Hanging in the Balance: India-France Talks on Rafale ‘Still Underway’

Brushing aside all speculations, India's Defense Minister Manohar Parrikar has made it clear that negotiations on the much hyped Rafale deal with France is nowhere near completion and that many more things remain to be sorted out.

Replying to a query in Parliament, the Minister said, "The meetings of the Indian Negotiations Team with the French side are underway. Details regarding the terms and conditions including total cost, actual delivery timelines and guarantee period will emerge once the negotiations are completed."

This is the second clarification within a week by the Indian Defense Minister; whose own political party, the Bharatiya Janta Party, recently claimed that the Government deserved credit for saving $3.2 billion of tax payers' money by clinching the deal at a cheaper cost of $8.8 billion.

​On January 26 this year, Indian Prime Minister Narendra Modi and visiting French President François Hollande suggested in a joint statement that negotiations for the 36 Rafale medium multi-role combat aircraft were near completion. Manufacturer of Rafale, Dassault Aviation Ltd, also simultaneously issued a press statement claiming that deal was set to be sealed within a month. This followed speculations in the media that India would soon procure Rafale combat aircraft from France.

However, Defense Ministry sources told Sputnik, "It's still far from over. Negotiations are on track but we should wait for a final announcement."

According to sources, negotiators are finding it hard to strike a consensus on the offset clause of the Indian Defense Procurement Policy. The offset policy is a mandatory provision which requires foreign vendors to invest a portion of the deal amount in India. The rationale behind such provision is to encourage foreign companies to invest in research and development, which would eventually make India self-dependent in defense equipment manufacturing. The French side is willing to invest 50% of the amount but the areas in which they have proposed to invest are not akin to India's expectations.

The offset clause is a rule defined in India's Defense Procurement Policy, under which, sellers have to invest a portion of the amount of the deal in India. This rule has been implemented so that Indian companies get defense technologies to make India self-sufficient in defense equipment manufacturing. In the case of Rafale, the French side has agreed on 50% of the amount of the deal to be invested in India. But, the Indian negotiation team is not happy with the French side's offering. Indian Defense Ministry officials are also reluctant to go with the high maintenance cost of Rafale.

Indian defense experts are also not in favor of this deal. Former Chief Economic Adviser and Defense Analyst Mohan Guruswamy says, "Sukhoi is a far better plane than Rafale as it is far more economic. If you have a requirement for Rafale, then we should buy more Sukhoi. It can't justify a plane which costs four times more than Sukhoi. Besides, 36 planes make no sense because it will be too expensive to operate."