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Rafale deal almost done: India negotiates cost down to Rs 58.6 thousand crore

Suhas Munshi | Updated on: 10 February 2017, 1:51 IST
The deal
  • India and France are set to ink a deal for 36 Rafale fighter jets for Rs 58.6 thousand crore ($8.8 billion)
  • The deal had been stalled for a while because negotiations had broken down
  • The significance
  • The Indian Air Force needs new jets soon because its fleet of MiGs needs to retire
  • The IAF has a requirement for 44 squadrons, of which only 32 are functional
  • Fourteen of these are MiG squadrons, while others featuring Mirage-2000s and Jaguars are being upgraded
  • More in the story
  • How China and Pakistan\'s air force progress has forced India\'s hand
  • Why the deal will be signed by the two countries
  • A year ago, during his visit to France, Prime Minister Narendra Modi had promised to buy Rafale jets in a government-to-government deal. And now, the two countries have almost concluded India's biggest deal for fighter aircraft.

    According to sources, the deal is likely to be signed by the end of this month. A senior official at the Ministry of Defence said India had got the asking price for 36 jets down from Rs 65,000 crore ($12 billion) to Rs 60,000 crore (nearly $9 billion).

    The deal is finally being sealed for Rs 58,653 crore ($8.8 billion). If India inks the deal within a couple of weeks, it can expect to receive the first few jets by the end of 2017.

    Negotiations had broken down in 2014, but Modi promised to resuscitate the deal during his Paris trip in April last year. France President Francois Hollande was the chief guest at the Republic Day celebrations in January, and it was expected that the two governments would ink the deal.

    Also read: Rafale: how the "mother of all deals" ended up like an "unplanned child"

    Deal expected to cost $8.8 billion for 36 jets. If finalised soon, deliveries can begin by end-2017

    However, the negotiations reportedly broke down again, and rumours began to float that the deal would be scrapped altogether.

    However, Defence Minister Manohar Parrikar kept reiterating the commitment of the two countries to close the deal, while also admitting that the pace at which the negotiations were progressing were 'not enough'.

    Bare necessity for the IAF

    The Indian Air Force's dominance in the subcontinent is depleting rapidly due to its ageing fighter squadrons, so it is crucial for it to get state-of-the-art fighter jets.

    The Air Force has a projected requirement of 44 squadrons, but it only has 32 squadrons operational at the moment. Of these, 14 squadrons feature out-of-date MiG-21 and MiG-27 aircraft, which have to be retired next year onwards.

    Some of the other squadrons of Mirage-2000s and Jaguars are also in the process of being upgraded, and are thus out of service.

    At the same time, India's neighbours - Pakistan and China - have been working to modernise their air forces.

    Also read: India looks set to buy those Rafales. But it's not a good idea

    The IAF has a projected requirement of 44 squadrons, but has only 32 operational, including MiGs

    Because of arms restrictions, China cannot collaborate with Western countries in the defence sector. So, it has been working with the Russians to develop advanced fighter jets. JF-17s are a result of this, with more projects are in the pipeline.

    Pakistan, on the other hand, is upgrading its air force with the help of the Americans. The sale of F-16s, which was temporarily halted, has reportedly been resumed again.

    With 36 Rafales, the Indian Air Force is looking at setting up two squadrons of the best available fighter jets immediately, to maintain its aerial superiority in the subcontinent.

    Also read: 4 reasons why the Rafale fighter jet deal is of prime importance to India

    Cost escalation

    The whole deal had begun with an order for 126 advanced fighter jets. India placed the order in 2012, against a price of $12 billion.

    All the world's biggest fighter jet manufacturers, from the Americans with their F/A-18 Super Hornets, the Russians with MiG-35s, the British with Eurofighter Typhoons, and the Swedes with Saab's Grippens, had lined up for this incredible contract, which some had referred to as the 'mother of all deals'.

    To speed up acquisition of the hardware, it was agreed that this contract would directly be between the countries.

    However talks between India and France broke down as the total cost escalated up to $22 billion. India subsequently placed a new order for 36 Rafales in ready-to-fly condition.

    By this time, those who had begun to question the feasibility of sticking with the Rafale deal began to refer to it as an 'unplanned child'.

    But the Indian side will still be quite happy to have finally come this close to finalising the deal, despite the high price it is paying for these jets. That's because this was the only aircraft that had fulfilled all the Air Force's requirements.

    Edited by Shreyas Sharma

    Also read: IAF desperately needs more jets; but the Rafales may be a while coming

    First published: 17 April 2016, 5:52 IST
    Suhas Munshi @suhasmunshi

    He hasn't been to journalism school, as evident by his refusal to end articles with 'ENDS' or 'EOM'. Principal correspondent at Catch, Suhas studied engineering and wrote code for a living before moving to writing mystery-shrouded-pall-of-gloom crime stories. On being accepted as an intern at Livemint in 2010, he etched PRESS onto his scooter. Some more bylines followed in Hindustan Times, Times of India and Mail Today.