India signs Rafale deal with France but price negotiation not yet over

India and France on Monday signed an Inter-Government Agreement (IGA) over the purchase of 36 Rafale combat jets. However, Prime Minister Narendra Modi, in his joint statement after talks with the visiting French President Francois Hollande, said that the financial issues will be worked out in some time.

The two countries have been holding the crucial price negotiations after a decision was made in this regard last April during Modi's visit to France.

"We are very happy that we have formed an agreement for purchase of 36 Rafale aircraft with France," PM said, adding that there are "some financial issues" that shall be sorted very soon.

Hollande too said that the financial issue will be worked out in a "couple of days" and termed the agreement as "decisive".

"These fighter jets are precisely those which are being used against Islamic State of Iraq & Syria (ISIS) in Syria. They have proven themselves against ISIS and we are happy to be able to provide them to India," he said.

Even though the 36 Rafale jets will give much needed succour to the Indian Air Force by adding two more combat squadrons to its strength and was being hailed as the centerpiece of French President's India visit, both the price and the delivery timelines that form the crucial part of the agreement are yet to be worked out.

India is to buy 36 Rafale Medium Multi-Role Combat Aircraft (MMRCA) in fly-away condition from France and is negotiating fa nearly 20 percent reduction in cost even as the cost of one unit comes around Rs 800 crore.

India's hunt for MMRCA began in January, 2012 when it decided to buy 18 such aircraft in "fly-away" condition, and 108 were to be made operational by state owned Hindustan Aeronautics Limited (HAL) through the transfer of technology clause.

However, Modi during his France visit last year announced buying 36 of them in fly-away condition by scrapping that tender and invoking "Critical Operational Necessity" of the IAF.

Other bidders who lost to Rafale in 2012 were the American F/A-18 and F-16, Russian MiG 35, European Eurofighter and Swedish Saab Gripen.