India, France cut down differences; Rafale deal in 'final stage'

The negotiations over the purchase of 36 Rafale fighter jets 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 came nearly four months after Prime Minister Narendra Modi and French President Francois Hollande signed a memorandum of agreement (MoU) 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 UPA tender, keeping the cost escalation and dollar rate in mind, comes to a little over Rs 65,000 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 Euros 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 percent offsets, creating business worth at least Euros  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 percent offsets in the deal. Initially, Dassault Aviation was willing to agree to reinvest only 30 percent of the value of its contract in Indian entities to meet the offset obligations. The French side finally agreed to invest 50 percent 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. 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.