Tough bargaining ahead for India’s MMRCA winner

The two finalists in India’s Medium Multi Role Combat Aircraft (MMRCA) aircraft deal, Eurofighter and Dassault, will have to be prepared for tough bargaining at the price negotiation stage as a rise in the value of the Euro Vs the Indian currency has pushed up the Rupee value of their bid by an estimated 15% in the last one year. Following the acceptance of the offsets proposals of the two bidders a fortnight ago, the only remaining formality is the opening of the envelopes containing the commercial bids and announcing the lowest bidder which will walk away with the estimated $1.2 billion prize. The lowest bidder will then be called for further talks called price negotiations to be held by the price negotiations committee. It is at this stage that the final price will be decided and tough bargaining will ensue. India has in the past let go of defence contracts as talks have broken down at the final price negotiation stage with the winning bidder. Cases to point are Airbus Industrie and Eurocopter both of which had to back off after being selected as winners, as the Indian Finance Ministry found their final price too expensive. “Even after the final winner is announced, it is still touch and go”, said an industry source to Defenseworld.net. “There is no finality that the lowest bidder will get the deal if India’s Finance Ministry which holds the purse strings objects to any part of the financial commitment. The Euro value rise will be an important element to discuss as a 15%-18% rise in the last 18 months means that order price has increased by over a billion Euros”. It may be recalled that in mid-2009, the MMRCA bidders have had to submit fresh bids as the two year validity of their commercial bids had expired then and a couple of the bidders had told defenseworld.net then “ the purpose of submitting fresh commercial bids is to take into account price escalation” adding that “the best value at current prices has been offered to India”, which means that a price rise has been effected in the new bids.