Dassault’s Rafale is leading India’s medium multi-role combat aircraft (MMRCA) competition after emerging as the preferred bidder in the US$15 billion contest, undercutting Eurofighter’s rival Typhoon and boosting French hopes of a long-awaited first export contract for its premier combat jet.
“France’s Dassault has emerged as the lowest bidder, and further commercial negotiations will take place with the company before signing a formal deal,” one Indian government source said. The source said both companies had been informed.
Defence Minister A.K. Antony said earlier yesterday that no deal would be signed before the end of March. “It is a long process. The file has not come to my table,” Antony said, adding that the finance ministry and a cabinet panel headed by the prime minister had to look at any agreement after him.
The source said the Rafale was preferred because of lower costs, and the Indian air force’s familiarity with French warplanes such as the Mirage.
“Unit-wise, the French plane is much cheaper than the Eurofighter. Moreover, the Indian air force, which is well equipped with French fighters, is favouring the French,” said the source, who asked not be named. Last year Dassault won a US$1.4 billion contract to upgrade India’s Mirage fleet.
In December, France’s defence minister Gerard Longuet warned that Dassault would stop production of the Rafale in 2021 if it did not win any export orders.
“The realisation of the Rafale project shows the depth and breadth of the strategic partnership between France and India,” Sarkozy said in a statement, while French officials avoided declaring outright victory after a series of false export hopes.
“Following the announcement of the final selection of the Rafale in the frame of the MMRCA programme, Dassault Aviation and its partners are honoured and grateful to the Indian Government and the people of India to be given the opportunity to extend their long-lasting cooperation,” Dassault said yesterday.
“Dassault Aviation and its partners reiterate their commitment to meet the operational requirements of the Indian Air Force and underline their pride in contributing to India’s defence for over half a century.”
India’s decision to enter exclusive talks with supplier Dassault Aviation also provides a welcome boost for President Nicolas Sarkozy, whose chances of being re-elected in April this year hinge partly on his credibility as a champion of French industry.
Developed over decades at huge expense, the Rafale is a powerful symbol of French technological prowess. Its sale to India over strong European rivals would be received as a victory for national prestige, as well as a commercial boon.
But Sarkozy, currently projected to lose an April-May presidential election, cannot claim credit too soon as India has cancelled defence procurement decisions in the past. Previous attempts to sell the Rafale have failed to produce firm deals.
A deal in the works since 2008 to sell 60 fighters to the United Arab Emirates hit a new snag last year when Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed called Dassault’s terms “uncompetitive and unworkable”.
The UAE has also sought details of the Typhoon, built by the German and Spanish branches of EADS, Britain’s BAE Systems and Italy’s Finmeccanica. American, Russian and Swedish bids were rejected in April.
“We’ve been waiting for this day for thirty years,” Sarkozy told a news conference, referring to the launch of Rafale’s development programme. Having “126 Rafales in the final phase (of talks) in India concerns more than aviation… It’s a signal of confidence in the entire French economy.”
While exclusive talks are not a guarantee of sale, they deal a probable knockout blow to Rafale’s chief rival in India, the Eurofighter Typhoon, a fighter plane developed by a consortium of four European aviation companies –the German and Spanish branches of EADS, Britain’s BAE Systems and Italy’s Finmeccanica.
James Hardy, Asia Pacific specialist at IHS Jane’s Defence Weekly said Dassault’s poll position in India was a big blow for Eurofighter.
“The Typhoon was widely tipped to be the favourite and had major political support from the big beasts of the Eurofighter nations,” he said. “Both Germany and the U.K. invested a lot of time in pushing the Typhoon so this will hurt.”
India rejected American, Russian and Swedish bids in April.
India, which owns more than 50 French Mirage jets, has become the world’s largest importer of weapons as it seeks to upgrade its largely Soviet-era navy and air force to counter the rising might of China and threats from Pakistan.
“The Rafale gives a huge combat edge to our air force given the situation in our region,” said former Indian air force chief Fali Homi Major. “We cannot say what kind of conflict situation there would be in the region 20 years hence.”
Shares in the thinly traded stock of Dassault Aviation (AVMD.PA) shot up 22 percent to a more than four-year high of 749 euros after the announcement.
A French source close to the matter said the decision to enter fresh negotiations with lowest-bidder Dassault, in exchange for a transfer of technology, was a step forward but that no deal had been signed.
Defence analysts said the deal needed to get through a potentially complex final stage of talks in which France’s willingness to transfer know-how would be tested to the full.
“This is not the end of the road by any stretch of the imagination. This is only the beginning of a second stage of this campaign,” said veteran defence analyst Howard Wheeldon, senior strategist at BGC Partners brokerage in London. Hardy said wrangling over the deal could go on for years.
“Financial pressures on India’s government could seriously complicate the chances of this being signed any time soon, in particular the depreciation of the rupee,” he said. “That and the standard contractual wrangling that occurs during Indian procurement deals could cause delays stretching to years.”
Indian defence ministry sources said the life-time cost of the tender, including training and maintenance could reach US$15 billion, above previous estimates of around US$11 billion.
A source familiar with the negotiations said the defence ministry was considering extending the tender to buy an additional 80 or so jets and that bidders excluded earlier in the race might be allowed to take part.
Analysts say such a move could notably open the door to the Lockheed Martin F-35, the most sophisticated fighter currently exported by the United States. In November, Washington expressed interest in selling the stealth aircraft to India.