Friday, April 12, 2013

Government hopeful of $15 billion Rafale fighter jet deal going through

Earlier this month, in a rather unusual move, the Indian Air Force (IAF) strongly refuted a report that it was working on a Plan B should its negotiations fail to buy 126 combat jets from Dassault Aviation.

"The CNC (Contract negotiations committee) process for acquisition of 126 MMRCA (Medium, multi-role combat aircraft) is underway and there is no thought process for any procurement  as a 'back up' as reported," the Air Force said.

The statement was unusual for two reasons. Usually, it's the Defence Ministry that handles clarifications and responses to reports about acquisition of equipment and technology. Also, this is the first time that a press note has been officially issued about plans for procurement.

The deal for the fighter jet is estimated to be worth 15 billion dollars. But even when Dassault Aviation won the hotly-contested bidding war with rival manufacturers for exclusive negotiations with India, neither the government nor the Air Force announced the news. It was left to the company to declare itself the winner in January 2012.

The press statement issued earlier this month, sources say, was triggered by concerns in the Defence Ministry and the Air Force that rumours were being spread by those with 'vested' interests or rival manufacturers to prevent the deal with Dassault Aviation from being signed.

Under the initial terms of the proposed deal, Dassault was expected to provide 18 Rafale fighter jets in "fly-away" condition, and then let the state-run Hindustan Aeronautics Limited  or HAL manufacture the rest in India.

However, Dassault now wants two separate contracts to be signed - one for the ready-made ones, and another for the rest to be built by HAL, but India opposes that proposal.

Dassault reportedly has concerns about whether HAL has the capacity and capability to assemble the aircraft and therefore wants to rope in other private Indian firms to manufacture the jets.

Sources involved in the negotiations say that the deal is a complex one which requires careful understanding on both sides of commercial factors, logistics, and the ability of HAL's staff and equipment to assemble the Rafale.

An official shared this example. The radar on the Rafale jet is to be manufactured by Bharat-Electronics Ltd (BEL) at its facility in Bangalore. The Radome (the protruding snub nose on the aircraft) is, however, manufactured by HAL at its Hyderabad facility. Dassault wants clarity on how the two units will coordinate their activities.

Sources expect the kinks to be ironed out within the next six months. French and Indian government officials are simultaneously working on an Inter-Government Agreement that will oblige Dassault to continue to supply, service and maintain Rafale jets to India over the next 40 years. India wants this feature to ensure manufacturers don't renege on their commitment.