France Puts Off India by Proposing New Conditions for Rafale Deal

NEW DELHI(Sputnik) — Highly placed sources in India's Defense Ministry have confirmed that France has been exerting undue pressure on India to seal the Rafale fighter aircraft deal without finalizing the mandatory offset contracts. The offset clause of India's Defense Procurement Policy (DPP) mandates that foreign vendors spend a portion of the deal's amount on projects within India. 

France has proposed that it would assist India in reviving the unsuccessful Kaveri gas turbine jet engine project and a host of other projects including the manufacturing of fighter jet components, but it would take a final call only after the contract for the procurement of Rafale jets is formally signed. 

Expert has view that India's revised Defense Procurement Policy (DPP) has no room for such an arrangement.

Amit Cowshish, former finance advisor to the Ministry of Defense, says, "Defense Procurement Policy doesn't support this proposal. According to the Indian defense policy, the Rafale deal contract as well as offsets contract ought to be signed at the same time. If the Ministry of Defense took this deal as exceptional, only then is it possible; but under the set procedure this is not possible."

The offset policy is a mandatory provision which requires foreign vendors to invest a portion of the deal's amount in India. The rationale behind the 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 are willing to invest 50% of the deal's amount, out of which 30% will be invested in the military aerospace research & development program.

Sources from the Ministry of Defense say that France's new condition has further complicated the deal, which had already been held back due to its many hiccups. To date, not a single major issue has been resolved between the negotiators. Apart from offset projects, the Ministry of Defense has yet to respond to the Ministry of Law's objection over inter-governmental agreement for the Rafale deal.

On January 26 this year, Indian Prime Minister Narendra Modi and visiting French President Francois Hollande had suggested in a joint statement that negotiation for the purchase of 36 Rafale medium multi-role combat aircraft was near completion. Later, Manohar Parrikar, India's Minister of Defense set a June 2016 deadline for the deal. However, the deal was not announced in June. Moreover, soures confirm that negotiators have not met for over a month now.