Indian MRCA competition

The Indian Air Force (IAF) is the air arm of the Armed Forces of India and has the primary responsibility of conducting aerial warfare, defending the Indian airspace, conducting strategic strikes inside enemy territory and providing aerial cover to ground troops.[17] It is the fourth largest air force in the world, with a strength of more than 1,500 aircraft, including more than 750 combat aircraft.[18][19]

The minimum sanctioned strength of the IAF is 39.5 squadrons of combat aircraft, with a healthy level of 44 squadrons.[20][21] However, this level was achieved only in the mid-1980s with the acquisition of the Mirage 2000s, MiG-29s and Jaguars. In addition, most IAF aircraft were comparatively new at the time, being less than 10 years old. Most of the older aircraft would have become obsolete by the mid-1990s, with the rest needing replacement by 2010. However, these aircraft were not replaced, which led to frequent crashes and attrition losses. Reduction in force levels and phasing out of aircraft have meant that the IAF operates only 30 fighter squadrons as of January 2014.[22] Even with the planned MMRCA procurement, the IAF will reach sanctioned strength only by 2017.[20]

A Sukhoi Su-30MKI

IAF MiG-21 Bison, the latest upgrade of IAF MiG-21s

Due to budgetary constraints—specifically, the economic problems in the early 1990s—the refurbishment of old planes and purchase of new ones was halted. Added to this was the disintegration of the Soviet Union, which led to severe shortage of aircraft spares, which rendered many of them unserviceable.

The attrition was stemmed to some extent by extensive upgrade programs on the MiG-21 (bis upgrade), MiG-27, Jaguar (DARIN I upgrade) and other aircraft in the mid-1990s. An aggressive program of upgrades was initiated. The MiG-21bis aircraft have been upgraded to MiG-21 Bison levels (125 aircraft will be upgraded to that standard), Jaguars to DARIN III standards, and Mirage 2000s and MiG-27s were also upgraded. The MiG-23MF air defence interceptor was phased out in 2007 by the IAF. Further retirements of MiG-23BN ground attack aircraft began in March 2009.[23][24] With decreased aircraft squadrons level, MiG-23s are set to be replaced by MRCA winner.[25]

Dassault Rafale – the Winner of MRCA competition.

The Dassault Rafale is a French twin-engined delta-wing agile multi-role fighter aircraft designed and built by Dassault Aviation. The Rafale was brought in as the replacement for the Mirage 2000-5 that was originally a competitor for the tender,[32] after the production lines for the Mirage closed down, as well as the entry of much more advanced aircraft into the competition.[33]

The Rafale has the advantage of being logistically and operationally similar to the Mirage 2000, which the IAF already operated and used with great success during the Kargil War in Operation Safed Sagar. This would require fewer changes in the existing infrastructure of the IAF, which reduces costs. Moreover, being 100% French also provided Dassault a distinct edge over its competitors on the issue of technology transfer.[34] Dassault claims that the Rafale has an advantage over many of the competitors because it is not subject to ITAR restrictions.[35]

While not included in the MRCA requirement, the French fighter has more configurations of potential interest for the IAF: a carrier-based version (the Rafale M) and a capability for nuclear strategic strike. Both of these particular versions are in use in the French Armed Forces. At present however the Rafale M uses a catapult system (not present on the initial Vikrant) and the nuclear strike use is earmarked by others jets of the IAF.[36] On 26 June 2012, it was revealed that the Rafale M (naval variant) could be used on a STOBAR aircraft carrier without any modification of the planes or installation of catapults on the flight deck.[37]

The French government has cleared full technology transfer of the Rafale to India, including that of the RBE2-AA AESA radar which will be integrated into the Rafale by 2010[38] and also the transfer of software source code, which will allow Indian scientists to re-programme a radar or any sensitive equipment if needed.[34] Without the software source code, the IAF would have to specify mission parameters to foreign manufacturers to enable configuration of their radar, seriously compromising security in the process.[39]

Dassault has also offered to fit the GTX-35VS Kaveri engine into the Rafale, which if chosen, would greatly improve commonality with the HAL Tejas that will enter service into the IAF by 2010. Concerns have been raised about cost issues as well as potential sales to Pakistan, which has also expressed interest in the Rafale. However, no such jets have been sold to Pakistan. India and France have recently agreed to "go beyond a buyer-seller relationship".[40] On 31 January 2012 Rafale was declared the winner of the MMRCA competition, beating Eurofighter Typhoon on cost.[41]

Eurofighter Typhoon

The Eurofighter Typhoon is a twin-engine multi-role canard-delta air superiority fighter aircraft, designed and built by a consortium of European aerospace manufacturers through Eurofighter GmbH.

