France, India Near €3 Billion Fighter Deal in Modi Arms Push

(Bloomberg) -- India is set to sign a naval fighter deal worth nearly €3 billion ($3.3 billion) with France when Prime Minister Narendra Modi visits this week, the latest defense deal for the South Asian nation as it presents itself as a bulwark against China in the Asia Pacific.

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Nearly three dozen Rafale-Marine fighters will be sold to the Indian Navy for use on its locally manufactured aircraft carrier, the INS Vikrant, according to senior officials familiar with the developments.

The deal is a key part of Modi’s two-day visit, which includes talks with French President Emmanuel Macron on Thursday, said the officials who asked not to be identified as the discussions are private. Modi will also attend Bastille Day celebrations on Friday.

Macron’s office declined to comment. India’s External Affairs and Defense Ministries didn’t comment. A spokesperson for Dassault Aviation, which produces the Rafale jet, didn’t respond to a request for comment.

The growing closeness between Moscow and Beijing has allowed Modi to position India as a partner in Asia for Washington and its allies looking to draw New Delhi into their orbit by offering sophisticated weapon platforms and investments.

Last month, India signed a flurry of defense agreements with the US during Modi’s first state visit — including a project by General Electric Co. to jointly manufacture the F414 engines used in fighter jets with state-owned Indian firm Hindustan Aeronautics Ltd. Germany’s Thyssenkrupp AG’s marine arm and India’s Mazagon Dock Shipbuilders Ltd. have also signed an initial agreement to jointly build submarines for the Indian navy.

Shares of defense equipment makers in India rallied in Mumbai Tuesday as state-run Mazagon Dock Shipbuilders Ltd. rose by its 10% daily limit while ammunition maker Bharat Dynamics Ltd. jumped as much as 18%, its biggest single-day surge since April last year. Dassault Aviation SA’s Paris-listed shares traded 4.1% higher.

US-based Boeing’s F/A-18 Super Hornets (Block III) fighters were also in the race to secure the Indian contract and the decision to buy from France reflects the government’s desire to deepen engagement beyond Washington. New Delhi last bought 36 Rafale fighter jets for the Indian Air Force in 2015 for about €7.9 billion.

Paris-based engine maker Safran and the Indian defense public sector firm Hindustan Aeronautics Limited will also set up a joint venture to produce engines for locally-made helicopters that will replace an aging Russian-made fleet, according to people familiar with the matter. An initial agreement was signed last year.

France is sweetening defense deals with India by offering to jointly design, manufacture and transfer jet engine technology without restrictions, the people said. This is in contrast to India’s recent agreement with GE, which is subject to clearance from US Congress, the people added.

The latest deal sees France closing in on Russia, which is traditionally India’s biggest weapons supplier but is slowing down deliveries due to sanctions for its war in Ukraine. India has two-squadrons comprised of 18 Russian-made MiG-29K fighters each, which are based on INS Vikramaditya — its second aircraft carrier.

Modi and Macron will also discuss producing jet engines for twin-engine fighters that are under development in India, additional jets for the Indian Air Force, and nuclear reactors for a new power plant in the western state of Maharashtra, the people said.

The joint venture solves a near three-decade problem for India, which has struggled to develop a local engine so that it can power aircraft. Safran didn’t respond to a request for comment.

--With assistance from Samy Adghirni.

(Updates with stock market movement.)

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