Friday, September 23, 2016

Air Force’s 16-year wait over, Rafale deal done

Sixteen years after the proposal for a replacement fighter jet was first mooted by the Indian Air Force (IAF) and 17 months after Prime Minister Narendra Modi announced acquisition of 36 fighter jets in Paris, India inked the approximately Rs 59,000 crore Rafale deal with France on Friday.
The inter-government agreement, signed between Defence Minister Manohar Parrikar and his French counterpart Jean-Yves Le Drian, specifies that the first aircraft will be inducted into the IAF within 36 months, and the full complement will be in service within 67 months. 

“Rafale is a potent aircraft for deep strike capabilities. It can move at high altitudes and has potential weapons with the most modern technology. It will add to the capability of the IAF,” Parrikar said. The induction of these 36 fighters — 28 single-seaters and eight twin-seaters — is expected to bridge the shortfall in the depleting number of fighter squadrons in the IAF.

The IAF currently has 32 fighter squadrons against an authorisation of 42, and this number is expected to come down to 25 by 2022. These 36 aircraft, however, make for only two squadrons. As reported by The Indian Express on September 18, the clinching factor for buying the two squadrons is their use for delivery of nuclear weapons after the French-built Mirage-2000s retire from service. 

Top defence sources said that the French fighters, equipped with Meteor air-to-air and Mica air-to-land missiles, will be delivered in a fly-away condition by Dassault. Moreover, offsets of half the value of the deal will be executed by France in India within seven years. Although Dassault is yet to submit the full details of its Indian offset partners, 74 per cent of the offsets are mandated to be exported from India. Another 6 per cent of the offsets are for technological sharing, which is currently being negotiated by the DRDO. 

 “We expect export worth Euro 3 billion to happen from India due to offsets as part of the deal. This will take a couple of years to start but it will create jobs and opportunities in India,” sources said. Although the base version of Rafale remains the same as the one being used by the French Air Force, the Indian version of the fighter jet will have 14 India-specific enhancements. Sources said these include the helmet mounted display, Doppler beam radar, IR search and track, and towed decoy. It is because of these enhancements that the delivery time of the first aircraft cannot be less than 36 months. 

In addition, the French are also guaranteeing performance-based logistics support, which means that 75 per cent of the fleet will be airworthy at any given time. According to sources, the airworthiness of the Russian Sukhoi Su-30, the mainstay of the IAF, has reached 55 per cent with great difficulty from 46 per cent two years ago. As reported by The Indian Express on Wednesday, the deal provides for free training of 10 IAF personnel, including three pilots, estimated to be worth Euro 100 million. 

The IAF will also get a guarantee for an additional 60 hours for the trainer version of Rafale fighters, and a concession to keep the weapons storage in France for an additional six months without any charge. The French have also agreed to supply spares for a period of seven years at initial cost. After Prime Minister Modi made the announcement of buying 36 Rafale fighters in Paris in April last year, the French had made an offer of Euro 11.8 billion. 

By January this year, when French President Francois Hollande was the chief guest at the Republic Day celebrations, the French offer had come down to Euro 8.6 billion. The negotiations, however, could not be concluded between the two sides then. In May, the two sides agreed to a price of Euro 7.878 billion, and the deal was formally cleared by the Cabinet Committee on Security in August. 

As per the agreement, 15 per cent of the total amount will be paid as advance, 25 per cent in 12-18 months, and the rest on schedule as per delivery, with 5 per cent of the amount being retained till the deal is completed. On questions about the high price of the French fighter, sources said that the base price of a single-seat fighter is only Euro 91.07 billion, while for a two-seater it is Euro 94 billion. 

“By negotiating the inflation at actual indices, but limited to 3.5 per cent, in comparison to 4 per cent or more in earlier deals, we will save Rs 4,000-14,000 crore over the deal. In addition, the annual maintenance for spares and performance-based logistics is 20-25 per cent of the cost. Besides the initial five years, an additional two years of performance-based logistics is included in the deal,” sources said. 

Many experts have compared it with the benchmarked price in the original Medium Multi-Role Combat Aircraft (MMRCA) deal. But Defence Ministry sources said the two prices cannot be compared. “The price of 18 Rafale fly-away aircraft was different from the 108 which were to be made by HAL in India. Dassault had used a factor of 2.7 for labour cost in India over France, which had raised questions about it being the lowest bidder itself. 

It also meant that each aircraft would cost Rs 68 crore more due to manpower costs itself. The then defence minister A K Antony had noted on the file that he will take a decision after price has been negotiated. That never happened and we don’t even know what their final price would have been,” sources explained.

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