Rafale Deal: French team arrives today; $4.5 billion may be invested in ‘Make in India’ projects

NEW DELHI: A major breakthrough could be imminent in the Rafale fighter aircraft deal with the French side agreeing to an Indian condition that calls for investing 50% of the deal value in ‘Make in India’ projects in the defence, security and aerospace sectors. A top team from Paris, led by Engineer-General Stephane Reb, director of the International Directorate of the DGA (General Directorate for Armament) of the French ministry of defence will be in Delhi on Tuesday to work out final price negotiations and take the deal to the final stage, sources familiar with the development told ET.

The French manufacturers of the Rafale fighter will commit to making investments worth $4.5 billion in the Indian industry as part of the deal. Sources aware of the matter told ET that while the French side has accepted in principle a 50% offset clause, which requires the Rafale manufacturers to invest half the deal value in India, the government will also liberalise its stringent defence offsets policy to address some specific concerns of the manufacturer.

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A final pact could be ready within a month. Negotiations had been stalled over these offset conditions.





The two sides are now working to finalise the draft Inter Governmental Agreement (IGA) that will be signed as part of the deal after the logjam over offsets and pricing was broken following top-level political intervention from New Delhi and Paris. Air Marshal SPB Sinha, the deputy chief of air staff, will lead the final price discussions from the Indian side. As reported by ET, the Rafale deal had been delayed following differences on pricing as well as the offsets clause between the two sides.





The logjam has been broken with a broad agreement on hybrid offsets in which French investments in other Make in India projects will also be considered as meeting offset obligations.

The investments in India could include civilian projects that companies like Dassault and Thales are pursuing. One of the Make in India investments is likely to be in the manufacturing of components of the French Falcon executive jets as well as in the smart city projects of Thales.





On September 1, the Indian negotiating team had been given a go-ahead to conclude the deal following a top-level defence acquisition meet in the Capital. Prime Minister Narendra Modi met his French counterpart in the US on Monday and is expected to discuss the state of the negotiations.

The deal, clinched in principal during Prime Minister Narendra Modi’s Paris trip in April, has since been stuck for over four months now.