New Delhi, Feb 14: French President Francois Hollande has come to iron out some difference over the deal to sell Rafale fighter aircraft during the turmoil in India over defence deals. The helicopter contract with Italy and bribery allegations are going to hang over the talks with the French even though France has no role in the Italian deal.
According to reports the Rafale contract worth $10 billion is itself progressing slowly due to escalation in price for technolgy transfer and mandatory 30 percent of sourcing of spare parts from Indian companies.
Among all these hiccups, India today suspended payments to Italian defence group Finmeccanica SpA for a $750 million helicopter deal and won't take delivery of more aircraft until the completion of investigation into bribery allegations.
India will also blacklist the Italian defence group if bribery allegations are proven, Defence Minister AK Antony has said, as political opponents tried to capitalize on the scandal.
Coming at a time of cuts in defence procurement spending, the latest scandal could lead to additional scrutiny and delays for defence deals in the works.
"I am sure that there will be initial setback, but we will overcome that. That is not the main thing. The main thing is that we cannot allow corruption in defence deals," Antony said on the impact on weapons modernization.
Meanwhile, the discussion with Dassault Aviation for acquiring 126 aircraft have been on since January 2012 and the two sides are yet to sign a final contract. The deal is likely to be discussed during a two-day visit by Hollande to India from today.
French Foreign Minister Laurent Fabius said on Sunday that talks with India to complete the long-awaited Rafale deal were looking up. Following India's strong objections to the cost escalation, French has broadly agreed to review its decision but negotiations were still going on for calculating the price for the maintenance and life-cycle cost of the planes, the second official said.
India has been insisting that at least 30-50 percent of the value of the contract be sourced from India, while Dassault wanted to lower that percentage as it was not convinced that Indian firms have the capacity to supply such quantity of parts.
Rafale has expressed doubts about the technological capability of HAL to manufacture such a sophisticated fighter jet.