Deal for 36 Rafale combat jets in final stages

The negotiations for the purchase of 36 Rafale fighter jets by the Indian Air Force have entered the ''final stages'' as both India and France have managed to narrow down their differences over the pricing.

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

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

The Indian side has been negotiating hard to bring down the price of the Rafale deal.

Sources said the price for 36 Rafales, as per the tender, keeping the cost escalation and dollar rate in mind, comes to a little over Rs65,000 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 €8 billion (Rs 59,000 crore),'' the sources said. Sources said the French have more or less agreed to Indian terms.

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

The deal comes with the clause of delivering 50 per cent offsets, creating business worth at least €3 billion for smaller Indian companies and creating thousands of new jobs in India through the offsets.

In fact, the toughest phase in the negotiations that began in July 2015 - three months after Modi announced in Paris India's plan to purchase 36 Rafale jets - was to get the French to agree to 50 per cent offsets in the deal.

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

The French side finally agreed to invest 50 per cent 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.

India had scaled back an original plan to buy 126 made-to-order Rafale jets to just 36 in fly-away condition to meet the Indian Air Force's urgent needs because of the high price and pressure from rival firms like Boeing and Eurofighter.

The French have more or less agreed to Indian terms and the deal is likely to be finalised, sources said, adding that a final deal could 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.

Meanwhile companies like Lockheed Martin Corp with its F-16 Fighting Falcon and Boeing Co with its F-18 Super Hornet are still hoping to get fighter jet orders from India.

Both are offering to support Modi's 'Make in India' drive to boost India's industrial base and reduce its import needs.