article on Rafael deal controversy
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The Rafale deal controversy is a political controversy in India related to the purchase of 36 multirole fighter aircraft for a price estimated at €7.8 billion by the Defence Ministry of India from France's Dassault Aviation. The origin of the deal lies in the Indian MRCA competition, a multi-billion dollar contract to supply 126 multi-role combat aiOn 31 January 2012, the Indian Ministry of Defence announced that Dassault Rafale had won the MMRCA competition to supply the Indian Air Force with 126 aircraft, along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology. The negotiations with Dassault dragged on due to disagreements on warranty for aircraft produced by HAL. India wanted Dassault to ensure the quality of aircraft produced by HAL, but Dassault refused to do so. In January 2014, it was reported that the cost of the deal had escalated to $30 billion (₹1,86,000 crore), with each aircraft costing $120 million (₹746 crore). In February 2014, defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in fiscal year 2013-14 due to budgetary constraints.In March 2014, HAL and Dassault signed a work share agreement to manage licensed manufacture. After the Indian general election in April–May 2014, the National Democratic Alliance led by Bharatiya Janata Party took control of the government from the United Progressive Alliance led by the Indian National Congress.
As disagreements over cost and warranty for aircraft produced by HAL continued, defence minister Manohar Parrikar said that the Sukhoi Su-30MKI could be acquired as an alternative to Rafale. Air Chief Marshal Arup Raha disagreed, saying that the Su-30MKI and Rafale had different capabilities, they were not interchangeable. In February 2015, it was reported that the Rafale purchase was headed for cancellation as it had been misjudged to be the lowest bidder due to deficiencies in Dassault's bid. On 25 March 2015, Dassault's CEO Éric Trappier said that although the deal was taking time, it was "95 percent completed".
During an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity".In July 2015, defence minister Manohar Parrikar informed the Rajya Sabha that the tender for 126 aircraft had been withdrawn and negotiations for 36 aircraft had begun. In January 2016, when commercial negotiations intensified, the French negotiating team quoted a figure of €8.6 billion for the deal, but India demurred from signing the deal in view of the high price. Subsequently, in the same month, India and France signed a memorandum of understanding (MoU) for acquisition of 36 aircraft without finalising the financial terms of the acquisition. In May 2016, the two sides arrived at a figure of €7.87 billion (₹58,891 crore) for the agreement, compared to €11.8 billion quoted in April 2015 and €8.6 billion quoted in January 2016. The Indian team was able to bring down the price by virtue of asking their French counterparts that the price of the deal be calculated based on the actual cost, i.e. "price as on today", and European inflation indices, which the Indian defence ministry capped at a maximum of 3.5% per annum, as against the fixed cost formula agreed upon during the erstwhile UPA government which enabled Dassault to add an additional price of 3.9% inflation from the beginning of the deal.