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The government has asked France's Dassault Aviation SA
Talks on the proposed purchase of 126 Rafale planes have been ongoing for more than three years to resolve differences over pricing as well as local assembly. The deal is back in focus as Prime Minister Narendra Modi visits France this week.
The deal was initially worth $12 billion but is now widely estimated to have jumped to $20 billion, primarily because of the implications of building some of the jets in India.
The paper quoted an unidentified Indian official as saying Dassault wanted to raise the price to cover the increased cost of local production, and that any such escalation could be a deal-breaker.
A defence ministry spokesman was not immediately available to comment on the report. Dassault was also not available.
Under terms of the contract, 18 of the planes will be sold ready-to-fly while the rest will be assembled at an Indian state-run facility as part of a government effort to build a domestic military-industrial base.
The price of the jets was set to increase substantially because the French firm had calculated a rise in hours required to make the jets at the factory of Hindustan Aeronautics Ltd
"Dassault should relent, become fully compliant to the request for proposal and stand 100 percent by its original offer. It can live with a slightly lesser profit margin," the official was quoted as saying.
The two sides have also wrangled over the issue of guarantees for local production of the aircraft which the newspaper said they were trying to work out. It said, under a new proposal, Dassault will not be liable for penalties if Hindustan Aeronautics failed to deliver the planes on time.
India conducted a global tender in 2007 for the planes after a domestic programme to build combat aircraft made slow progress. The Rafale was chosen in 2012 over rival offers from the United States, Europe and Russia.
Modi is travelling to France, Germany and Canada this week.
