CAG slams French giant Dassault for not fulfilling Rafale “technology transfer” terms under the offset contract
The CAG (Comptroller and Auditor General) said in its report that Dassault Aviation, the French aerospace giant and MBDA, the European missile maker have not yet confirmed the technology transfer for indigenous development of Light Combat Aircraft (LCA) engine. The report by CAG was tabled in Parliament on September 23. The Defence Research and Development Organization (DRDO) is to indigenously develop engines for LCA for which technology plans were to be transferred to India under the offset contract. India had a deal with Dassault worth INR 60,000 crore for 36 Rafale fighter jets.
The clauses report on the defence deals as in October 2019 states that the Ministry of Defence (MoD) has informed that the vendor has not been able to conform on the requested upgrade of the deal. The report said on offsets in the Rafale deal, “Thus, it is not clear if this technology transfer will take place, and there is need for MoD/DRDO to identify and acquire the right technologies in order to comply with the directions of Defence Acquisition Council (DAC) given in September 2016.”
Dassault Aviation and MBDA had initially proposed in September 2015 to release 30% of their offset commitment in the Rafale deal by offering high technology details to the DRDO. The report thus said that according to the contract technology acquisition by DRDO is foreseen, which is subject to discussions between DRDO and vendor. Later in April 2016, under offset obligations DRDO identified six new technologies which were to be received from the firms. But the vendors “did not agree on transfer of five technologies as most of them were not within the vendor’s core competence”. CAG noted “In many cases, it was found that the foreign vendors made various offset commitments to qualify for the main supply contract but later, were not earnest about fulfilling these commitments.”
The Rafale deal was signed in September 2016 states a discharge of 50% offset clause by the four French partner firms — Dassault Aviation, MBDA, Thales and Safran. Dassault Aviation collaborated with Anil Ambani’s Reliance Defence to form a joint venture Dassault Reliance Aerospace Limited in Nagpur where civil jets components would be manufactured. The MoD relayed to the CAG that the offset obligations are to commence from September 23, 2019 and the first annual commitment must be completed by September 23, 2020. Defence deals offset policy auditing was done by CAG in which it said that from 2005 to March 2018, 46 offset contracts were signed with foreign vendors which were valued at INR 66,427 crore. Of this INR 19,223 crore worth of offsets should have been discharged by the vendors by December 2018. The report said, “However, the offsets claimed to have been discharged by them was only INR 11,396 crore, which was only 59% of the commitment.” The remaining offset commitments worth INR 55,000 crore are due to be fulfilled by 2024. CAG mentioned that the rate at which the foreign vendors are currently fulfilling their offset commitments is about INR 1,300 crore per year. The report mentions that with this deal complete fulfillment of INR 55,000 crore by vendors in next six years seems a major challenge.