India's choice to meet its requirements for 126 combat planes is expected in the middle of January 2012.
With Cassidian and Dassault having submitted voluminous paperwork in the form of bids for their respective aircraft Eurofighter Typhoon and Rafale that are in the race for this deal, considered as the mother of all deals because of its sheer size and value, the calculations of the per unit cost, technology transfer, offset proposals and life cycle cost is taking longer than expected, sources in the defence ministry said.
The bids from the two firms were opened on November 4 and the winner expected by the middle of December this year, but now it will go beyond the New Year and the contract signed with the ultimate winner before the end of this financial year on March 31, 2012, sources said.
After the calculations of the bids are done, the Cost Negotiation Committee of the Defence Ministry is expected to hold "negotiations" with one of the two firms considered to have met both technical and financial requirements before announcing the winner.
India had in August 2007 fixed the Acceptance of Necessity for budgetary allocations at $10.4 billion or Rs. 42,000 crore for the Medium Multi Role Aircraft (MMRCA) when it issued the RFP to six global firms. The process of selecting the best of the six contenders -- others eliminated from the race are US firms Lockheed Martin's F-16, Boeing's F/A-18, Russian UAC's MiG-35 and Swedish Saab's Gripen -- has taken over four years.
The down select of Eurofighter Typhoon and Rafale was announced in April, when only their two bids were asked to be extended till December 2011, as the commercial offer was expiring in April 2011.
With the defence ministry having opened their two commercial bids on November 4 much ahead of its expiry in December, the offer will continue to be valid till the winner is announced as the contract value will be calculated on the basis of the value of Euro on that day at the Parliament Street branch of the State Bank of India.
With the Indian Rupee faring badly in recent times and due to the four-year time taken for finalising the winner of the deal -- considered quite a reasonable time as per international standards -- the cost of the 126 aircraft is likely to nearly double to about $20 billion (Rs 80,000 crore) and it has been admitted by Defence Ministry officials that the $10.4 billion will not be enough.
Though no more financial approvals are required for the contract, the winner itself is likely to be approved by the Cabinet Committee on Security (CCS) that decides on all national security matters including defence purchases from abroad.
Defence Minister AK Antony, who is a key member of the CCS headed by Prime Minister Manmohan Singh, has often made it clear that geopolitics will play no role in the MMRCA decision and that the technical qualification of the plane and the price offered will be the consideration. The other members of CCS are Finance Minister Pranab Mukherjee, External Affairs Minister SM Krishna and Home Minister P. Chidambaram.