Indian MMRCA Deal May Not Conclude This Year

India’s $20 billion deal to buy Rafale fighter jets may not conclude this financial year as negotiations are still to be completed without which budgetary provision cannot be made.

The Indian budget for fiscal 2014-15 is scheduled for July during which a higher allocation for defence as compared to last year could be made. However provision for the Rafale MMRCA purchase seems unlikely as the Indian MoD is yet to conclude negotiations with Dassault. A huge capital expenditure of this type is budgeted over several year as per the schedule of payments agreed upon.

Experts say that even if the negotiations are concluded and contract signed this year, the earliest a financial provision can be made would be in the fiscal 2015-16 budget. This means, the earliest the aircraft to be bought in fly-away condition could arrive in India, will be 2018-19.

Meanwhile, fresh hurdles in the MMRCA negotiations have been reported in the Indian and international media. Hindustan Aeronautics Ltd (HAL) is yet to finalize the cost of the Rafale to be license-manufactured in India. This is being cited as a major concern for the delay in concluding the negotiations. The MoD wants an estimate of what it will cost to license-manufacture the aircraft at HAL in India which the latter is yet to provide.

In addition, it wants a guarantee from HAL as when each of the licenced-manufactured aircraft will be delivered to the IAF. This is because delay means cost escalation. HAL is reluctant to give this guarantee, according to the reports.

The Indian MoD and the IAF have had to grapple with delays concerning HAL’s other projects, namely the Su-30MKI and the Hawk trainer aircraft. They do not want a repeat of this with the Rafale.