India is insisting that France's Dassault Aviation take full responsibility for the production of the aircraft at a state-run facility in Bangalore under the 2012 bid offer.
France has said it will help HAL stick to delivery schedules, but that it cannot give guarantees for production of the aircraft made at a facility over which it has no administrative or expert control.
Military experts say the deal could cost India $20 billion, double the original estimate, because of the benchmarking of aircraft prices and a roughly 5 percent annual cost increase.
The Rafale fighter beat the Swedish Gripen, the Russian MiG-35, and the U.S.-built F-18 and F-16 and finally the Eurofighter in a decade-long selection process for a new Indian multi-role combat aircraft, as Dassault was the lowest bidder on up-front and lifecycle costs over 40 years.
But three years on, the sides are far from signing the contract and an Indian defence source said price negotiations were on hold until the issue of licensed production was resolved in line with the original request for proposals (RFP) floated by the Indian defence ministry.
For the French, the deal would be a major boost for domestic defence manufacturing, with the first 18 Rafale planes built in France and the remaining 108 produced in India.
For the Indian Air Force, the planes are critical to arrest a decline in its operational preparedness, already down to 25 active fighter squadrons compared with a government approved strength of 42.
Half of the operational fleet is Mig-21 and MiG-27 planes due to retire beginning this year until 2024,stressing the need for an early induction of new combat planes.
reuters
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