Eurofighter is offering the Tranche-3 Typhoon for the Indian requirement, equipped with the CAESAR AESA radar. EADS has invited India to become a partner of the Eurofighter Typhoon programme if the Typhoon wins the contract, and will be given technological and development participation in future tranches of the Typhoon.[42] Bernhard Gerwert, CEO of EADS Defense Department, elaborated that if India becomes the fifth partner of the Eurofighter programme, it will be able to manufacture assemblies for new Eurofighters.[43]

In January 2010, EADS offered to include thrust vectoring nozzles (TVNs) with the Typhoon's EJ200 engines for India. Thrust vectoring will improve operational capabilities, and reduce fuel burn by up to 5% and increase thrust while supersonic cruising by 7%.[44]

F/A-18F Super Hornet

The Boeing F/A-18E/F Super Hornet is a twin-engine carrier-based multirole fighter aircraft. The MMRCA contract represents a prime opportunity for US defence companies to gain a foothold in the Indian defence market, which is estimated to be about US$100 billion in the next 10 years. Initially, the Request for Information (RFI) was not issued to Boeing, which decided to field the Super Hornet. The US Government allowed Boeing to participate in the RFI, and later gave permission for the Request For Proposal (RFP). However, any sale of aircraft would have to be approved by the US Congress.

Initial reactions within the IAF were enthusiastic, although there were apprehensions of support issues in case of future sanctions. The US stated that there would have been some restrictions and pre-conditions for the purchase of the aircraft.[45]

On 24 April 2008, Boeing submitted its 7,000-page proposal to the Ministry of Defence through the US Embassy in New Delhi, before the 28 April deadline for the submission for proposals. The Super Hornet variant being offered to India, the F/A-18IN, is based on the F/A-18E/F model operated by the US Navy and being built for the Royal Australian Air Force (RAAF). Raytheon's APG-79 AESA radar was offered on the aircraft. There would have been limited Transfer of Technology on the radar, up to the level approved by the US Government. However, Raytheon stated that the level of ToT offered would be compliant with the RFP requirements.[46] Delivery of the first F/A-18IN Super Hornets could have begun approximately 36 months after contract award.[47]

Boeing proposed joint manufacture of the jets with Indian partners. It also planned to offset the cost by setting up a US$100 million maintenance and training hub in Nagpur. This is the first time the Super Hornet has been offered for production in a foreign country.[48] On 14 February 2008, Boeing and Tata Industries agreed to form a joint-venture company. The new entity formed in February 2008, will supply components for Boeing military aircraft, including the Super Hornet.[49][50]

In order to satisfy its offset requirements, Boeing has signed long-term partnership agreements with Hindustan Aeronautics Limited (HAL), Tata Industries, and Larsen & Toubro.[47]

F-16 Block 60

India initially sent the RFI for a F-16C/D Block 52+ configuration aircraft. On 17 January 2008, Lockheed Martin offered a customized version of the F-16, the F-16IN Super Viper for the Indian MMRCA contract.[51] The F-16IN, which is similar to the F-16 Block 60, will be a 4.5 generation aircraft. Lockheed Martin has stated that it will be the most advanced F-16 variant developed. It will be more advanced than the F-16 Block 52s that the Pakistan Air Force has acquired.

