dna exclusive: 100% price escalation on Rafale fighter aircraft to Rs 1.75 lakh crore likely to dent IAF's strike capability

India’s biggest deal of procuring 126 medium multi-role combat aircraft (MMRCA) for $18 billion (Rs90,000 crore) has hit rough weather. Two years after French aircraft maker Dassault Aviation bagged the deal for its Rafale fighter jets on account of being the lowest bidder, its cost has now shot up by 100 per cent.

In January 2012, when Rafale was declared the winner, its price was quoted between $60-65 million (Rs373-Rs400 crore). A top defence ministry official said the price of a fighter jet made by Dassault could now cost $120 million (Rs746 crore). The second bidder, Eurofighter, had quoted $80-85 million (Rs497-Rs528 crore).

The price hike would mean that the deal would cost India nothing less than $28-30 billion (Rs1.75 lakh crore-Rs1.86 lakh crore),” said an Indian Air Force (IAF) official, who is privy to discussions of the cost negotiation committee.

The defence ministry headed by AK Antony has developed cold feet after the cost doubled compared to the original estimate. With the general elections just months away, Antony is unsure about the fate of the deal, a defence ministry official said. “As the negotiations continue, the cost is spiralling out of hand. It is a major worry,” he said.

An IAF official said that in 2007, when the tender was floated, the cost of the programme was $12 billion (Rs42,000 crore). When the lowest bidder was declared in January 2012, the cost of the deal shot up to $18 billion (Rs90,000 crore).

Eighteen of the 126 planes will be purchased directly from Dassault, while Hindustan Aeronautics Limited will manufacture the other 108 under a licence, at an upcoming facility in Bangalore.

The IAF, which is fighting its depleting combat strength, was banking on Rafale as this was going to be the force’s leading fighter plane for the next four decades. “With chances of the MMRCA deal getting inked appearing dim, there seems to be no

solution to the immediate problem of shrinking squadron numbers as existing aircraft are forced into retirement,” said another IAF official.

The air force is seeking to replace its ageing MiG-21s with a modern fighter and MMRCA fits between India’s high-end Sukhoi-30MKIs and its low-end Tejas LCA lightweight fighter. The IAF has a sanctioned strength of 45 fighter jet squadrons. However, it only has 30 squadrons operational as old aircraft have been retired.