UPDATE 1-France says India fighter jet deal negotiations going well

Fri Jul 26, 2013 8:39am EDT

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By Anurag Kotoky

NEW DELHI, July 26 (Reuters) - France's defence minister said on Friday negotiations with India to sell 126 Rafale fighter jets from Dassault Aviation were proceeding well, but did not say when the deal would be finalised.

India picked the Rafale for exclusive negotiations in January 2012 after a hotly contested bidding war. But differences over the industrial role of India's state-run Hindustan Aeronautics Ltd have delayed the deal.

French Defence Minister Jean-Yves Le Drian, who is on a three-day visit to India, told reporters he was not concerned about the delay to finalise the $15 billion contract, one of the world's largest defence import orders.

"Of course, the project is the priority. At the risk of disappointing you, I will not be announcing the date of signing the contract. I would like you to know that the negotiations are going on well and I have full confidence," Le Drian said.

Under the deal, Dassault is expected to send 18 ready-made jets, then manufacture the rest in India. Hindustan Aeronautics Ltd (HAL) will be the company's lead partner in the process.

Dassault had earlier expressed doubts about the technological capability of HAL to manufacture such a sophisticated fighter jet.

The deal has come at a time when India is pushing for greater local manufacturing of military equipment. It is ranked as the world's biggest importer, buying up to 80 percent of its weapons from overseas, a figure Indian leaders want reduced.

Le Drian said the fighter deal called for the involvement of Indian companies.

"Numerous Indian companies will benefit from the offset laid down in the contract and I know for a fact that they have been actively preparing for this."

Foreign companies have in the past questioned whether Indian companies have the advanced technology and trained staff to build world-class systems.

Negotiations slowed down after Dassault said it wanted two separate contracts to be signed - one for the ready-made aircraft, and another for the rest to be built by HAL, an Indian defence ministry official told Reuters earlier this year.

India had opposed the proposal, the official said in April.

Le Drian met Indian Defence Minister A. K. Antony earlier on Friday.

An Indian defence ministry spokesman declined to comment on the status of negotiations for the jet deal.

But a joint statement said any defence deal must involve greater collaboration to protect their mutual interests.

"They agreed that such cooperation should continue to be progressed to the mutual benefit of both countries, including in high technology areas involving joint research and development and transfer of technology." (Writing by Sanjeev Miglani; Editing by Ron Popeski)

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