Lockheed Martin described the F-16IN as "the most advanced and capable F-16 ever." Based closely on the F-16E/F Block 60 as supplied to the UAE, the features on the F-16IN include:[52]

• Conformal Fuel Tanks (CFTs) – This will give the F-16IN a combat range of 1700 km with 1500 kg weapons load.
• A Northrop Grumman AN/APG-80 AESA (active electronically scanned array) radar.[53] This is the same radar fitted on the F-16 Block 60s in service in UAE.
• General Electric F110-132A engine with 143 kN full afterburning thrust with FADEC Controls.
• Electronic warfare suites and infra-red searching.
• Advanced all-color glass cockpit.
• Helmet-mounted cueing system.

Lockheed Martin offered to sell India the F-35 Lightning II aircraft in the future, as replacements, if the F-16 was chosen.[52]

Mikoyan MiG-35

The Mikoyan MiG-35 (Russian: Микоян МиГ-35) (NATO reporting name Fulcrum-F) is the production version of the latest MiG-29 and incorporates mature development of the MiG-29M/M2 and MiG-29K/KUB technology, such as glass cockpit and fly-by-wire technology. The IAF already operates MiG-29s, and the Navy has ordered MiG-29K/KUBs for its INS Vikramaditya (formerly Admiral Gorshkov) and INS Vikrant-class aircraft carriers.

Russia unveiled the MiG-35 at Aero India 2007 in Bangalore, amid Moscow's keen interest to sell these planes to India. This was the first time that the final version of the MiG-35 was publicly displayed at an international air show, and thus, generated a great deal of interest.[54]

Since the IAF already has maintenance and upgrade facilities for the MiG-29, this would mean that the fighter could be brought into service with a minimum of expenditure on infrastructure. A major advantage of MiG-35 is that Russia is committed to transfer the plane's technology, including the new advanced Zhuk Active Electronically Scanned Array radar, to India.[55] In the past, Russia has provided customised versions of military equipment such as the Su-30MKI and continued to provide support for equipment during international sanctions. However, Russian product support, especially for the MiG-29 fleet has been inadequate.[56]

Additionally, buying the MiG-35 would mean an almost total dependence on a single supplier for India's entire fighter fleet. Recent Russian demands for renegotiation of earlier contracts, the sale of RD-93 engines (a variant of the Klimov RD-33 that powers the Indian MiG-29s) to Pakistan for its JF-17 Thunder aircraft and concurrently supplying combat aircraft to China[56] has also caused concern in New Delhi.

Gripen in flight

The Saab JAS 39 Gripen (Griffin or "Gryphon") is a fighter aircraft manufactured by the Swedish aerospace company Saab. The aircraft is in service with the Swedish, Czech, Hungarian, Brazilian, and the South African air forces. The Royal Thai Air Force has also received the aircraft.

The Gripen was one of the aircraft that the IAF sent the Request for Information. The Gripen participated at Aero India 2007, where one JAS 39C (single seater) and two JAS 39D (two-seater) variants were brought.[57] Gripen International offered the Gripen IN, a version of the Gripen NG (Next Generation) for India's competition.[58] The Gripen NG has increased fuel capacity, more powerful powerplant, higher payload, upgraded avionics and other improvements.[59][60]

The economic offset for the MMRCA tender was increased to 50% under the DPP 2006. The bidders must confirm the offset details in a separate proposal, to be submitted by 9 June 2008.[94] This brings the value of offsets in the MMRCA deal to almost ₹25,000 crore (US$3.1 billion).

The initial Request for Information (RFI) for the Multi-Role Combat Aircraft (MRCA) was put out in 2001. At that time the request for proposal (RFP) was expected to be issued in December 2005. Later the RFP was expected to be issued in June 2007.[96] During Aero India 2007, Defence Minister A.K. Antony stated that the RFP would be issued by 31 March 2007. However, Air Marshal A.S. Tyagi, in his last press conference before he retired, had stated that there were delays in issuing the RFP. His successor, Air Marshal F.H. Major had said that the RFP would be issued by June. The delays were said to be due to new factors added into the RFP such as Total Life-cycle Costs as well as fine-tuning the Offset policy, under the new DPP 2005. The Total Life-cycle Cost has been introduced for the first time in Indian defence procurements, and has reportedly been a major source of the delay.[30][98]

