New Delhi, January 5
Contrary to expectations of an early push towards finalising the contract for the 126 Medium Multi-Role Combat Aircraft (MMRCA) for the Indian Air Force, the deal will not be signed before the current financial year comes to an end in March this year.

The IAF is keen that the negotiations are concluded and the way is paved to finalise the multi-billion dollar deal with the French manufacturer Dasault Aviation for its Rafale ominrole fighter plane.

Sources in the Ministry of Defence told The Tribune that there was no possibility that the contract can be signed in the current financial year. While the negotiations started after Dassault was declared the lowest bidder in January 2012, indications are that the discussions between the Contract Negotiation Committee and the French company is far from over.

Dassault Aviation Chief Executive Officer Charles Edelstenne, scheduled to demit office next week, told a French Parliamentary panel last month that while there was “relative optimism” over the progress of talks. He acknowledged the negotiations were tough. “We are deep in talks at the moment. It’s a complicated country, the negotiations are tough, but there is a desire to wrap up on both sides,” Edelstenne told the panel.

The contract envisages that of the 126 aircraft, 18 will be in fly-away condition while the rest will be license produced by the public sector Hindustan Aeronautics Limited (HAL) that will do the final assembly. Reports indicate that among the points of discussion was a suggestion by the French manufacturer that it be allowed decide on the quantum of work to be done by the HAL and private enterprise in India, to cater to the 50 per cent offset clause in the deal.

However, last week a news agency reported that the Ministry of Defence insisted that the HAL remain the lead integrator since any deviation in the tender floated in 2007 would require it be taken back to the Defence Acquisition Council for approval.

In the meantime, the Defence Ministry received a jolt in the form of Rs 10,000 crore cut from the Rs.79,578 crore capital expenditure in the 2012-13 annual budget, putting a question mark on many acquisitions that the three services — Army, Navy and IAF — were planning. The Ministry of Finance intimated the Defence Ministry of the budget cut which comes at a time when the tri-services were seeking to accelerate modernisation programme.

Depending on the progress of negotiations and sorting out issues including re-evaluating the controversy on the process leading to the declaration of the lowest bidder, the government will be left with a narrow window to sign the deal before preparations for the 2014 General Election set-in.