Defence Minister Manohar Parrikar bluntly stated on Thursday that negotiations for buying 36 Rafale fighters from French aerospace vendor, Dassault, were deadlocked on the issue of price, and that no deal would be signed until the price was right.
Well-informed defence ministry sources that are close to the negotiation say there is a wide gulf between the two sides. "The difference between what France is demanding and what India is willing to pay is too large to bridge easily - about 25 per cent."
Business Standard understands that Dassault has quoted about Rs 91,548 crore, while Indian negotiators are refusing to go above Rs 68,499 crore.
Parrikar told India Today TV: "Price is the problem which has to be resolved. Unless I get the right price, I cannot sign."
Debunking recent media articles that a deal was imminent, most recently in Hindustan Times on February 11, Parrikar said ironing out the remaining issues would take "a few months".
Pressed on the question of time-frame, Parrikar responded: "You can't commit yourself to a time, because this is not a negotiation for a few hundred crores. This is thousands of crores. I should not… put a time line on my price negotiation."
On January 25, during his visit to Delhi, French President Francois Hollande declared after signing an inter-governmental agreement for the supply of 36 Rafales, "There are some financial issues that will be sorted out in a couple of days…" It now appears he may have been speaking figuratively.
On January 27, French ambassador to New Delhi, Francois Richier, put a deadline of four months for the price to be negotiated.
On Thrursday, Parrikar also confirmed that India had demanded offsets worth 50 per cent of the deal value, and that Dassault had agreed to that condition.
"We have resolved all the other issues. There were terms of guarantees, there were terms of supply, there were terms of how it will be done", said Parrikar.
The defence minister denied that the window was open for buying more Rafale fighters, beyond the 36 being currently negotiated. "As of now, the negotiation is for 36 (fighters). There are many possibilities, but this deal is for 36", he said.
When Prime Minister Narendra Modi, on a visit to Paris last April, requested for 36 Rafales, New Delhi and had Paris agreed the price would be less than what Dassault had quoted in response to the Indian tender of 2007 for 126 medium multi-role combat aircraft (MMRCA). Of those 126 fighters, the first 18 were to be supplied in "flyaway condition", i.e. fully built. Since 36 Rafales are now being bought in "flyaway condition", their per-piece price must be lower than what Dassault quoted for those 18 fighters.
The Indian Air Force had chosen the Rafale on January 31, 2012, in India's tender for 126 MMRCA aircraft. However, in protracted price negotiations that followed, the defence ministry found problems in Dassault's financial bid. Eventually, Modi chose to abandon the MMRCA tender, and instead buy 36 Rafales over-the-counter.