Rafale was declared the lowest bidder in Janaury 2012 but the deal has not been inked so far on account of escalation in the cost. The Cost Negotiation Committee, which was set up in February 2012 to work out the modalities for the deal has not reached a conclusion after 30 months of negotiations.
The government raised its concerns over this last month, during the visit of French foreign minister Laurent Fabius to New Delhi.
"Yes, we are in the process of finalizing the draft contract for the deal. And we also expect the Cost Negotiation Committee to submit its report soon," said a senior defence ministry official, who was privy to the developments.
But the official refused to give a time frame for inking the deal. "It is very difficult to predict any date for signing the contract. But, it should happen in the next few months," the officer said, requesting anonymity.
The Indian Air Force (IAF), which is coping with a depleted combat strength, claims that even if the deal is signed by the end of the year the first lot of Rafale aircraft would arrive only by 2017, by which time the IAF would have to phase out its MiG-21 squadrons.
The likelihood of an early signing is encouraging. Besides, the ruling NDA government has promised to address all the needs of the armed forces to ensure defence preparedness.
According to officials privy to the development, the defence ministry has asked representatives of M/s Dassault Aviation – the French manufacturer of Rafale aircraft – to revise the price structure which has gone beyond expected estimates.
Officials claim that when the tender was floated in 2007 the cost of the programme was $12 billion (Rs42,000 crore).When the lowest bidder was declared in January 2012, the cost of the deal shot up to $18 billion (Rs90,000 crore). Now with the inclusion of transfer of technology, the life cycle cost and creation of an assembly line, the deal has climbed to a whopping $20 billion.
The air force is seeking to replace its aging MiG-21s with a modern fighter and the medium multi-role combat aircraft (MMRCA) fits between India's high-end Sukhoi-30MKIs and the low-end Tejas LCA lightweight fighter. The IAF has a sanctioned strength of 45 fighter jet squadrons. However, only 30 squadrons are operational as old aircraft have been retired.
Eighteen of the 126 new aircraft are to be purchased directly from Dassault and Hindustan Aeronautics Limited will manufacture 108 under a licence, at a new facility in Bangalore.
Defence minister Arun Jaitley informed parliament last week that "given the complexity of the procurement case, the process of negotiations with Dassault Aviation on various aspects of the commercial proposal and provisions of draft contract is on."
Dassault Aviation emerged as L-1 bidder for procurement of the MMRCA based on its quotation.