Rafale deal in sight, 50% offset clause added

Differences over pricing, offsets, customisations and sovereign guarantees sorted out

September 13, 2016 01:51 am | Updated October 01, 2016 09:50 pm IST - NEW DELHI:

Seventeen months after Prime Minister Narendra Modi announced India’s intent to procure 36 Rafale fighter jets from France in flyaway condition, a final agreement seems to be a week or two away from being concluded.

“The final points and language of the contract are being worked out. It is expected to be signed very soon,” government sources said on Monday.

The high-power committee set up to negotiate the terms and conditions of the Inter-Governmental Agreement (IGA) has already submitted its report and the file is with the Prime Minister’s Office (PMO). Final clearance from the Cabinet Committee on Security (CCS) is awaited.

The deal, expected to cost just under $8 billion, was announced by Mr. Modi in Paris last year, setting aside the original medium multi-role combat aircraft (MMRCA) deal under which Rafale was initially selected, in view of the “critical operational requirements” of the India Air Force (IAF).

However, talks then dragged on because of the differences over pricing, offsets, customisations sought by the Air Force and sovereign guarantees the Defence Ministry was pushing for.

All issues have now been resolved, and the deal now includes a 50 per cent offset clause as per India’s procurement procedure under which French companies would have to invest that value in India for goods and services.

The direct purchase is meant to ensure quick deliveries to the IAF, which is facing a drop in its fighter aircraft strength.

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