The ongoing Indo-French negotiations for the purchase of 36 Rafale fighter jets has run into rough weather over offset clause and tweaking of weaponry technology which is driving up the cost.
Defence sources said one of the main stumbling block was the offset clause that India is insisting on, something which the French says will drive up the cost of the the aircraft.
Offset policy was first introduced as part of the Defence Procurement Procedure (DPP), 2005, under which a foreign company has to invest back a portion of the deal into India.
Another issue is IAF seeking modifications on the Rafale so that a particular set of weapons could be integrated in the Rafale instead of the ones being offered by the French.
This too will drive up the cost. "The benchmark for the prices are already there since the deal with Egypt and Qatar has been struck. The price of the aircraft to India cannot be less than what the other two countries have bought it for," the sources said.
They added that no talks have been held between the two sides in the recent past, indicating a possible stalemate.
Prime Minister Narendra Modi had during his visit to France announced his decision to buy 36 Rafale fighter jets citing operational necessity of the IAF.
The announcement had come as a boost to the modernisation plan of the IAF as the original deal for 126 Rafale jets through a tendering process was stuck for years. India has constituted a committee headed by Air Marshal SBP Sinha to hold negotiations with the French team.
France is offering the Rafale jets at almost the same price its Air Force is buying it from the original manufacturer Dassault Aviation. The eventual cost would have come to about 2-3 per cent per cent more as it will be a government to government deal, as in the case of all such contracts.