India says budget cuts won't delay Rafale talks

BANGALORE Wed Feb 6, 2013 7:10pm IST

1 of 2. A Dassault Rafale combat aircraft, which has been selected by the Indian Air Force for purchase, performs during the inauguration ceremony of the 'Aero India 2013' at Yelahanka air force station on the outskirts of Bangalore February 6, 2013.

Credit: Reuters/Stringer

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BANGALORE (Reuters) - The government pledged on Wednesday not to let defence cuts disrupt efforts to finalize a potential $10 billion purchase of French warplanes, but both sides played down expectations of a landmark deal in time for a visit by French President Francois Hollande next week.

India picked the Rafale combat jet, made by Dassault Aviation (AVMD.PA), for exclusive negotiations over a year ago after a hotly contested bidding war with rival manufacturers, but is still to finalize the 126-aircraft deal.

"The Rafale purchase is being reviewed by a cost negotiation committee," Defence Minister A.K. Antony told reporters.

"There are six to seven layers of procedure after that. We cannot cut short the procedure," Antony said at an air show in Bangalore.

"There is no question of delay because of the budget cuts."

In Paris, officials said the complex negotiations were going smoothly but ruled out a signature during a visit to India by Hollande on February 14-15.

"Things are moving quite quickly. We hope the contract can be concluded as soon as possible but it won't be during the visit," said a French diplomatic source who declined to be named.

"India never signs military contracts during political visits, but above all, the contract is not ready yet."

India, the world's biggest arms importer in recent years, plans to spend around $100 billion over the next 10 years in upgrading its mostly Soviet-era military hardware to keep pace with China's ramping up of defence spending.

Despite the modernization push, India's defence budget will not escape a tightening of government spending this year, Antony said, as New Delhi looks to rein in its fiscal deficit.

(Reporting by Anurag Kotoky and Ananthalakshmi Ananthsankar in Bangalore and Elizabeth Pineau in Paris; Writing by Henry Foy; Editing by Tim Hepher)

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