I had put that link
http://www.defproac.com/?p=2125
So that you can understand what was the situation, and by the way, as you did note (if you did read it) that if Dassault had given the actual figures, Rafale would never be L1. Thus Rafale was L1 because it was fixed .
Now why PM Modi asked for 36 Rafales,, few things
REASON A) he perhaps believed that Defence chiefs are honest and want best for india and there are several misgivings about MMRCA. So when DM had already talked about scrapping of MMRCA. He thought would be nice to have a G2G deal so that IAF can get the plane they want and there would be no scope of corruption.. But now he is wiser and does not even say a single word about Rafale. If you actually see, Hollande has used the word rafale with India context a lot more.. shows who is desperate now
REASON B) Perhaps Hollande told him how bad the French situation was and if France did not get Rafale deal perhaps the country might get bankrupt. So maybe modi thought to give France a chance.
REASON C) Perhaps he thought to entertain Hollande by this, Did not think Hollande will take it this seriously.
REASON D) Maybe he was just keeping France amused..Did not want to give France anything Free, wanted them to work it out.. You see how hard the french are working on the deal? French already sllmmed down
REASON E) Perhaps he wanted to ensure the UNSC seat so UNSC seat + 36 Rafales for 7 bn dollars was not really bad deal was it?
You can select any of these reasons if you want to, it will keep you amused too