India has finally sealed a work share agreement with the French-firm Dassault Aviation for building 70 per cent of the Rafale fighters domestically, according to New Delhi Television.
India will acquire 18 of the 126 Rafale fighter jets it is buying from France in "fly away" condition, and the rest will be manufactured by the local firm Hindustan Aeronautics Limited (HAL).
The final contract, though, is still far from being signed. For one, India's Ministry of Defence has no money in the current financial year that ends this month, for initial payment. Also, general elections are due by May and the final contract will only be signed by the next government, if it chooses to go ahead on the same terms and conditions.
Dassault Aviation had won the contract to supply 126 Medium, multi-role combat aircraft or MMRCA in 2012. The -massive contract is pegged anywhere between $12 billion to $15 billion.
Dassault has had reservations over HAL's capacity to absorb complex technology and wanted to rope in other private sector companies for manufacturing the jets in India. The Defence Ministry, however, told the French company that HAL would remain the lead player.
According to the report, the deal is complex and requires both sides to be in sync on commercial factors, logistics and HAL's ability to assemble the Rafale.
For instance, the radar on the Rafale jet is to be manufactured by Bharat-Electronics Ltd (BEL) in Bangalore. The Radome (the protruding snub nose on the aircraft) would, however, be manufactured by HAL at its Hyderabad facility. Dassault wanted clarity on how the two units would coordinate their activities.
Now, HAL has apparently agreed to set up a new facility close to the one that BEL has in Bangalore.
Dassault's officials are simultaneously negotiating with different divisions of HAL based in cities like Lucknow, Nashik, Bangalore and Hyderabad.
The French and Indian governments are also working on an agreement for a sovereign guarantee that Dassault will supply, service and maintain the Rafales over the next 40 years.
This is an important provision in the Indian defence procurement procedure, designed to ensure that manufacturers don't renege on their commitment.