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Friday, March 29 2024
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Fighter Jets delayed; Negotiations stuck over price and offset clauses

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New Delhi: In April, during PM Modi’s visit to Paris, India scrapped the long pending in priciple approved deal to buy 126 Rafale Fighter jets, and decided to buy 36 Rafale jets from France in a flyaway condition.

Fighter jetAs agreed during the PM’s visit, the Indian and French teams are now busy negotiating in Delhi to thrash out the fine print of the contract which remains to be signed and the fine print, like in an insurance policy, is the key to the contract going through. Sources say the negotiations are stuck on the offset clause, which requires 30 per cent indigenous content in defence contracts costing more than Rs 300 crore.

While Dassault had offered 50 per cent indigenous content in the earlier 126 Rafale jet deal, there is lack of clarity regarding offsets in the purchase of the 36 jets.

“In the earlier deal, the negotiations involved talking to the manufacturer- Dassault. In present case, the talks are between the two governments. Unlike US, France does not have Foreign Military Sales (FMS) route and thus does not have any provision for discharge of offsets. This is clashing with the Indian requirement which views offsets as a prime boost to the Indian industry. Further, this fits well in line with the government’s Make in India initiative..It is unlikely that the Indian side will part with/dilute the offset requirement,” a defence ministry official said.

Sources further indicated that the IAF’s requirement of integrating indigenous weapon systems on board the Rafale jets may require modifications on the original platform, which may add to the cost.

The french side also wants to hike the price, pegging it to its recently signed deal with Egypt. In February, Egypt signed a contract to buy 24 Rafale jets from France in a 5.2 billion euro deal. Initially they had told PM Modi during his visit that it would offer the aircraft to India at a price at which it sold the fighters to its own air force.

 “The French side has made the price offered to Egypt the new benchmark. Further cost escalations were discussed due to the modifications that may be required to integrate Indian systems on board the fighters,” a Defence Ministry official said. 

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