In a big defence news, under an offsets deal reached by India and France regarding the acquisition of 36 Rafale fighter jets, France has agreed that it will fulfill its obligations only within the aerospace arena and not partly through research and development projects, an Indian Defence Ministry source said.
With a final agreement reached on offsets, India and France are likely to sign a protocol by the end of this month to buy 36 Rafales and thereafter the price negotiations will follow, leading to a final deal in the next four to six months, the MoD the source added.
Ever since Indian Prime Minister Narendra Modi announced in his April visit to Paris that India intended to buy 36 Rafales on a government-to-government (G2G) basis, talks between India and French were stuck on the issue of offsets, with the French initially not agreeing to discharge offsets at all.
India wants 50 percent of the total amount of the deal, estimated to be around $10 billion for 36 Rafales, including weaponry, to be matched by offsets involving purchases from the Indian aerospace sector, including tie-ups and cooperation with domestic defense companies to boost India’s defense production base.
The French wanted 20 percent of the offsets to be discharged through R&D tie ups with India’s Defence Research and Development Organization (DRDO), but the MoD rejected their request, the source added. The list of R&D projects in which the French had evinced interest to participate is not known.
But Dassault Chairman Eric Trappier said, “We are working with the Indian authorities on the offsets. Nothing has been decided. We are following the Make in India program. It’s going in the right direction. Talks are still continuing.”
“The offset policy of 2012 allows offset obligations to be discharged through collaboration with DRDO, subject to some conditions. However, offsets are best undertaken through collaboration with industry, for direct impact on defense manufacturing. This may be the reason for the MoD’s position,” said Vivek Rae, MoD’s former director general of procurement. “It is not a good idea to discharge all offsets through DRDO.”
“A G2G contract is a customized contract. So the two countries can agree to a unique set of terms of conditions, but these have to be mutually acceptable. While doing so, neither party can completely overlook the laws, regulations, procedures and precedents,” said Shri Amit Cowshish, MoD’s former financial adviser.
India typically allows companies to discharge offset obligations through participation in R&D projects along with the direct purchase of equipment and systems in designated areas from industry, and training.
The G2G deal on Rafale was a separate deal to the 2007 request for proposal, which has since been canceled. Under the 2007 RFP, India was to procure 126 Rafales with 108 being license-produced in India.
MoD’s top acquisition body, the Defence Acquisition Council, on Sept. 1 had given the go-ahead to the negotiation committee on purchasing Rafale Jets for the Indian Air Force.