Article Posted on : - Jan 07, 2015

A file photo.

NEW DELHI (PTI): The multi-billion dollar Rafale fighter jet contract with France has run into rough weather over a guarantee clause and steep rise in price with India making it clear that the ball is in France's court as it looks at the option of buying more Russian Sukhoi-30 MKI warplanes as a back-up plan.

India is insisting that Dassault Aviation, which manufactures Rafale, cannot renege on the Request for Proposal (RFP) clauses, which it had initially agreed to.

The situation has come to such a level that France has been forced to send an empowered delegation later this month to "solve all remaining issues" to salvage the contract.

A top Defence Ministry official here had this week admitted that there were problems and said India could consider buying more Russian-made Sukhoi-30 planes if the proposed deal with France collapsed.

Recalling the last month's meeting between Defence Minister Manohar Parrikar and his French counterpart, sources said French "were told categorically to stick to the RFP".

"The ball is in France's court," the sources said adding that if the "RFP is adhered to, the deal can be wrapped up soon".

They claimed that while the deal was initially for about Rs 42,000 crore, French are seeking a higher price now. This, the sources said, has put the price at a "little more than double the cost".

Dassault did not comment on queries sent by PTI to it.

The French Rafale and European Eurofighter Typhoon were the only one left standing after years of tests on technical and other aspects.

"Rafale was selected in 2012 since it was the lowest bidder. The difference in cost with the second bidder was razor thin. With cost now more than double, how can it be the lowest bidder," the sources said, explaining why the negotiation for a final contract has been taking so much time.

Another point of contention is the guarantee clause under which Rafale has to stand guarantee for the planes that would be manufactured by state-owned HAL.

As per the RFP issued in 2007, the first 18 jets are to be imported and the rest 108 manufactured under licence by Hindustan Aeronautics Ltd (HAL).

According to the sources, Dassault was reluctant to stand guarantee for the 108 fighters to be built by HAL as far as liquidity damages and timelines for production were concerned.

The Defence Ministry is of the view that the guarantee clause was part of the Air Staff Qualitative Requirements (ASQR) under the RFP.

Dassault had agreed to the ASQR and hence was selected for the deal, the sources maintained.

"How can the ASQR be relaxed? This is not allowed under the Defence Procurement Procedure, 2013," the sources said.

However French authorities insist otherwise.

"Please read the RFP document yourself and see if there is any such clause," a top French diplomat had said last month when asked about this.

Replying to queries sent by PTI, French officials said negotiations have progressed well on the Rafale contract, which is a large project with the transfer of cutting-edge technology and production in India.

"As Minister Le Drian (French Defence Minister) said, both our governments share the will to conclude it and, during his visit to Delhi (December 1-2, 2014), it was agreed to fast-track the discussions," they said, adding that indeed, empowered people will come from France to Delhi to solve all remaining issues.

Talking about the price and guarantee clause, they said all this takes place within the Indian Defence procurement procedure.

"At the conclusion of the competition, the Rafale was selected and its competitors eliminated on the basis of technical/operational assessment and on the basis of price," they said.

Off the record, French sources claimed that that the price that is being negotiated is as per the bid that was submitted.

But Indian authorities insist otherwise and say that the French need to understand that "there is lack of space for manoeuvrability in the contract".

French officials said the differences can be ironed out and that both governments are committed to it.