On 29 June, the Defence Acquisition Council (DAC), headed by the Defence Minister, cleared the process for the procurement of 126 aircraft.[99] The 211-page RFP was approved for release to the respective bidders. On 28 August 2007, the RFP was released to the 6 bidding companies.[100]

The bidders had to give their Formal Proposals within six months from the release of the RFP, latest by 3 March 2008. However, some of the bidders asked for an extension of the deadline, citing complexity of the RFP. The deadline for submission of the proposals was then extended by a month. The Formal Proposals will have to be submitted by 28 April 2008. The Proposals will then be technically evaluated to check for compliance with IAF's requirements and other RFP conditions. After that, field trials will be carried out to evaluate the performance. Finally, the Commercial Proposal of the vendors, short-listed after technical and field evaluations, will be examined and compared, and a winner announced.[30][101][102]

After the winner is chosen, there will be further rounds of negotiation to decide the final price, as well as sensor suite and aircraft configuration, along with other factors, like offsets and maintenance. The first squadron of 18 aircraft will come in a 'fly away' condition, while the remaining 108 will be manufactured in India under ToT.[100]

Typhoon

On 8 August 2008, the then IAF Chief Air Marshal Fali H. Major informed that technical evaluations were being conducted and claimed that the IAF is all set to conduct field trials of the MRCA bidding aircraft in the second half of 2008.[103] The industry offset proposals from the bidders have been provided to India as of 11 August 2008.[104] The technical evaluation of the medium multi-role combat aircraft (MMRCA) has been completed by 18 November 2008.[105]

There have been concerns that this process would take a few years at least, and getting the aircraft after that would take longer. It is reasonable to expect that the aircraft can be delivered no sooner than 2011.[106]

In January 2009 SAAB International, proposed to India the transfer of technology if Gripen win the MRCA and make India 'an independent manufacturer' of its own fighter jets. SAAB favored 'extensive transfer of technology' well in excess of 60% more than requirement of RFI to boost India's indigenous capabilities in fighter jets.[107]

It was reported in April 2009 that Dassault Aviation's Rafale has been rejected after technical evaluation of the fighters.[108][109] However, this has been disputed by IAF.[110] In late May 2009 Times of India has reported that Dassault Aviation has submitted the missing answers to the General Staff Qualitative Requirements drawn up by the IAF, and after serious diplomatic intervention, they are back in the race.[111]

On 27 May 2009 Indian Air Force completed the technical evaluation of all 6 fighter jets. Air chief marshal Fali H. Major told the press that the reports had been submitted to the ministry of defence. The aircraft will be put through a rigorous testing process at Bangalore, Jaisalmer and Leh. The aircraft will undergo technical and humid condition tests in Bangalore. Desert trials will be conducted in Jaisalmer, Rajasthan and High-altitude and mountainous condition trials will be conducted at Leh in Ladakh.[34]

Rafale

Flight evaluation of the fighters started in August 2009 at Bangalore.[112] The F/A-18E/F and F-16IN completed their field trials by mid-September 2009.[113] The Rafale began trials in late September 2009.[114] As of late October 2009, the IAF has completed the trials of F/A-18, F-16, Rafale, and MiG-35. According to Air Chief Marshal P.V. Naik, all the aircraft tested so far "are going neck and neck".[115]

The Gripen was the last of the aircraft to be evaluated by the IAF. On 22 March, two Gripens left Bangalore, one to Jaisalmer and the other to Leh, Ladakh. At Jaisalmer AFS, a Gripen would undertake the hot weather trials and also a dummy run and bomb drop at the Pokhran Firing Range. The other Gripen headed towards Leh, would perform high altitude tests involving landing, refueling and restarting engines. Prior to the Gripen, 4 out of the 5 aircraft had issues restarting their engines during trials conducted in Leh.[116] The Gripen completed its high altitude tests in Leh and other hot weather tests.[117]

