Rafale cost could soar into Skies
SUMAN SHARMA NEW DELHI | 12th Feb
A Rafale fighter jet makes a catapult launch aboard France’s flagship Charles de Gaulle aircraft carrier last year. REUTERS
huge imponderables remain in the pricing of the French fighter Rafale, which the Indian Air Force is expected to purchase this year. France has two audit reports on the pricing of the Rafale fighter aircraft, and the price of the aircraft is different in the two. Variables also include the transfer of technology and development costs. French Dassault Aviation's Rafale fighter was recently declared the lowest bidder (L-1) for the IAF's 126 medium multi-role combat aircraft (MMRCA) contract.
One of the audit report records the total cost of the programme at double than the original Indian tender estimate, and the other is triple. If the tab picked up by the French government for the development of Rafale, which is 75%, is included in the eventual price, going by these audit reports, the amount could escalate to close to around $30 billion for the MMRCA, from its original $12 billion.
It may be noted that the MMRCA tender, which was floated in August 2007 and given to six competitors, had a price tag of $12 billion (Rs 42,000 cr) for the total programme for 126 planes. But when the commercial bids opened in November 2011, the price of the programme was announced as $15 billion by the Ministry of Defence (MoD). On 31 January 2012, when the L-1 was declared, the price was announced at $18 billion.
In either of the prices, the MoD will have to fall back on the Ministry of Finance's final word to be put up by the Defence Acquisition Council (DAC), before inking the deal. This is because one report records the total price of the programme at more than $20 billion (around Rs 83,000 cr) and the other records it to around $30 billion (around Rs 125,000 cr).
the first report by the French audit watchdog was submitted in February last year and was based on 2009 estimates, when the Indian technical evaluation got completed and field trials began. According to this report, the price of one Rafale was 142.3 million euro (roughly Rs 900 cr). This cost comprised cost of development and the number of aircraft, in which 101.1 million euro was the cost of development.
This 142.3 million euro is 16.5% more than what was estimated in 1988 by the French government. The increased pricing was attributed by the French audit to the usage of excess polyvalence (raw material). Meanwhile, it has been widely believed that India will probably buy Rafales at around 80-87 million euro each, which means the 126 planes will come without the cost of development.
The second audit report compiled by the French Senate says that a Rafale would cost 152.3 million euro (approximately Rs 1,000 cr), which includes development costs as well.
The Indian MMRCA is important for Dassault, considering the fact that the French government has spent more than $50 billion in developing the aircraft. The programme will create 10,000 jobs. The current production capacity of the company is that of 11 aircraft per year. Every year, the Rafale programme costs around 1 billion euro in the French defence budget.
Talking about price, former Air Chief S. Krishnaswamy told this newspaper, "India may have identified the cheaper aircraft out of the two shortlisted, but it is India which is the loser as our own fighter, the LCA Tejas could not come on time, which is why we had to go for MMRCA. All the money to be spent on MMRCA could have been pumped into the LCA, our indigenous plane, for its development and production, but since we have already spent so much on the LCA and now all this additional money for the MMRCA, it makes the country a loser in the end."
Dassault has lost out bids for the aircraft in Singapore, Morocco, South Korea, Norway and Netherlands in the recent past, which dashed the hopes of the makers who were eyeing India as a big market. Brazil, Switzerland and UAE too rejected Rafale last year, taking the count of countries rejecting Rafale to eight.
The most recent deal lost out by Dassault for 60 Rafales, worth $10 billion, was the one for the United Arab Emirates Air Force, which Dassault was pursuing for years. Citing "uncompetitive and unworkable commercial terms" as the reason, the Abu Dhabi crown prince Sheik Mohamed bin Zayed announced Rafale's ouster from the competition at the Dubai air show last year.
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