Price for 36 Rafales settled; French team likely to visit next month

A high-level team from France is expected to arrive here next month to firm up the order for the purchase of 36 Rafale fighter aircraft by India as both countries have managed to narrow down their differences over pricing.

The development comes nearly four months after Prime Minister Narendra Modi and French President Francois Hollande signed a memorandum of agreement to purchase 36 Rafale combat jets.

The Indian side has been negotiating hard to bring down the price, with Defence Minister Manohar Parrikar refusing to buckle under pressure even as questions were being raised about the delay in signing the contract.

The deal comes with the clause of 50% offsets, which will be a bonanza for the domestic industry as it will lead to business worth at least 3 billion Euros and creating new jobs in India.

The tough part of the negotiations, that began in July 2015, was to get the French side to agree to 50% offsets in the deal.

Initially, Dassault Aviation, makers of Rafale, was willing to agree to reinvest only 30% of the value of its contract in Indian entities to meet the offset obligations.

The French side finally agreed to invest 50% of the value following a phone conversation between Modi and Hollande late last year.

The commercial negotiations, as in the pricing of the planes, equipment and other issues, actually began only in mid-January this year.

"It is correct to say that differences over pricing as more or less being settled. A final deal should take place next month if all matters go as scheduled," a defence source said.

Government sources said that the deal has not been concluded yet but it is in "final stages".

The sources said that the price for 36 Rafales, according to the United Progressive Alliance tender, keeping the cost escalation and dollar rate in mind, comes to a little over Rs 65,000 crore.

This includes the cost involved in making changes India has sought in the aircraft, including Israeli helmet mounted display and some specific weaponry, among others.

"The effort is to bring down the price to less than Euros 8 billion (Rs 59,000 crore)," the sources said.

The expectation is that the final deal will be clinched by May-end.

Under the proposed deal, French companies, apart from Dassault Aviation, will provide several aeronautics, electronics and micro-electronics technologies to comply with the offset obligation.

Companies like Safran and Thales will join Dassault in providing state-of-art technologies in stealth, radar, thrust vectoring for missiles and materials for electronics and micro-electronics.