Monday, June 30, 2014

India Close to Rs. 100,000 Crore Deal With France for Fighter Jets: Sources

French Foreign Minister Laurent Fabius has landed in the capital to, among other issues, close a stalled deal to sell India 126 Rafale fighter jets, built by Dassault Aviation, for an estimated $15-17 billion or Rs. 100,000 crores. 

The French minister will meet Prime Minister Narendra Modi and Arun Jaitley, who holds the twin portfolios of Defence and Finance. Sources tell NDTV that India has closed most of the technical negotiations with the French manufacturer over the deal. And now the government has to decide whether to go ahead with committing to the Rs. 100,000-crore contract, with a plan to spend the money over a decade. 
 
Three technical committees have signed off on how transfer of technology and maintenance of the combat jets should be handled in the contract. A fourth committee that is looking at the overall costs needs the green-light from the government. 
 
The defence minister has been briefed by the Air Force about the urgent need for fighter jets. Currently, the Air Force has 32 squadrons; a minimum of 39 are sought by top officers. 
 
As the government prepares to open the nascent defence industry to foreign investment, Western governments are rushing to visit the PM. 

In the second week of July, Britain is likely to send in Foreign Secretary William Hague and Finance Minister George Osborne, a British government source said on Friday.

Britain has drawn some cheer from the slow progress of the negotiations for the Rafale deal. The Eurofighter Typhoon was shortlisted along with the Dassault fighter before India announced the French jet was the winner.

Cost escalations and disagreements about building the Rafale in partnership with India's state-run Hindustan Aeronautics Limited have complicated talks with France, and London has never entirely given up hope that it will return to the race.

India spent some $6 billion last year on weapons imports. It makes few of its own weapons, beyond ballistic missiles and assembly lines for foreign jets. 

On Thursday, the government signalled it was in the mood for liberalisation by allowing manufacturers to build more defence components without licences, making it easier for Indian firms to partner with foreigners.

At present, foreign companies can only invest 26 per cent in Indian defence projects without committing to technology transfer, which has put off many investors.

AK Antony, who was India's longest serving defence minister until his Congress party's election defeat in May, said this week that allowing higher foreign investment in defence would be "suicidal".

India's Department of Industrial Policy and Promotion has circulated a discussion document that proposes allowing up to 100 per cent foreign direct investment, or FDI, in defence production, say government sources.

The note suggested allowing 100 per cent FDI in manufacturing of state-of-the art equipment, an official said. It also recommends a cap of 49 per cent for investments which do not involve transfer technology and a 74 per cent ceiling in such cases where the foreign investor is ready to share technology know-how, the official added.