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Business News/ Home-page / Dassault is lowest bidder for fighter deal

New Delhi: India will begin exclusive negotiations with French defence company Dassault Aviation SA to buy 126 Rafale fighter jets for its air force in a deal valued in excess of $126 billion (Rs 6.3 trillion), marking the culmination of a process that began about a decade ago, after it emerged as the lowest bidder.

A file photo of Dassault Aviation’s Rafale combat jet (Bloomberg)

The jets are to replace the ageing Russia-made MiGs that dominate the fighter squadrons of the Indian Air Force (IAF) in what will be India’s biggest defence deal ever.

Dassault has emerged as the lowest bidder, two senior government officials said. One of them said a letter to this effect had been issued on Tuesday.

“It is L1 at the moment," or the lowest bidder, the second official said.

European Aeronautic Defence and Space Co. (EADS) -promoted Eurofighter Typhoon was the other contender for the L1 slot. EADS comprises a consortium of firms from Germany, Spain, Italy and the UK.

“Although this is not yet a contract signature and contract negotiations are still ahead, we are disappointed," EADS said in an email release. “However, we respect the decision of the Indian MoD (ministry of defence)."

This is the second big deal the Eurofighter has lost recently. In December, Japan chose the F-35 Joint Strike Fighter, made by Lockheed Martin Corp. of the US. Japan is acquiring 42 fighters for its air force.

AFP cited French minister of state for foreign trade Pierre Lellouche as saying that “a certain number of things remain to be finalized". Boeing Co., Lockheed Martin, RSK MiG of Russia and Saab AB of Sweden had been disqualified at the technical evaluation level in 2011.

Defence minister A.K. Antony told reporters on Tuesday that the deal won’t be signed before the end of the current fiscal year.

Both the Rafale and the Eurofighter were in action last year when the North Atlantic Treaty Organization enforced an air embargo over Libya and bombed targets and resources belonging to the North African country’s former ruler Moammar Gadhafi.

IAF already has French Mirage 2000 aircraft in its inventory. India recently signed up for a $2 billion upgrade of the planes. India is already building six French Scorpene submarines under licence at Mazagon Dock Ltd.

A senior official belonging to one of the six competing firms that lost out in the deal said the discussions will now be focused on the “offset bids" and price. The deal, initially pegged at $10 billion, is likely to be “much more than that", he said. Offsets refer to counter-trade obligations under which companies move part of the manufacturing to India and transfer technology.

The defence ministry had shortlisted Rafale and Eurofighter in April. The bids from the two contenders were opened in the presence of representatives of the defence ministry, IAF and the firms in November.

A British high commission official said the UK was disappointed with the decision.

“We genuinely believe the Eurofighter offered the best capability now and in the future," said the official, who didn’t want to be named.

India is already jointly developing a fifth-generation fighter aircraft with Russia. IAF is likely to induct 214 of these aircraft beginning 2017.

It was heartening that the government went along with what IAF suggested, said a former air force chief.

“There was total harmony in the process and complete government acceptance. I am absolutely happy with the selection," former IAF chief Fali H. Major said. “Rafale is splendid news. I think the selection of the aircraft is great and what is good about the whole thing is that IAF shortlisted two aircraft which had the same punch for a fourth-generation fighter."

Major said he expects the whole process to be completed in the next few months and that there wasn’t much chance that the second-lowest bidder will come back into the reckoning “unless something earth-shattering" happens.

Former foreign secretary and ex-ambassador to France Kanwal Sibal said there was unlikely to be any consideration other than merit.

“This is an international tender and if the French have won this deal it is against another European competitor and there is no likely political angle in this where France would have been deliberately favoured," he said.

Bloomberg and AFP contributed to this story.

Also Read | No jet fighter deal before end March: Antony

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Updated: 01 Feb 2012, 12:33 AM IST
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