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India’s $11 billion Rafale jet deal delayed

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Bloomberg News
Published:
NEW DELHI — India postponed a final agreement to buy 126 Rafale combat planes worth more than $11 billion from Dassault Aviation to the next fiscal year as the government has almost exhausted its annual defense budget for purchases.
Shortage of funds for capital spending in the year ending March is one of the reasons leading to the delay in signing the final deal, Defense Minister A.K. Antony said here Thursday. The ministry has already spent 92 percent of the allocated funds, he said.
“Major procurements are only possible next year,” Antony said after opening a defense exhibition in the capital.
The ministry will seek to boost next year’s budget as lack of funds also hurt India’s plan to take delivery of some Lockheed Martin Corp. C-130J planes, Antony said. Asia’s third- largest economy has tripled defense spending over the past decade as it increasingly looks beyond Russia to modernize the military and orders arms from countries including the U.S.
About 79 billion rupees ($1.3 billion) from the defense ministry’s capital budget has been diverted for paying salaries and meeting other expenses, Antony said. The government said in its federal budget that the nation’s defense spending will increase by 14 percent to 2.04 trillion rupees this year. Of the total expenditure, 867.4 billion rupees was to be used to modernize the forces, up 25 percent from a year earlier.
Final negotiations with Dassault over pricing Rafale jets are also continuing, Antony said, adding that he expects the deal to be completed next fiscal year.
In 2012, the government chose Dassault to supply at least 126 Rafale combat planes after initiating the purchase plan about five years earlier. Until India decided on the Rafale, Dassault had failed to win any export contracts for the jet.
Antony said India’s Central Bureau of Investigation is in the final stages of its probe into allegations of corruption in a $753 million deal to buy helicopters from AgustaWestland. In January, the nation scrapped the contract after a 15-month investigation.
India is also working to boost local production of defense gear with a goal to raise the proportion of equipment built at home to 75 percent from about 30 percent in the coming decade. Antony said the country will build a substantial portion of its defense requirements locally in the next 10 years.
Story tags » Military aviationAsia

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