Offset Obligation Dispute Hinders France-India Rafale Deal - Reports

India's purchase of 36 Rafale fighter jets from France is impeded by disputes over offset requirements.

NEW DELHI (Sputnik) — India-France negotiations for the purchase of 36 Rafale fighter jets stalled because of disputes over offset requirements, The Economic Times reported Friday, citing sources familiar with the deal.

Countries importing military equipment often require obligations of 50 to 100 percent of the deal when buying from foreign suppliers. These obligations are met by investing in the importer's defense industry.

In April, Indian Prime Minister Narendra Modi and French President Francois Hollande agreed to supply the Indian Air Force with 36 French-built Rafale fighters.

According to the newspaper, India insisted that France spend half of the Rafale deal value, about $4 billion, in India's defense sector in a form of offset obligations, as the Indian Air Force is planning to create two separate bases for the jets.

France is ready to place a 30-percent investment to cover infrastructure costs, maintenance, training and storage facilities for one base, the newspaper reported.

India and France have been negotiating the deal for over three years and during that time the deal's budget has almost doubled.

The initial price for each of 36 Rafale aircraft offered to India was 25 percent higher than the $200-million price tag offered to the Indian prime minister upon his April visit to France.

According to The Economic Times, officials familiar with the Rafale negotiations said India and France can only proceed with the deal with political intervention at a higher level.