Differences over offset clause delay Rafale deal

With India and France negotiating an agreement for direct purchase of 36 Rafale fighters, the government has officially withdrawn the original request for proposal (RFP) for 126 of the jets, which won the medium multi-role combat aircraft contest.

“The RFP issued earlier for procurement of 126 MMRCA has been withdrawn, Defence Minister Manohar Parrikar said in a written reply in the Rajya Sabha on Thursday.

During his visit to France, Prime Minister Narendra Modi had announced the direct purchase as quickly as possible through a deal between the two governments in view of the “critical operational necessity” of the Air Force.

A team has been constituted to negotiate the terms and conditions of the procurement and recommend a draft agreement. “The meetings of the Indian negotiating team with the French side have commenced,” Mr. Parrikar said.

However, official sources said an agreement had been delayed over the issue of offsets. France insists that the offset clause would raise the cost and delay deliveries.

While the offset clause applies for deals estimated at over Rs. 300 crore and companies have to invest 30 per cent of the value of the contract back in the country, for the MMRCA deal, the government had fixed it at 50 per cent.

The joint statement during Mr. Modi’s visit states that the delivery would be “in a time-frame that would be compatible with the operational requirement of the Air Force”.

The two-year timeline from the signing of contract, as envisaged by the government, however, seems doubtful. The current production rate by Dassault systems is 11 aircraft and the orders already secured from Egypt and Qatar for 24 jets each need to be fulfilled before India’s.

Dasault chief executive Eric Trappier said in Paris last month that production would at least double from 2018. That would still not address the delivery schedule if a deal is concluded by year-end.

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Printable version | Jun 23, 2021 7:40:06 AM |

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