The Indian government has more or less decided to scrap the medium-multi role combat aircraft (MMRCA) selection process in favour of direct purchase of 63 Rafale aircraft from France in a government-to-government deal, says India Strategic magazine.
Authoritative sources told the journal that a MoU would be formally signed in Paris during the summit meeting between Prime Minister Narendra Modi and his host, President Francois Hollande.
The number of aircraft is half that the 126 jets the Indian Air Force (IAF) had tendered for, 18 of which were to be acquired direct. The rest will be made by Hindustan Aeronautics Ltd (HAL) in India.
There have been serious differences over responsibility for the quality of aircraft to be made by HAL and the overall pricing.
Dassault, which produces the Rafale, had said it would do the transfer of technology and invest 50 percent in India as part of the 50 percent offsets clause stipulated in the tender but would not be responsible for what comes out of the HAL production lines.
Although Dassault had won the tender on the basis of technical evaluation and its "lowest" bid, the costing after accounting for periodic escalations during the life of the programme was touching $24 billion.
This made the ministry of defence uncomfortable. As negotiations with Dassault were not leading anywhere, Defence Minister Manohar Parikkar observed that the deal could not go through if Dassault continued to ask for way too much.
Defence ministry sources said it had "bitter experience" with French firm DCNS in the past over pricing while negotiating the Scorpene submarine deal and a decision was becoming difficult.
It appears that there were frantic discussions between the defence ministry and the IAF, which has been keen for the induction of new aircraft.
The ministry then put up some options before the defence minister for a political decision - and the option to buy 63 aircraft through the government-to-government route was found the most acceptable.
Indications are that the Rafale deal will be part of a composite agreement including nuclear cooperation, some technology sharing and more bilateral investments.
India had purchased about 50 Mirage 2000 from Dassault in 1985 (and a few more later). Although they were not under any government-to-government deal, that acquisition would be a model to follow.
The aircraft are under upgrades by Dassault and Thales - the electronic warfare and other systems provider - and HAL.
Defence analyst Amit Cowshish, a former top defence ministry officer responsible for military acquisitions, observed that if the decision to go in for a direct purchase of 63 aircraft had indeed been taken, "then this shows great out-of-the box thinking" on the part of the ministry.
"It should make everyone happy, particularly the IAF, which needs the aircraft urgently, and Dassault and its associates for the way out," he said.
He added that it also opens more options for IAF to catch up with its requirements.
The tender, or Request for Proposal (RfP) for the 126 MMRCA was floated in 2007. Rafale was declared the winner in 2012.
Others in the competition were European Eurofighter Typhoon, Swedish Saab Gripen, US Boeing's F/A-18 Super Hornet and Lockheed Martin F-16 and the Russian MiG-35.
The number of IAF combat squadrons is much less than the sanctioned 42, hovering around 32 or 34.
The Mirage 2000 and MiG 29s, both acquired in the 1980s, are under upgrades to extend their lives by another 10 to 15 years.