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India, Dassault Rafale Deal Appears Stalled

Feb. 4, 2014 - 03:45AM   |  
Stalemate: A Rafale fighter is shown at the Dassault Aviation assembly line last month in Merignac, near Bordeaux, southwestern France. Under the proposed sale to India, state-owned Hindustan Aeronautics would build 108 of the 126 jets at its facility. (AFP/Getty Images)
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NEW DELHI — Negotiations over the multibillion dollar deal to sell 126 Dassault Rafale jets to India have stalled, according to Indian Defence Ministry sources, who say the sticking point involves issues governing license-production of the jets at state-owned Hindustan Aeronautics Ltd. (HAL).

A series of meetings held over the past three months have failed to resolve the stalemate, the sources said, meaning it is unlikely the deal will be finalized during the current New Delhi administration.

At the beginning of the year, Rafale-maker Dassault met with the MoD, Indian Air Force and HAL to break the impasse, sources said. A planned visit by HAL Chairman R.K. Tyagi for Jan. 27-31 has been postponed, putting a question mark over the entire program.

A Dassault executive said the company was informed at the last minute about the postponement of the HAL team visit to Paris and gave no details.

However, a senior HAL executive said the visit was postponed due to a sudden company board meeting at home. He said the visit has just been postponed, not canceled.

At issue is the Indian Air Force’s insistence that HAL provide guarantees on the delivery schedule for the Rafale aircraft. According to the tender, 108 of the 126 jets are to be license-produced at HAL.

HAL in turn has shifted the onus of providing guarantees to Dassault, which initially refused before agreeing to help HAL adhere to the delivery schedule.

However, HAL has failed to take responsibility and guarantee the work of its sub vendors, which includes state-owned companies, including Bharat Electronics Ltd. (BEL), which would supply auxiliary systems, the Air Force sources said.

At the same time, the framework governing work share has not been finalized because the Indian side wants a greater percentage of subsystems and auxiliary work in the license production deal. The French say HAL will need to absorb Western technologies, so the work share can increase only as the license production progresses, MoD sources said.

The Air Force, having suffered delays from HAL, is adamant that the delivery schedule is followed. Air Force sources say the delay in procurement of the fighter will severely affect the fleet strength of the force. The service had to search for a fighter aircraft in the overseas market because the homegrown light combat aircraft, proposed to replace Russian MiG fighters, is more than 15 years behind schedule.

MoD sources say the delay over the Rafale deal has led to a steep rise in the cost of the project — from an estimated $11 billion to more than $14 billion — due to inflation and a more than 20 percent fall in the value of the Indian rupee against the US dollar in the last three years.

The first request for information for the program was floated in December 2005, followed by a request for proposal in August 2007.

As part of the contract negotiations, the Indian MoD set up four subcommittees in the run up to the finalization of the deal with Dassault. These include subcommittees on technology of production, offsets, logistics and cost negotiations.

MoD sources said the Air Force’s tough stance and delivery guarantees havestalled the negotiations.

Rafale was shortlisted alongside the Eurofighter Typhoon after the first round of competition; the US-made F-16 and F/A-18, Sweden’s Gripen and Russia’s MiG-35 were ejected after the technical evaluation.

After the flight trials and life cycle cost phase, Rafale was selected due to its low cost. Contract negotiations began in early 2012, with the goal of signing a contract in the current financial year ending in March.

“The project, regarded as a prestigious project for the MoD, is not getting the right priority by the MoD,” said New Delhi-based defense analyst Nitin Mehta. “The ruling government could be seen as avoiding taking a decision on the big ticket project ahead of the general elections.”


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