Is the Indian Rafale MMRCA Purchase Really Dead?

Is the Indian Rafale MMRCA Purchase Really Dead?
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Senior Indian Ministry of Defense (MoD) officials’ recent statements to local media regarding a potential $20 billion procurement of 126 new-build French Dassault Rafale jet fighters as being "effectively dead" have led to confusion and speculation. Whether or not these statements accurately portray the mindset in the Defense Ministry, or are a negotiating ploy, remains to be seen. Yet there is little doubt that in terms of finalizing a deal, crunch time is fast approaching.

India chose the Rafale over the Eurofighter Typhoon on Jan. 31, 2012, following a two-round competition to meet the Indian Air Force's (IAF) medium multi-role combat aircraft (MMRCA) requirement. The Rafale won out over its competitors due to a variety of reasons, including favorable technology transfer guarantees, the aircraft's overall performance and India's longstanding defense trade relationship with France.

But the most important of the reasons came down to Dassault’s lower life cycle cost estimate.

Now, after three years of frustrating negotiations for both sides, the culmination point is fast approaching – with no deal signed.

Under the terms of the MMRCA, the first batch of 18 aircraft is to be produced by the selected vendor and arrive in India in flyaway condition. The remaining 108 units are to be licensed-produced by India's state-owned aerospace giant, Hindustan Aeronautics Ltd (HAL).

Dassault has long been concerned whether India's defense industrial sector has the capacity to supply the percentage of parts (30-50 percent) that are required under the contract. An additional concern is whether HAL is technologically capable enough for Dassault to partner with on such an advanced aircraft. The Indian side has also voiced discomfort with these issues.

On Dec. 30, 2014, India's Defense Minister Manohar Parrikar admitted to complications in the negotiations and began outlining alternatives to meet the IAF's combat aircraft requirements.

Initially, France publicly downplayed any gap in the negotiations, but by early February its defense procurement chief, Laurent Collet-Billon, was pushing back on India. Collet-Billon stated that Dassault would not be responsible for the whole contract. Referring to the original Request for Proposals (RFP) issued by India, Collet-Billon also said that Dassault would not assume full liability for the HAL-produced Rafales.

For its part, India believes it was misled by Dassault's commercial bid. Over the course of three years of fleshing out an agreement, India's contract negotiation committee (CNC) has discovered that the Dassault bid actually came in over the cost of the Eurofighter Typhoon option, rather than below as was initially believed. India's inexperience with factoring life-cycle costs – buying, flying, maintaining and refitting an aircraft over a 30-40 year period – plus alleged incomplete details on the part of Dassault, apparently led to the incorrect conclusion in 2012.

The risk for India now is that if it does not reach an agreement with Dassault on a Rafale purchase, then the original tender (issued in 2007) will be cancelled. This would push the entry date for a new IAF fighter to replace the aging fleet of MiG-21 Bisons further into the future. Barring a gap-filling, supplemental order of Sukhoi Su-30MKI Flankers or indigenous Tejas Mark 1 fighters, the IAF will be short-handed.

As for Dassault, missing out on two of the most prized global fighter contract opportunities (Brazil's FX-2 order being the other) in a span of three years might prove painful. But the company just notched a 24-unit order with Egypt, providing it with a little relief. Dassault is also reportedly approaching another agreement with Qatar for up to 36 of its Rafales

Nonetheless, the Indian MMRCA contract represents the big prize for the world's jet fighter manufacturers.

Despite the flurry of reports regarding the Indian Rafale deal, there remains a sliver of hope that an agreement will ultimately be reached. Denying that the center-right National Democratic Alliance (NDA) government has delayed reaching a conclusion on a deal, Defense Minister Parrikar has stated that the final report of the CNC will be provided in early March. In the meantime, Parrikar has emphasized there is no Plan B alternative in the offing for India. 

Indian defense procurement is notoriously slow and winding, suffering from bureaucratic red-tape, indecision at the official level, disagreement between the military and the MoD and, quite often, charges of corruption followed by lengthy investigations. The end result has more often than not resulted in a cancelled tender, a foreign vendor blacklisted from participating in future Indian defense bids and a capabilities shortcoming for the Indian armed forces.

Should the MMRCA project fall apart, it would represent just the latest in a long line of such aborted or bungled procurement efforts.

But as the clock continues to tick, the deal is not dead just yet. French aircraft engine manufacturer Snecma has signed a ‘Memorandum of Understanding’ with HAL for the establishment of a joint venture for the production of aero-engine parts (initially focusing on Snecma's M88 engine which powers the Rafale).

Then there is the longstanding relationship between Dassault and the Indian military. From its Ouragan (Toofani, or Hurricane, in Indian service) delivered in 1953 through its more recent Jaguar and Mirage 2000, Dassault has long been a crucial provider of combat aircraft to India's armed forces.

The big question now is whether the Indian side, which continues adhering to the government's "Make in India" industrial campaign, is willing to ease its demand that Dassault guarantee the HAL-produced Rafale aircraft. If not, it could be back to square one for the Ministry of Defense as it seeks to patch an emerging fighter capabilities gap. Meanwhile, the IAF will be left flying its MiG-21Bison fighters – a fleet originally slated for retirement in 2014 – out to 2025.

Pressure on both sides to reach a deal is mounting, but at this point in time a happy conclusion appears further rather than near.



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