India’s order of 36 French-made Rafale fighter jets has run into trouble with government officials struggling to agree sales terms, sources said, four months after Prime Minister Narendra Modi intervened to break a logjam in previous commercial negotiations.
Two senior Indian defence officials told Reuters that both sides were wrangling over the unit price of the aircraft and a condition that planemaker Dassault Aviation invest a big percentage of the value of the multi-billion dollar contract in India.
The problems threaten to further delay the modernisation of India’s ageing air force.
Military officials have warned of a major capability gap opening up with rivals China and Pakistan without new Western warplanes or if local defence contractors cannot build what the military needs in a timely manner.
Modi and French President Francois Hollande announced the government-to-government deal for the sale of the off-the-shelf Rafale fighters on April 10.
That followed three years of commercial negotiations with Dassault for 126 aircraft that stalled due to disagreements over assembling most of the aircraft in India.
Citing India’s urgent defence needs, Modi chose to deal directly with Paris for a smaller order, saying officials would work out the details.
On May 16, Indian Defence Minister Manohar Parrikar told local media that negotiations over pricing would be finished in a “month or two”.
But those talks were bogged down over India’s insistence on a lower price for the frontline warplanes than the roughly $200 million each that was discussed with Dassault during the commercial talks, said the two defence officials, who have been briefed on the new negotiations.
Under the previous proposal, Dassault was to assemble 108 of the aircraft in India, a move New Delhi hoped would help boost a high-tech local aerospace industry. There is no production in India in the new arrangement.
“Since there is no technology transfer, the price that was on the table during the commercial talks cannot stand,” said one of the officials, who declined to be identified because he was not authorised to speak to the media.
The Indian Defence Ministry said negotiators were in talks to produce a draft agreement, but declined to give details.
Parrikar said last week that New Delhi had told Paris in April it wanted the jets as soon as possible. A Dassault spokesman declined to comment, as did the French defence procurement agency.