Updated bids were requested by the MOD in April 2010. The IAF was to complete an evaluation report on the six fighters in July 2010 and then begin to shortlist them based on the air force's evaluations.[118] A report suggested Rafale and Typhoon were in the final stage.[119] The Sunday Telegraph reported in November 2010 that the Eurofighter Typhoon was leading the competition on "technical terms". Now Indian government will take its strategic decision.[120] On 18 December 2010, the IAF chief stated that the "evaluation of the fighters has been completed and the matter is now with the Ministry of Defence". He hoped a contract would be signed by July 2011.[121]

It was reported on 27 April 2011 that only Eurofighter Typhoon and Dassault Rafale made the cut to the shortlist.[122][123] Eurofighter and Dassault have been told to keep their commercial bids open till 31 December 2011.[124] The US ambassador in India, Timothy Roemer said that they were "deeply disappointed" by the news, but added that they were reviewing the documents received from the Government of India and were "respectful of the procurement process". He also said that the US looked forward to continuing to grow and develop their defence partnership with India.[125] Officials from SAAB confirmed that the Gripen was not shortlisted but added that they were committed to the Indian market and continue their plans for growth and that they see large business opportunities in the aerospace, defence and security sectors in India.[126]

A US diplomatic cable leaked by WikiLeaks has brought forward the fact that US diplomats already held the view that Indian defense trade, in such important deals with the US, will be subject to scrutiny, owing to the US maintaining a favorable military partnership with Pakistan and due to the sanctions that the US imposed on India after the Pokhran-II nuclear tests. Timothy Roemer, the US ambassador to India, said in a 29 October 2009 cable to Michele Flournoy, a top Pentagon official then about to visit India that "Our ability to seize the opportunities presented by this newly improved environment is limited by the commonly held view that the US will not prove to be a reliable supplier of defense equipment".[127]

After entries from Lockheed Martin and Boeing were not short-listed, both companies requested a debrief to understand why their bids fell short in the technical evaluation. On 11 July 2011 representatives from Lockheed Martin and Boeing attended a government-to-government debriefing between Indian and US officials. The companies stated they accepted the IAF decision in releases.[128][129] In late July 2011, the IAF said that the lowest bidder was to be determined in the "next five to six weeks".[130]

On 9 October 2011, despite reports that a winner would be announced in October 2011, Air Chief Marshal Norman Anil Kumar Browne stated that India is first approving the finalists' industrial offset offers, and allowing each time to make a final bid. A total cost based on life-cycle cost, purchase cost, and technology transfer value for each competitor will be calculated. The two competing financial bids were formally opened on 4 November 2011.[30]

French newspaper La Tribune reported on 12 January that the Eurofighter consortium seems to have submitted the lower bid.[132]

On 31 January 2012, it was announced that the Dassault Rafale won the competition and has been selected for exclusive negotiations.[133] The reasons given for selection included lower unit cost and lower overall lifecycle cost for the Rafale compared to the Eurofighter due to lower fuel consumption and simpler maintenance requirements.[134] Some reports indicated that EADS may try to re-enter the bid with a lower price quote, but MoD sources ruled out re-entry; the Rafale's lifecycle cost per unit was about $40 million less than that of the Typhoon. MoD sources also indicated that the final value of MMRCA deal for 126 aircraft (After negotiations) was expected to be about $20–$25 billion.[135]

Defense analysts also point out the operational performance of Rafale during the Libyan bombing campaign and in Afghanistan, the existing experience of the Indian Air Force in operating the French Mirage 2000H during the Kargil War and compatibility with Indian, Israeli, and Russian sub-systems as possible reasons.[136] It was also noted that the recent decision to upgrade India's Mirage 2000H fighters will simplify the Indian Air Force's logistics chain. Historical reasons are also considered by analysts to be a potential reason as France was also the only Western nation not to impose sanctions after India tested five nuclear devices in 1998.[137]

The decision was welcomed in France with the French President Nicolas Sarkozy, Minister of State for Foreign Trade Pierre Lellouche, and Dassault Aviation all issuing statements in support of the decision. Dassault Aviation shares soared more than 21 percent on the Paris Stock Exchange immediately after the news broke.[138] Nicolas Sarkozy said the selection of Dassault's Rafale multi-role fighter "goes far beyond the company that makes them, far beyond aerospace – it is a vote of confidence in the entire French economy."[139] The office of the French President issued a statement:

The President of the French Republic has learned of India’s selection of the Rafale for the acquisition by the Indian Air Force of 126 fighter aircraft. France is pleased with the Indian government’s decision to select the French aircraft to enter into exclusive negotiations with Dassault. This announcement comes at the end of a very high-level, fair and transparent competition involving two European finalists.

