Article Posted on : - Apr 09, 2013

A file photo.

NEW DELHI (PTI): India and French firm Dassault Aviation on Monday decided to keep aside their sharp differences over contractual obligations and move ahead on the other aspects of the deal to procure 126 multirole combat aircraft for the IAF.

During the contract negotiation committee meeting on Monday, the two sides agreed to keep their discussions pending on the issue of having separate contracts and the role of HAL in the deal and move ahead on other things such as pricing and support services, sources told PTI here on Monday.

Serious differences have cropped up in the contract negotiations between the Defence Ministry and the French firm, threatening to delay the country's single largest dose military acquisition.

The French firm has already agreed with the Defence Ministry's demand for having one contract with the four major firms involved in the deal, including MBDA, for the weapons package for the aircraft instead of four separate contracts, they said.

The firm is understood to have agreed to the Defence Ministry's demand on the issue after the involvement of French government.

Dassault has made it clear that it was "technically and practically not feasible to stick to the present obligations" as it is wary of encountering the fate of British telecom company Vodafone, which is facing problems over taxation issues.

In the contract, Dassault wants to be held responsible for only the first 18 aircraft to be supplied by it along with the kits to be supplied by it for the remaining 108 aircraft to be produced by HAL in India but the Defence Ministry wants it to take responsibility for delivery of all the 126 aircraft.

The French firm also does not want to be held responsible for delay in the delivery of the aircraft to be manufactured by HAL and has told the Ministry that it cannot be held responsible for paying the liquidity damages in case there is delay by HAL, they said.

Dassault fears it may land up in a Vodafone-like situation in terms of taxation for transfer pricing if it agrees with present obligations and such a thing can impact it adversely in a big way, sources said.