Rafale deal faces many obstacles

September 30, 2015 03:03 am | Updated 03:03 am IST - NEW DELHI:

India and France are engaged in intense negotiations to thrash out an inter-governmental agreement which would provide the framework for final negotiation on the deal for 36 Rafale fighters.

Sources on both sides said the deal was far from final conclusion, and serious differences over almost every major aspect of the deal for the advanced fighters remain. Among them are French side’s concerns about a major Indian private sector conglomerate whose services are being recommended by some sections of the Indian government.

Officials said a delegation of senior officials from the French government had been in New Delhi for the past few days fine-tuning the agreement to be signed between the two sides.

The deal for the purchase of 36 fighters from Dassault announced by Prime Minister Narendra Modi in Paris in April is yet to be formally signed into an agreement. “It would be a framework under which we will have to deal with various aspects of the deal,” a source said.

One official in the know of things said the French side had several concerns that could play out as both sides sit down to carry out specific negotiations. Key among them is their questions about what role a major Indian private conglomerate would play in the deal. Due diligence done on the group, recommended strongly by a section in the government, has thrown up questions over its financial capabilities, the sources said.

The two sides could also find the negotiations running into serious trouble over the offset clause for the deal. While the MMRCA (Medium Multi-Role Combat Aircraft) deal — the precursor to the present Rafale deal — had 50 per cent offset, and most of its fighters were to be assembled in India, the deal under negotiation is for off-the-shelf purchase of 36 fighters from France.

The Economic Times on Tuesday reported that a major breakthrough was imminent in the deal with the French side agreeing to an Indian condition that calls for investing 50 per cent of the deal value in ‘Make in India’ projects in the defence, security and aerospace sectors. Under the formula, the newspaper said, French investments in other projects, including in civilian sectors, will also be considered as meeting offset obligations. Sources said the French side was hopeful of a more liberalised offset policy, without which the contract would be difficult to execute. Another issue would be over the final price of the fighter. Sources said India could demand mounting of some non-French armaments on Rafale, which could also add to further complications in the deal.

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