The Rafale has been selected thanks to the aircraft’s competitive life-cycle costs, after the April 2011 pre-selection on the basis of its top-level operational performance. The negotiation of the contract will begin very soon and has the full support of the French authorities. It will include important technology transfers guaranteed by the French government.

The realization of the Rafale project will illustrate the depth and scale of the strategic partnership between France and India.[140]

Dassault Aviation also released a statement claiming that following the announcement of the final selection of the Rafale in the frame of the MMRCA program, Dassault Aviation and its partners are honored and grateful to the Indian Government and the people of India to be given the opportunity to extend their long-lasting cooperation. Dassault Aviation also stated that they reiterate their commitment to meet the operational requirements of the Indian Air Force and underline their pride in contributing to India's defence for over half a century. The French Minister of State for Foreign Trade Pierre Lellouche called the selection as a positive sign for the struggling French economy but he later cautioned that a number of things remained to be finalized: "I confirm that we are in a very positive phase for the Rafale in India. ... At this stage we have to remain prudent; we are in a phase of exclusive negotiations. We have won the contract but there a number of things to finalize so let's be cautious for now". He also stated that he hoped that the order will finally open up real perspectives for the Rafale programme and referring to the lobbying done by the American, Russian and British governments, added that the political pressure applied by the competitors did not make things very easy.[139]

Eurofighter issued a statement saying that although they are disappointed, they respect the decision: "India took the decision to select our competitor as the preferred bidder in the Medium Multi-Role Combat Aircraft (MMRCA) tender. Although this is not yet a contract signature and contract negotiations are still ahead, we are disappointed. However, we respect the decision of the Indian MoD. With the Eurofighter Typhoon, we offered the Indian Air Force the most modern combat aircraft available. Based on the Indian Government feedback, we will now carefully analyze and evaluate this situation together with our European Partner Companies and their respective Governments." Officials at the British High Commission in Delhi also said they were disappointed with the decision but added that it was expressly said this was about the cost of the contract, not a reflection on the health of bilateral relations between India and the countries.[136]

After the announcement of Dassault Rafale as the L1 bidder, the Eurofighter Consortium also decided to lower the price of the Typhoon jets to stay in the race. This decision came after extensive discussion amongst the member nations. However, the Indian MoD officials ruled out any possibility of a comeback by the Eurofighter Typhoon in the competition. According to them, Dassault Rafale beat the Typhoon by a huge margin in terms of life cycle costs as well as direct acquisition costs. In March 2012 UK defense minister Gerald Howarth told the British House of Commons that the Eurofighter Consortium respects the Indian government's decision but stands ready to enter further negotiations if possible.[141][142][143][144][145]

Though a letter of intent (LoI) has been issued to Dassault, contract negotiations must be completed.[146] Indian Defence Minister A K Antony confirmed that the contract was not expected to be signed until after March 2012.[147] A total of 126 Rafale fighters are to be supplied; Dassault Aviation is to build the initial batch of 18, with the remaining aircraft produced by HAL in India.[148][149]

It has been speculated that at a later stage, India's order may include a further 64 aircraft to equip three squadrons. Some Indian politicians have questioned the aircraft's performance, notably precision bombing, in Opération Harmattan during the Libyan Civil War and have alleged "manipulation in the evaluation process."[150][151] In response to these concerns, an independent investigation concluded that the evaluation was conducted according to the RFP terms and defence procurement procedures.[152]

