NEW DELHI: The vexed Rafale deal will not be signed now even with the arrival of French President Francois Hollande as the Republic Day Chief Guest. At best the two signs might, if they so manage, ink a basic Memorandum of Understanding about the deal but not the actual agreement that officials on both sides have been burning the midnight oil to achieve.

Cost remains the issue, with the Indians raising a host of conditions and the French matching these with figures that the government is finding difficult to accept just before the crucial budget session of Parliament. The initial 126 fighters deal was agreed upon at a cost of just over 21 billion US dollars, while the figures for the 36 fighters are not going below $ 10 billion.

Hollande, now in Chandigarh has tried to make the best of the non-deal to dispel criticism at home, with an interview to PTI where he said, “"Rafale will pave the way for unprecedented industrial and technological cooperation including 'Make in India' for the next 40 years. Agreeing on the technicalities of this arrangement obviously takes time, but we are on the right track.”

Prime Minister Narendra Modi has found that grand gestures can turn rather fast into white elephants without the necessary backroom work beforehand. It is nine months since his visit to France where he stunned many in his own government with the announcement that instead of the 18 agreed to in the earlier contract, the government would now buy 36 Rafale jets in flyaway condition from Dassault, France. It took a few weeks for the Defence Minister Manohar Parrikar to stop contradicting himself in the confusion, and finally make it clear that the ad hoc announcement had in effect killed the earlier of 126 Rafale jets.

Sources said that India now wants Dassault to ensure 90 per cent operational availability for the fact that the French have said they are willing to do, but with a cost. The figures being bandied around for just this suggest a one and a billion escalation.

Negotiations between India and Dassault Aviation for the 126 medium multi-role combat aircraft (MMRCA) started after 2012 after the 30 billion dollar deal coveted by all major defence manufacturers across the globe was awarded to the French company by India. The negotiations became increasingly complicated, and remained stuck in a groove, until PM Modi after coming to power unilaterally announced during a visit to France that both had agreed for the supply of 36 ‘ready to fly’ Rafale fighters.

The PM’s direct intervention had, thus, effectively closed the earlier file stuck in negotiations between the two sides for three years, and converted the deal into a government-to-government transaction for what is a first for India in its military dealings with France.

However, despite this ‘elevation’ the new file that basically scraps the earlier deal and replaces it with the contract for the 36 read to fly jets has not moved as was anticipated. Earlier the larger deal got bogged down over differences centering around the French resistance to the Indian demand that Dassault take responsibility for the HAL produced fighters and stand guarantee for the same.

Now the deal seems to have got stuck over the offset clause under which the supplier has to invest 50 per cent of the contract cost in India in civil aviation and other such sectors. This cost is basically attached, sources said, to the contract cost and in effect is paid for by the buyer, in this case India. The costs for the fighters have escalated dramatically as a result. The sources said that the French estimates are far higher now than the original cost offered by Dassault when it had bid for the 125 jet fighters deal.

A political push to resolve the deal in August last did not succeed, as a result of which French Defence Minister Jean-Yves Le Drian who was scheduled to stop in New Delhi to ink the pact was cancelled. He was to stop by on the way back from a visit to Malaysia in early September but this did not happen. A Memorandum of Understanding between India and France for the Rafale deal has still not been signed, but could be the pact that is inked during Hollande’s visit to New Delhi.

Hollande had told reporters earlier "We have big hopes for commercial successes of the Rafale." France has already concluded deals for jets to Egypt and Qatar. and is in talks with the United Arab Emirates and Malaysia. Sources said that it seemed to have been smooth sailing for France in Egypt as well, with three of the 24 fighter jets having already been delivered to Cairo. In contrast, the vastly truncated deal with India has still to materialise in real terms.