India Still to Finalize Terms for Jet Deal With Dassault

India is still to finalize the terms for a potential purchase of 126 fighter jets from Dassault Aviation S.A., AM.FR -0.33% more than a year after the French defense contractor was chosen for the deal estimated to be worth more than $10 billion.

Commercial discussions are continuing with Dassault because of which a specific time frame cannot be provided for the delivery of the Rafale combat planes, Defense Minister A.K. Antony told a lawmaker in the lower house of Parliament Monday.

However, under the terms of the tender, the initial 18 jets must be supplied in a fly-away condition between the third and fourth year of signing of the contract, he said. The remainder would have to be assembled in India between the fourth year and the 11th year.

The deal's finalization would be key to the efforts by India's air force to upgrade its mainly Soviet-vintage weaponry to partly catch up with China as well as Pakistan which are also upgrading their defense equipment.

India's air force plans to add up to 400 planes and helicopters until 2022. At the same time, it will phase out the aging MiG-21 and MiG-27 fighter jets as well as the Mi-8 helicopters and Avro turboprop transport aircraft.

India's air force chief, N.A.K. Browne, said in February that he expected the deal with Dassault to be signed by the middle of the financial year that began on April 1.

Dassault had emerged as the preferred bidder in January last year for the fighter-jet contract. The Rafale was selected over jets from Boeing Co., BA +0.83% Lockheed Martin Corp., LMT +1.14% MiG Corp., Saab AB SAAB-B.SK +1.11% and Eurofighter GmbH.

The contract is keenly watched as it comes amid a cut in India's defense budget in the last financial year ended in March due to the ongoing economic slowdown, and allegations of bribery over a 2010 deal to supply a dozen helicopters to India by the AgustaWestland unit of Italy's Finmeccanica FNC.MI -0.36% SpA.

The government has said however that it won't curtail spending on critical defense equipment such as fighter jets following the cut in overall defense spending. The South Asian country--one of the world's top spenders on defense equipment--spent 1.78 trillion rupees ($33 billion) on defense in the last financial year, lower than the original allocation of 1.93 trillion rupees, according to the federal budget.

Of the total, spending on defense-equipment purchases was cut to 695.79 billion rupees from the allocation of 795.78 billion rupees.

According to analysts, the Finmeccanica bribery episode may lead to stringent scrutiny of defense contracts in India, delaying orders.


Source: By SANTANU CHOUDHURY, NEW DELHI – WSJ News - 6 May 2013

Photo: The French Air Force Dassault Rafale Fighter Aircraft performs during an aviation trade show in Bangalore on Feb. 6, 2013. (Photo by Manjunath Kiran/Agence France-Presse/Getty Images)


(6.05.2013)