In February 2012, Dassault Aviation and Reliance Industries Ltd (RIL) formed a joint venture for joint opportunities in the defence sector and cooperation in the execution of the MMRCA deal. The partnership provides Dassault with a substantial opportunity to fulfill its offset responsibilities under the contract.[153][154] Dassault wanted RIL to be the main partner in production of the aircraft, but the Indian government refused to allow that as the tender for the procurement had already specified that Hindustan Aeronautics would be the lead integrator. The differences were resolved when Dassault agreed to the Indian government's condition.[155][156] Dassault will now help Reliance create a ₹1,500 crore (US$188 million) factory in Bangalore, similar to its production facilities in France, to produce the wings of aircraft.[157][158]

Indian Air Force chief Air Chief Marshal N A K Browne went on a four-day tour of France from 21 May 2012. The tour was to include a visit to a French Rafale squadron and see Rafale's production facilities at Merignac. He would also meet the French Chief of Defence Staff Admiral Edouard Guillaud and his French Air force counterpart General Jean-Paul Palomeros to discuss the ongoing defence cooperation between India and France.[159]

In September 2012, India media outlets suggested cost escalation and contract delays are likely.[33] The Indian Air Force expected to complete negotiations and sign the contract by the end of the fiscal year, in March 2013.[160] However, in 2013, Indian Minister of External Affairs, Salman Khurshid said that the contract was taking longer than expected to finalize.[161] EADS on the other hand is still hopeful of the contract given the delay in signing the contract. It is said that the deal came up during the visit of British prime minister to India in February 2013.[162][163]

In January 2014, the cost of the aircraft had reportedly escalated by 100% to no less than US$28–30 billion. The cost of the program was projected at US$12 billion (Rs42,000 crore) in 2007. The cost increased to US$18 billion (Rs90,000 crore) in January 2012 when the lowest bidder was declared.[22] In February 2014, it was reported that contract had not been signed due to the department's budget had been spent for the year, but that it was expected to be signed in the next fiscal year, not before six months after the new government takes charge after the elections.[164] In March 2014, the two sides were reported to have agreed that the first 18 aircraft would be delivered to India in flying condition and that the remaining 108 would be 70% built by HAL.[165]

In June 2014, following the Indian general elections, it was reported the contract negotiations had stalled, as neither Dassault Aviation nor HAL, which would produce the Rafale in India, were willing to issue written guarantees on delivery schedules, a condition which the MoD insisted upon before signing the contract for the aircraft.[166] Owing to the continued deadlock over the Rafale negotiations, it was reported that both Eurofighter and Saab remained hopeful their bids could be reconsidered. Saab had also submitted a proposal to co-develop the HAL Tejas Mk. II LCA with the Defence Research and Developments Organisation(DRDO), thus reducing the need to induct the Rafale; however, a spokesman for the DRDO said foreign assistance with the Tejas Mk. II project was not needed, as the work was progressing satisfactorily.[167]

On an official visit to India at the start of July 2014, Laurent Fabius, the Foreign Minister of France, said discussions were "developing in [a] very positive way" and that he was "very confident about the final outcome." It was also noted that of the four committees set up by the MoD to review the Rafale project, three had replied positively about inducting the aircraft, but that the recommendation of the fourth committee, which dealt with pricing and costs, would be crucial for the government's final decision. Analysts also noted that it was vital for the technology element of the project to also be transferred to India.[168] During the visit there was speculation that the MoD was considering reducing the order from 126 to 80 aircraft due to the escalating costs of the deal.[169] During an official visit from 6–8 July 2014, the British Foreign Secretary William Hague said he had discussed the Rafale contract and the Eurofighter, among other issues, with Sushma Swaraj, the new Indian Minister of External Affairs. "Of course, we have always had a strong belief in the capabilities of the Eurofighter and its potential. It is always available to those countries that are able and willing to purchase it", Hague told reporters.[170] Germany also expressed support for the Eurofighter to be reconsidered, and the US lobby said re-evaluating the American candidates in the MMRCA competition would "set the right tone" for a September visit to the US by the new Prime Minister Narendra Modi.[171]

