In Surprise Move, India Orders 36 Rafales – and May Have Killed the MMRCA Program in the Process

by Dan Darling, Forecast International.

Indian Prime Minister Narendra Modi flew to Paris on April 9 for a much-anticipated diplomatic swing through France, Germany and Canada. Prior to his departure, the speculation surrounding his Paris visit concerned the fate of the Indian Air Force’s Medium Multi-Role Combat Aircraft (MMRCA) negotiations, which had winded their way over three-plus years to 90 percent completion.

The final 10 percent to be worked out, however, appeared to be on a path to nowhere.

In the end, practicality appears to have won out over outsized domestic manufacturing expectations as the Modi government opted to purchase 36 Dassault Rafale combat aircraft directly from the French government rather than continuing on the same difficult track. The latter had resulted in negotiation gridlock with little to show for it other than deterioration in IAF capability.

Modi’s center-right National Democratic Alliance government came into office in summer 2014 with a vow of bolstering the Indian armed forces and fast-tracking stagnant modernization efforts. The $20 billion MMRCA project, therefore, served as an important benchmark for progress towards that goal. But upon assuming the role of negotiator for the MMRCA tender – a deal involving 126 total fighters, with 108 slated for production in India by local aerospace giant Hindustan Aeronautics Ltd (HAL) – the Modi government discovered the difficulties in fulfilling the domestic side of the arrangement. Dassault has long harbored concerns as to whether HAL is technologically capable enough to partner with on producing such an advanced aircraft as the Rafale.

Rather than continue haggling over technology transfer, price, local production, and other issues, the Modi government took heed of IAF concerns, opting to cut through the red tape and seek a deal that would come with lower cost (due to the French government’s price guarantees) and faster delivery. With Dassault showing little faith in HAL’s ability to meet production standards and delivery timetables, the MMRCA negotiations would have merely dragged on while IAF combat aircraft requirements – under pressure due to delays in the Fifth-Generation Fighter Aircraft project with Russia and the locally derived Tejas Light Combat Aircraft program – remained unfulfilled.

Ultimately, the Modi government elected to send negotiating teams to Paris to wrap up a direct purchase of the Rafale ahead of the prime minister’s visit. With a larger direct procurement requested (double the original amount under the MMRCA requirement), India secured more favorable terms, not merely in regards to price and delivery schedule, but also related to maintenance and servicing. Now the IAF will be able to equip two squadrons with the Rafale going forward – a crucial boost at a time when strategic rival China is improving and expanding its combat aircraft capability.

French Defense Minister Jean-Yves Le Drian is scheduled to travel to India to wrap up final details of the EUR4 billion ($4.23 billion) sale, with an official agreement signing to take place at the Paris Air Show in June. Deliveries of the Rafales and their induction into IAF service will then be completed sometime in 2017 or early 2018.

What was left unclear from the deal Modi worked out is what will happen with the MMRCA project. Local media reports indicated that talks over the remaining 108 planes to be produced in India would still be conducted. However, sources indicated that this time local production would not be the exclusive domain of HAL. Rather, other local entities will be considered (private venture Reliance Group had originally been Dassault’s preferred local partner).

Sidestepping India’s knotty – and traditionally opaque – procurement process in order to meet a capability requirement in a timely manner with best price and support agreements to boot is a victory for the IAF. Untangling the one part, off-the-shelf procurement of the Rafale, from the other, localized production, enabled the Indian Defense Ministry to bring the acquisition back on track.

The only question now is whether the second part – crucial to the Modi government’s “Make in India” domestic production campaign – is still in play. The MMRCA process could be reworked to cover a larger total of 144 aircraft by including the (otherwise separate) 36-unit government-to-government deal. The Modi government could also slice the direct purchase off entirely and focus on the 108 locally produced Rafales, or scrap the MMRCA program altogether, resulting in a larger direct Rafale buy.

The Modi government may have simplified things by buying the first 36 Rafales directly from the French government but covering the remainder of the IAF requirement through Dassault/HAL or Dassault/fill-in-the-blank may prove insurmountable. If the government has already reached that conclusion, then another government-to-government procurement for more Rafales may be in the offing.

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