All you need to know about Rs 59,000 crore Rafale deal between India and France

 India and France signed the Euro 7.87-billion (Rs 59,000 crore approx) deal for Rafale fighter jets, equipped with latest missiles and weapon system besides multiple India-specific modifications that will give the IAF greater "potency" over arch rival Pakistan. The Inter Governmental Agreement was signed by Defence Minister Manohar Parrikar and his visiting French counterpart Jean Yves Le Drian 16-months after Prime Minister Narendra Modi announced India's plans to buy 36 Rafale fighter aircraft in fly away condition during his trip to France. 

The contracts for the deal was also signed earlier today. The 'vanila price' (just the aircraft alone) will cost about 91 million Euros each for a single seater and about 94 million Euros for a two seater trainer aircraft.
"Pleased to inform that India has signed an agreement for procurement of 36 Rafale aircraft with weapon systems, five years complete spares and maintenance, performance based logistics, India specific special provisions. This is an achievement which will give the IAF the required potency in terms of penetration and capability," Parrikar told reporters at the South Block.
The deal, first fighter plane contract in 20 years, comes with a saving of nearly 750 million Euros, gained through hard negotiations by the Indian side, over the one struck during the previous UPA government, which was scrapped by the Narendra Modi government, besides a 50 per cent offset clause.

The 50 per cent offset clause means that Indian businesses, both big and small, will gain work to the tune of over three billion Euros. These combat aircraft, delivery of which will start in 36 months and will be completed in 66 months from the date the contract is inked, comes equipped with state-of-the-art missiles weaponry that will give IAF a capability that had been sorely missing in its arsenal.
The features that make the Rafale a strategic weapon in the hands of IAF include its Beyond Visual Range (BVR) Meteor air-to-air missile with a range in excess of 150 km.
Its integration on the Rafale jets will mean IAF can hit targets inside both Pakistan and across the northern and eastern borders while staying within India's territorial boundary.
Pakistan at present has only a BVR with 80 km range. 

During the Kargil war, India had used a BVR of 50 km range while Pakistan had none. However, Pakistan later acquired 80-km-range BVR, but now with 'Meteor', the balance of power in the air space has again tilted in India's favour. 'Scalp', a long-range air-to-ground cruise missile with a range in excess of 300 km, also gives IAF an edge over its adversaries. Both missiles have a 2 metres precision which means that a target can be hit with high precision. Defence Ministry sources said the Rafale, which has a range of 780 to 1055 km, depending on mission role, as compared to 400-450 of the Su30, will be better than what even the French uses as it will have numerous India specific additions. 

Sources said the "vanilla price" of just the 36 aircraft is about 3.42 billion Euros. The armaments cost about 710 million Euros while Indian specific changes, including integration of Israeli helmet-mounted displays, will cost 1,700 million Euros. Associate supplies for the 36 fighter jets will cost about 1800 million Euros while performance based logistics will cost about 353 million Euros.

Rafale is a multi-role fighter aircraft capable of undertaking all types of missions with a capability to simultaneously perform both air defence and ground attack role in a single mission. Sources said that Rafale would be able to do five missions per day as compared to three for other aircraft because of high turnaround time. For example, the engine of the Rafale can be replaced in 30 minutes as compared to 8 hours for the Su30.

The India specific modifications would also include Israeli helmet mounted displays, ability to start at cold bases like Leh, better radar, better detection and survival features among others. The tough negotiations by the MoD-IAF team extracted many concessions and discounts from the French before arriving at a price that is almost 750 million Euros less than what was being quoted by the French side in January 2016.

This was when the commercial negotiations gathered pace. The French side had quoted a price of 8.6 billion Euros in January following which India refused to sign the contract. This forced both the countries to just sign an MoU in January, when French President Francois Hollande came, announcing their intention to sign an IGA. To bring down the cost, the Indian side asked French officials to calculate the deal on actual cost (Price as on today) plus European Inflation Indices. The Defence Ministry has capped the European Inflation Indices to maximum 3.5 per cent a year. In other words, if inflation Indices goes down, India will have to pay less. Even if it goes up India will not pay more than 3.5 per cent increase, sources said. 

After Dassault Aviation, makers of the Rafales, emerged as winners, the UPA government had agreed with French officials to calculate the price on the fixed cost formula that allowed the company to include additional price of 3.9 per cent inflation indices from day one of the deal.
So, had the deal gone ahead, India would have ended up paying additional cost of inflation Indices (@3.9 per cent) which was already added at the initial negotiation itself.
Moreover, there was confusion on the calculation of the basic price itself.
In the original MMRCA proposal, 18 planes were to be manufactured in France and 108 in India in collaboration with the HAL.
It was later discovered that the cost of 108 fighters would go up by about Rs 150 crore per plane since the labour man hours in India were 2.7 times higher than in France, raising questions about the French firm being the lowest bidder.
Interestingly, the then Defence Minister A K Antony had put down on file a remark that the negotiating team must come back to him before finalising the contract, creating more confusion for the negotiators.
However, the new deal comes with several discounts, sources said.
For instance, Dassault will have to ensure that at least 75 per cent of the entire fleet remains operational at any given time. This warranty is signed for the first five years.
Despite several steps taken by the Defence Ministry over the last three years, 55 per cent of India's frontline fighters, the Sukhoi-30 fleet, remains operational at any given time, up from the dismal 46 per cent earlier, sources said.
Three other concessions include free training for 10 IAF personnel, including three pilots besides additional guarantee for 60 hours of usage of training aircraft for Indian pilots and six months of free weapons storage without charge (in case the Indian infrastructure is not ready for storing the weapons).
Sources said the timeline for the delivery of Rafale jets was five months earlier compared to the MMRCA deal.
They added that while effort was to make the starting date of delivery closer than the 36 months, it could not be done because the India specific modifications will take time.
India currently has a fleet of 34 squadrons as against a sanctioned strength of 44.