The process to determine the L1 (lowest bidder) has been completed, and sources indicate that the final contract is expected to be signed in the next financial year. The first 18 aircraft will be bought off the shelf. The rest 108 will be built by state-owned Hindustan Aeronautics Ltd. through technology transfers.
Sources say Defense ministry experts are still fine-tuning pricing details, including the cost of on-board weaponry and royalties for producing the aircraft in India.
There were six contenders for the world's biggest defence deal which included the Russian MiG- 35,Lockheed Martin's F-16 Falcon, Boeing's F-18 Hornet, the Swedish Saab Gripen, Eurofighter Typhoon and Rafale. (In Pics: Aircraft that competed for the defence deal)
Of these, the European EADS Eurofighter Typhoon and Dassault Rafale were in the final race for the global tender for a medium multi-role combat aircraft (MMRCA). The Eurofighter bid was backed by four partner nations including Germany, Spain, Italy and the United Kingdom while the Dassault Rafale was backed by the French Government.
On November 4 last year, Defence ministry had opened the commercial bid of the two firms left in the race and since then has been busy in determining the lowest bidder. The rest were rejected as they didn't meet the technical qualifications.
French President Nicolas Sarkozy has expressed happiness at India's selection of the Rafale. "The President of the French Republic has learned of Indias selection of the Rafale for the acquisition by the Indian Air Force of 126 fighter aircrafts. France is pleased with Indian governments decision to select the French aircraft to enter into exclusive negotiations with Dassault," said a statement issued by the French Embassy in New Delhi.
It said the announcement comes at the end of "a very high-level, fair and transparent competition" involving two European finalists for the bid.
"Negotiations for the contract will begin very soon and has the full support of the French authorities. It will include important technology transfers guaranteed by the French government. The Rafale has been selected, thanks to the aircrafts competitive life-cycle costs, after the April 2011 pre-selection on the basis of its top-level operational performance.The realisation of the Rafale project will illustrate the depth and scale of the strategic partnership between France and India," the statement said.
The deal is the first foreign deal for Dassault's fighter jets. The French have for years been trying to get an export deal. Just last month, French Defense Minister Gerard Longuet warned the Rafale program could be stopped if foreign buyers don't materialize.
Longuet maintained that the Rafale is an "excellent plane" but acknowledged it is handicapped by its price, which is higher than its U.S. rival.
The Rafale, in service for the French Air Force since 2006, has been flying air support roles in Afghanistan since 2007, and was a big part of the NATO air campaign against Moammar Gaddafi's forces in Libya in 2011.