Rafale chosen to bid on $10 billion Indian military contract

Rafale chosen to bid on $10 billion Indian military contract
Paris:  India has selected Dassault Aviation of France as its preferred bidder in a $10 billion contest to supply its air force with a new fleet of advanced combat aircraft, the French government said on Tuesday. The company edged out a European consortium to enter the final round of talks for the coveted contract with one of the world's biggest arms importers.

Dassault emerged as the lowest bidder in the final round, with its offer of 126 Rafale multi-role fighters undercutting a competing offer from Eurofighter, a consortium of European companies led by European Aeronautic Defense & Space, according to industry officials who asked not to be named because the bids were confidential.

The Indian Defense Ministry will now enter into exclusive talks with Dassault with an eye to finalizing an agreement later this year - although some analysts predicted Eurofighter might still return to New Delhi with a revised proposal.

Nonetheless, France's beleagured president, Nicolas Sarkozy, touted the news as a victory for French industry. Mr. Sarkozy, who faces an uphill battle for re-election in May, has pushed hard to secure contracts for French companies in India, particularly in strategic sectors such as aerospace and energy.

In a statement, Mr. Sarkozy said that Dassault's bid would receive the "full support" of his government, adding that a deal would include "significant transfers of technology guaranteed by the French state."

Under Indian rules, foreign defense manufacturers have to "offset," or buy from local suppliers or joint-venture partners, components and services worth 30 percent of the total cost of its contract. According to the terms of Dassault's bid, the first 18 aircraft will be built solely by the French manufacturer, with the rest to be built in partnership with an Indian company.

If signed, the contract with India would be Dassault's first export sale for the Rafale, which has been in service with the French military for more than a decade.

''It would be a wonderful contract to win,'' said Alexandra Ashbourne, an aerospace and defense industry consultant in London. ''Until now, Rafale has sort of an embarassment for Dassault, kind of a white elephant.''

Analysts stressed that Dassault's selection marked the beginning of what could still be an arduous negotiation process. Defense procurement has typically been a long, slow process in India and the country continues to use decades-old technology in many parts of its armed forces.

"This is by no means the end of the game," said Howard Wheeldon, senior strategist at BGC Parners, a London brokerage. "This is only the beginning of the next stage of the competition."

Eurofighter, meanwhile, made clear Tuesday that it was not ready to concede defeat.

"Based on the Indian government feedback, we will now carefully analyze and evaluate this situation together with our European partners and their respective governments," said Theodor Benien, a spokesman for Cassidian, the EADS division responsible for the Eurofighter project.

The Indian authorities have said from the start that they would award the contract to the lowest-price bidder. In April, the country narrowed its choices to the Eurofighter Typhoon and the Rafale, ruling out planes by the American manufacturers Boeing and Lockheed Martin and two other contenders from Russia and Sweden. That decision upset officials in Washington, who had expected that at least one of the American companies would make it to the final round.

India already uses French-built Mirage fighter jets, but this order is meant to replace an aging fleet of Russian-made jets. The deal was watched with great interest around the world because it is one of the largest single defense procurements ever. Also, it is seen as an indication of Indian preferences because the country is expected to spend $50 billion to $80 billion on defense equipment in the next five years.

Price has probably become even more of a concern for India since last year, because the government's fiscal deficit is expected to be much bigger than earlier projected and the rupee fell sharply against the dollar and the euro at the end of last year, though it has recovered some of that lost ground in recent weeks.

Vikas Bajaj contributed reporting from Mumbai.

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