confirmed by the French President and Indian Prime Minister during their joint press briefing – and the quantum of offsets which will be discharged by Dassault’s Indian partner.
The financial negotiations are mainly over the factor of inflation that has to be used over the price of a Rafale fighter in the old deal. Sources say that the French were asking for a five per cent annual hike while Indians are insisting on a 1.25 per cent increase. Besides the factor of inflation, there are some other minor financial areas of disagreement between the two sides.
The offsets in the original 126 fighter deal – which included 108 aircraft being made in India — was 50 per cent. With all 36 Rafale fighters now coming from France in flyaway condition, there were reports of a lower quantum of offsets. It is believed that the two sides are close to working out a mutually acceptable offsets percentage.
The IGA will be signed after the financial negotiations are completed between the two sides.
Once inducted, 36 Rafales will form two squadrons of the Indian Air Force (IAF). The IAF is authorised 42 fighter squadrons but currently has only 35 squadrons, which are insufficient to counter a collaborative two-front threat from Pakistan and China.