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India and France sign surprise deal for 36 Rafale multirole fighter aircraft

World Aviation Defense & Security News - India & France
India and France sign surprise deal for 36 Rafale multirole fighter aircraft
After a series of twists and turns almost befitting its size, the multi-billion dollar deal for new fighter jets for the Indian Air Force has hit the last mile with an out-of-the-box solution which end a two-year-old deadlock. In the initial phase, 36 Rafale fighters will be bought off the shelf and negotiations will continue for manufacturing more in India at a later stage.
The reworked deal — buying 36 fighters outright with the option for more could be worth up to $7.5 billion — has the potential of pumping in over $2.3 billion into the Indian defence manufacturing sector, a major chunk of which will go to the private industry.

According to the understanding reached, the two sides agreed to conclude an Inter-Governmental Agreement for supply of the aircraft on terms that would be 'better than as conveyed by Dassault Aviation as part of a separate process underway'. This means that the 36 fighters are cheaper than offers made in the past by Dassault.

Buying fighters off the shelf means the delivery would be faster and would meet a time frame set by IAF that urgently needs the aircraft to fill operational gaps. The aircraft would be delivered on the same configuration as had been tested and approved by IAF during the 2007 tendering process. Sources said separate negotiations will continue at a ministerial level on manufacturing more fighters in India. The total requirement is for 126 fighters.

While the mega deal - initiated in 2007 with six competitors — had been slowly chugging along since 2012 when Dassault's Rafale was declared as the winner, signs had appeared in the last few weeks that for the first time since coming to power, the NDA government was looking at walking the distance, provided significant concessions did not have to be made by New Delhi. For Dassault, which had been struggling to get the contract through in the last year of the UPA, the new-found political will in New Delhi as well as the strong diplomatic push from Paris was a final chance to bag an order that was widely classified as the world's biggest open tender for fighter aircraft.

While many differences had been sorted out, for almost two years a deadlock remained on two major sticking points that prevented any real forward movement. Innovative and out-of-the-box solutions were needed for both, something that the new government is not known to shy away from.

In the larger deal, two sticking points related to pricing and fixing of liability for delivery of the fighters remain and need to be sorted out. The larger deal to make a significant number in India is complex - it involves the calculation of life cycle costs, carries a major technology transfer component to HAL and has a clause that half the value of the contract has to be invested in India by Dassault. After detailed negotiations on transfer of technology and setting up a production line in India with HAL, it has emerged that the estimated value that Dassault projected for the India manufactured Rafale would be surpassed.

The difference is because the Indian PSU would have to purchase more equipment, facilities and technology than anticipated to deliver the fighter on time. Again, an innovative solution is needed. One being offered was that the production line cost be divided as Dassault has offered that the same line be graded to produce different platforms - like its Falcon executive jets and UAVs that churn out of the same line in France. This would have the potential of bringing down the per-unit cost of the Rafale fighter.

The endearment that has worked is a commitment by the government for an outright purchase order for 36 jets that would keep the French company in profit and meet operational requirements of the IAF that is battling with a crisis when it comes to obsolete fighter aircraft. To offset criticism on the deal not bringing manufacturing and jobs to India, the government is likely to insist that the French firm invest at least 30% of the contract value in India and rope in the Indian private sector as a major, global chain supplier to Dassault and its associates. This could end up benefitting the private sector in a major way.

(Source: The Economic Times)