* Talks hampered by pricing of technology transfer
* Rafale talks "progressing well" - India PM
* France unsure about technical capacity of Indian aerospace
* Officials say deal could be finalised by July
By Manoj Kumar and Elizabeth Pineau
NEW DELHI, Feb 14 (Reuters) - India and France are speeding
up negotiations on a $10 billion deal for 126 Rafale aircraft
following disagreements over the cost of building them in India,
which caused months of delays, two Indian Defence Ministry
officials told Reuters.
India started exclusive talks with French Dassault
Aviation's Rafale for a 126-plane order in January
2012, over the competing Eurofighter Typhoon
. The two sides still have to sign a final contract.
French President Francois Hollande discussed the deal with
Indian Prime Minister Manmohan Singh on Thursday, the first day
of a two-day visit to India.
"We've seen progress in these discussions and I'm hopeful
that they will succeed," Hollande said after the talks. Singh
said discussions on the sale were "progressing well".
The deal is being negotiated against the backdrop of the
arrest of the chief executive of Italy's Finmeccanica
this week after allegations kickbacks were paid during the sale
of helicopters to India. India has suspended the deal pending
There were no immediate indications the fallout from the
Finmeccanica investigation would affect the French deal.
Indian Defence Minister A.K. Antony said on Wednesday that
the kickback allegations were likely to cause an "initial
setback" to India's push to modernise its weaponry.
DEAL FINALISED IN JULY?
The talks on the Rafale sale have progressed slowly because
of differences about how to price the transfer of technology,
sourcing of spares and the selection of an Indian partner, two
Indian Defence Ministry officials said.
"There are three issues of contention - pricing of transfer
of technology, sourcing from India and the joint venture with
Hindustan Aeronautics Ltd (HAL)," said one of the ministry
officials, who said negotiations had been delayed by a few
months, largely because of those issues.
The other official said the contentious points had been
mostly resolved and the deal could be finalised as soon as July.
Dassault declined to comment.
The second official said Dassault had earlier asked India to
pay up to $2 billion more for the future upgrading of technology
that would be transferred over the 30-year life-cycle of the
At an air show in Bangalore last week, India pledged not to
let defence cuts stand in the way of efforts to finalise the
Following India's strong objections to the cost escalation,
France has broadly agreed to review its decision but
negotiations were still going on for calculating the price for
the maintenance and life-cycle cost of the planes, the second
COMMITTED TO A DEAL
Under the Rafale deal, Dassault is expected to send 18
ready-made jets, then manufacture the rest in India.
India expects the deal will provide business of $4 billion
to $5 billion to Indian companies, said the second ministry
official, who has knowledge of the talks.
Both officials said another contentious issue in the
negotiations was the selection of India's state-run Hindustan
Aeronautics Ltd (HAL) as partner of Dassault to manufacture
planes in India.
Rafale has expressed doubts about the technological
capability of HAL to manufacture such a sophisticated fighter
jet, the official said. A HAL programme to manufacture advanced
jet trainers is running years behind schedule.
However, India has told French negotiators that provisions
of entering into a joint venture with the HAL to produce fighter
jets was non-negotiable and there was no question of involving
any private company in the deal, the officials said.
The second official said both countries were committed to
the deal, and India's defence minister, A.K. Antony, and the
Indian air force chief, N.A.K Browne, were making it a top
priority during the upcoming fiscal year that begins in April.
President Hollande, accompanied by ministers and corporate
delegates, also discussed the sale of nuclear plants to India.
That included the Jaitapur nuclear plant being built by
France's Areva, which is still under negotiations and
has been hit by protests in the Indian state of Maharashtra.