Bharat Karnad, former member, India's National Security Council, confirms the conjecture, "The AgustaWestland corruption scandal has pretty much sunk the Rafale deal for fear that France's cultivation of interested parties over the past decade could end up tarring the ruling BJP regime in some way, considering a lot of the Indian Air Force brass and Ministry of Defense officials spanning the NDA and UPA governments may be implicated in any future investigation and who, in turn, may drag the relatively clean reputation of Narendra Modi & Co. through the mud."
L’ 'Inde a décidé d'annuler l'achat de 126 Rafale.— Jeremy (@ClientJeremy) 16 May 2016
Silence total des communicants élyséens! 18 milliards d'euros qui tombent à l'eau.
The AgustaWestland controversy was triggered by an Italian High Court ruling that the initial three AgustaWestland VVIP choppers delivered to India actually failed their payload test, which implied that vested interests were involved in pushing through the deal despite quality concerns. The delivery of the remaining choppers has been cancelled.
Price is another factor that remains a bone of contention between the two sides. Earlier negotiations between India and France for the purchase of 126 Rafale failed owing to the price quoted by France, which India said was too high. Now, in fresh negotiations, India is expecting to procure 36 Rafale at a cost as economical as possible. During the negotiations for 126 Rafale, India's Defense Minister Parrikar had said that India would require at least 19 billion euro for 126 Rafale over a period of 10-11 years. But now he expects to clinch a deal for 36 Rafale at an even lower cost. In his statement in Parliament he said:
"We are trying our best to save money. If we purchase the required 36 Rafale, we will buy them at a price that's below the cost that was estimated when we were negotiating for 126 Rafale."
Based on the original cost for 126 Rafale agreed in the earlier negotiations, 36 Rafale would cost no more than 5 billion Euro. However, France quoted 7.5 billion euro for the 36 Rafale in April this year — a proposition India is reluctant to accept. Meanwhile, sources close to the French negotiating team suggest that the price offered by India is not acceptable to the Dassault Aviation, which already has a full order-book. As per a 2015 deal, the manufacturer has agreed to sell 24 Rafale to Egypt at a cost of 5.2 billion euro. It is also selling 24 Rafale to Qatar and expects Malaysia to place an order soon.
On the price factor, Bharat Karnad told Sputnik:
"India simply cannot afford investing in Tejas Mk-2, Fifth Generation Fighter Aircraft or the Rafale — the three frontline projects on the Indian Air Force's menu. Because Su-50 is the future; Rafale becomes expendable. This is so because the present threats can be handled by the immediate augmentation of the Su-30MKI fleet by accelerating the LCA Mk-2 to speedy development and induction."
India was interested in buying 126 Rafale in 2007. But, negotiations were not unsuccessful because of the high price and unfavorable terms quoted by Dassault Aviation. During the Indian Prime Minister Narendra Modi's visit to France in April 2015, the Indian government conveyed to France that in view of the critical operational necessity for Multi-role combat Aircraft for Indian Air Force (IAF) India would like to acquire 36 Rafale jets in fly-away condition as quickly as possible. Subsequently, negotiations on charting an Inter-Governmental Agreement started in May 2015. However, India's Law & Justice department has made strong objections against the proposed Inter-Governmental Agreement.