Tuesday, March 15, 2016

Rafale fighter Jet deal in trouble: Here's why French govt is shirking liability

New Delhi: Around 2004, when the Indian Air Force (IAF) ordered some 40 additional Sukhoi-30MKI fighters from Russia, India’s cabinet exempted Moscow from providing bank guarantees to cover “performance and delivery liabilities” for the new aircraft. Russia had insisted on this exceptional waiver, given its strategic relationship with India and the Su-30MKI’s proven performance. In the years ahead, New Delhi was to regret not binding Moscow to specific liabilities, as the Su-30MKI consistently disappointed the IAF with availability rates of below 50 per cent.

Now, with New Delhi and Paris having inked an inter-governmental agreement (IGA) on January 25 for the purchase of 36 Rafale fighters, France, like Russia in 2004, is resisting sovereign liabilities that would make the government of France, not just Dassault alone, responsible for delivery or performance shortfalls in the Rafale.

India’s defence ministry, like weapons buyers everywhere, insists on writing “liabilities” into contracts for defence equipment. These are usually backed by bank guarantees that New Delhi can encash if the equipment’s delivery or performance is not according to the contract. On Monday, Indian Express reported that the Ministry of Law and Justice has insisted on sovereign guarantees.
But Paris, like Moscow earlier, wants to provide just a “letter of comfort”, the disparaging term for a written (but commercially un-enforceable) government undertaking to enforce the contract provisions.
15/03/16 Ajai Shukla/Business Standard
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