September 18, 2020
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Complications ahead
MMRCA deal facing new challenges

The MMRCA deal is facing a fresh round of complication which could further damage the progress as the Indian Government is worried whether France will be able to manage the demands of the French workers union over conducting the mandatory 50 per cent offset in India.

Indian government is carefully assessing the effects of French workers demand that no offset should be done in the MMRCA deal by Dassault Aviation as it may erode the prospect of improvement in job market in France.

The real worry, from the French workers unions, is India could benefit more from the MMRCA deal whereas France will lose out lots of jobs and technology even if the deal is sealed with the Indian government.    

This conflict of interests, according to MoD sources, could bring France and India into a new situation as both may find it peculiar and the Indian government is reluctant to finalize the multi-billion dollar MMRCA deal despite having the best of intentions.

Now, this has cascading effect on Indo-French defence relationship as most would like to see it other way blaming India as a sluggish market for taking bold decisions to facilitate arms import.

As the issue boils over having implications for domestic politics, the real conflict is France wants to change the rule of game.

French Government has conveyed that it will not carry out the deal with mere 18 to be manufactured in France as it will not benefit France.

Offset demand

On the top of it, French President Francoise Hollande who is visiting India this week is going to take up the issue. Strategic experts believe that France may become more adamant as India has few options at this point not to agree to the French demand over offset.

France wants at least 63 should be manufactured in France and rest can be assembled in India under offset production. The French have reportedly hinted that if India insists on 18 at fly away condition and 108 under the present tender and defence offset, then, there may not be any ToT.

The problem is France wants to maximize the MMRCA for political purpose. Hollande wants to prove he is better than Sarkozy as the latter had agreed for 18 plus 108 to be manufactured in India earlier but Hollande could turn it around into 63 plus 63 aircraft.

If that can happen then this could give huge domestic advantage to Hollande politically. But India is afraid of the new game as the whole deal may get into a state of slumber.

Already, there are some controversies about MMRCA and if the French will change the rule of game then it will have to go for Defence Acquisition Council (DAC) approval. Then the possibility of retendering the whole deal will cast a shadow with the changing rule.

And this could fuel yet another controversy. Already, the Indian Government has gone for slashing 10,000 crore defence budget.

That will have direct bearing on the MMRCA deal as corpus fund accumulation is no more an option for the government to wait for the deal too long to mature at a time when the Indian government is already borrowing from the market.

On the top of it, most countries who lost out in the competition have expressed their dissatisfaction with India as it has gone in favor of France.

Indeed, MoD sources said, French labor unions have protested the Indian government’s mandatory condition of 50 percent offset work to be done by the French company in India.

In last couple of months, number of French labor unions have complained to the French President Hollande in various occasions that French national labor unions will not allow Dassault deal with the Indian government unless both India and France renegotiate about the full waiver of offset obligation on the French company.

French labor unions, with which the President once upon a time had special relationship as he hails from Socialist Party, had sent a delegation to the President’s office and strongly conveyed the new position.

Although Indian government is scared of this position of French labor unions, it hopes the French government will handle it at its own end.

But Indian Ministry of External Affairs and Ministry of Defence are exploring the ideas that how effectively France can handle this protest by French labor unions.

In fact, French labor unions are notorious for their strong position and have got required strength to enforce their will.

The labor unions are worried that 50 percent offset means MMRCA deal at its present form will take away French jobs to India. Since job market prospect in France has only deteriorated, this attitude of French labour unions is now casting a new problem for MMRCA deal.

However, it appears Indian government will not succumb to this demand and will seek a proper clarification from French officials during Hollande’s visit to India.

Russian pressure

The MMRCA deal is facing another pressure this time from a former contender-Russia, which has urged Indian Government to abandon the MMRCA deal as Russia can meet Indian Air Force needs.

Russian President Vladimir Putin who visited India in third week of December had conveyed to India that there is no need to go for MMRCA as Moscow can meet IAF's short term and long term fighter requirement.

He even advised Indian Government that France does not comply with Terms and Conditions which might land India in troubled waters over a period of time once the deal is clinched in favor of French Dassault.

Putin also mentioned that since Russia is going to provide India with FGFA and modernize Sukhois and MiG-29s to a 4.5 generation, there is hardly any need for MMRCA as French Rafale is inferior to refurbished Russian jets.   

Russia is trying to block the MMRCA deal with a renewed interest as Moscow feels French entrance into Indian aerospace market could jeopardize long term Russian interest.

Now, it has come to the notice that the battle to cancel MMRCA had raised few months ago when Russia made a statement saying MMRCA deal is collapsing due to France creating problems in the negotiation.

Although Indian government had denied the statement, this time Russians are more blunt as they feel it is the right time to put pressure for the MMRCA deal cancellation.  

But Indian Government sources said that India will take the MMRCA negotiation to a logical conclusion and the deal will hopefully be signed in future despite all odds.