"We are in advanced stages of negotiations and the contract will be inked soon," said a source in the Indian Ministry of Defense (MoD).
Dassault declined comment but Dassault chairman Eric Trappier said April 13 on Radio Classique he expected a contract could be signed "in the next few days," adding "I have high hopes this contract could be signed fairly quickly."
On the possibility of topping the existing purchase of Rafale, the MoD source said, "We will certainly buy more Rafale fighters in the future, but that would depend on the funds."
"We have agreed to execute 50 percent offsets in the Rafale deal but we have not compromised on the cost," a source in the French Embassy in New Delhi said.
Refusing to give details, the French Embassy source said, "Thirty percent offsets will be embarked for future military aviation research and development (R&D) programs and the remaining 20 percent will be with Indian [defense] industries making components for Rafale."
To execute the offsets, several French companies including Safran and Thales will join Dassault in providing state-of-the-art technologies in stealth, radar, thrust vectoring for missiles, and materials for electronics and micro-electronics, the French Embassy source said.
Meanwhile, the "state-owned Defence Research and Development Organisation (DRDO) has almost finalized the future defense R&D projects in which French defense companies will participate as technology partners," the MoD source added but refused to give details on the R&D projects.
Indian Prime Minister Narendra Modi had announced in his April 2015 visit to Paris the intention to buy 36 Rafales on a government-to-government (G2G) basis. However, finalizing the cost, and agreement on the size of offsets had become the major hurdles in the yearlong negotiations.
India had put forth the list of weaponry during the negotiations which the IAF wants and includes Mica air-to-air missile, Scalp cruise missile and Meteor beyond-visual-range missile and precision-guided munitions. An IAF source said India-specific Rafale aircraft will be able to carry 10 tons of weaponry.
The Rafale order is driven by a sense of urgency as the Indian air force has operational needs which cannot be met with by the Russian fighters they fly today, said Robbin Laird of ICSA, a consulting firm based in Washington and Paris.
There are effectively two separate forces, one flying Russian fighters, the other the Mirage 2000, when the service needs to have a more integrated air force, Laird said.
An acquisition of the French fighter could also strengthen the Indian Air Force's ties with the French Air Force, which has flown combat operations in Iraq and Syria.
"French pilots are highly capable and have a professional inventiveness that tap into their experience," Laird said. "I would not underestimate French pilots. If India fails to get the Rafale into operation in three years, that would be a strategic failure."
"The IAF has assessed the need for Rafale-type fighters 10 years ago which is a calculated operational requirement based on government approved norms and enough to equip six squadrons (with about 15 percent assets as maintenance and war reserves)," said Subhash Bhojwani, retired IAF air marshal.
"There is a long-term requirement of about 10 squadrons of Rafale aircraft (say 200 aircraft, including missile warning radar)," Bhojwani added.
"Currently IAF has a significant shortage of combat aircraft. The numbers are well below the authorized level and continue to dwindle as older machines retire. Considering the low rate of induction, IAF may take more than a decade or two to reach its authorized strength," Srinivasapuram Krishnaswamy, retired IAF air chief marshal and former IAF chief had told Defense News earlier.
IAF's fighter aircraft strengthis down to 25 squadrons (one squadron is equal to 18 aircraft) as against the required strength of 45 squadrons.
Out of the 25 squadrons, 14 squadrons are equipped with Russian made MiG-21 and MiG-27 fighters that are on the verge of retirement.
Pierre Tran contributed to this report from Paris.
Vivek Raghuvanshi is the India correspondent for Defense News.