By 14 July 2014, it was reported another meeting of a sub-committee of the contract negotiation committee had been scheduled for later that week in Bangalore, with MoD, Air Force, Dassault, DRDO and HAL representatives to be in attendance.[171] It was reported the contract negotiations had finally reached the stage where they could be finalised in the upcoming three months, after which the Cabinet Committee on Security (CCS) would review the approval process before the contract could be signed. According to a source, none of the previously eliminated candidates in the MMRCA competition could be officially re-evaluated. "There are only two possibilities. One, the deal is inked for the Rafale jets. Conversely, the entire MMRCA process is scrapped after being in the works for a decade, and a fresh global tender or RFP (request for proposal) is issued."[171] On 16 July, it was reported the contract sub-committee would be negotiating final details in Bangalore from 17–19 July, leaving the way clear for finalising the contract. "We expect total closure of negotiations over Transfer of Technology (ToT) from this round. With that done, we will have completed negotiations by sub-committees on ToT, offsets and maintenance. What will remain will be the overall cost and there too, 75 per cent of the work has been completed, " a senior MoD official said. ACM Raha expressed his optimism, and said the negotiations for the Rafale "are progressing well" and the contract is likely "sooner than later in the current financial year (2014–15)." Raha said he expected the IAF to attain a strength of 42 squadrons by 2022, up from the current number of 34, which is well below desired strength. Raha expressed confidence that the induction of the Rafale and the HAL LCA would "arrest the drawdown in the strength of fighter squadrons ... [the] IAF is likely to have its sanctioned strength of combat squadrons operational sooner than later."[172] Sources indicated the IAF believes that Contract Negotiation Committee (CNC) could complete the necessary work before December 2014, after which the Cabinet Committee on Security (CCS) will consult with the Finance Ministry before signing the contract.[173] On 12 August, Arun Jaitley, the new Defence Minister of India, issued a statement that negotiations will continue as planned.[174]

On 18 August 2014, a senior defence ministry official said a draft contract was being finalised and that the Cost Negotiations Committee was expected to file a final report shortly. Other ministry sources said the ministry was requesting Dassault to revise its pricing structure, as the estimated price had increased to ₹106,000 crore (US$13 billion) from the original estimate of ₹42,000 crore (US$5 billion) envisioned in 2007.[175] On 2 September, the Chief of Air Staff, Air Chief Marshal Arup Raha, said the contract was expected to be signed "soon," and further stressed the importance of keeping the Rafale deal, by then estimated to cost ₹150,000 crore (US$19 billion). Although the Eurofighter consortium has made a counteroffer, by which India could purchase 126 discounted Typhoons, Raha dismissed any chance of the Typhoon being reconsidered. "It will not be appropriate to make any changes in the process. The current government has set the pace of work and things are moving fast enough on the fighter deal." Regarding the counteroffer, a senior defence ministry official said, "Rafale has run through the finish line. It’s too late in the day to parachute into the race. The door is closed."[176]

Despite efforts, negotiations had once again stalled by October 2014, due to disputes over final costs and technology transfers. According to official reports, Dassault remained unwilling to be held liable for the 108 Rafales to be manufactured under licence by HAL, and had expressed doubts the Indian defence industry had fully developed the capabilities to handle aspects of the sensitive technologies being supplied with the Rafale, including its electronically scanned AESA radar. Due to the protracted lack of progress over the final negotiations, a senior team of Dassault executives and French defence ministry officials were scheduled to visit India in November to expedite the process.[177] The French ambassador to India, Francois Richier, expressed satisfaction with the progress of the negotiations, however, stating they were "progressing well ... moving in the right direction." A French diplomat further said "this is a very big contract, complex ... it takes time."[178]

On 5 November 2014, Dassault Aviation CEO Eric Trappier said he expected the final contract would be signed by March 2015.[179]

Initially it was 18 Rafales that were to be built and sent to India in fly away conditions by France. But, on the joint press statement made by Prime Minister Narendra Modi's with President François Hollande, during his visit of France, the PM said that India will purchase 36 Rafales directly from France. And the contract is said to be sealed soon.[13] There is some controversy surrounding the change in the original deal due to a shift in Indian leadership, which led to the transition of the deal to the private sector. It was handed over to a newly established entity, Reliance Defence Limited, which lacks previous expertise in this specific industry.