Military offset part of Rafale deal still pending, flags CAG

CAG SHARPLY CRITICISED FOREIGN VENDORS WHO MADE OFFSET COMMITMENTS TO QUALIFY BUT WERE LATER NOT EARNEST ABOUT FULFILLING THEIR COMMITMENTS

NEW DELHI: Two weeks after the Indian Air Force (IAF) formally inducted five of the 36 Rafale jets ordered from France under a ₹59,000-crore deal, the country’s top auditor on Wednesday said that the plane’s maker Dassault Aviation and weapons-supplier MBDA have not confirmed the transfer of technology (ToT) to the Defence Research and Development Organisation (DRDO), which was part of the contract.

The Comptroller and Auditor General (CAG), in a detailed report tabled in Parliament, doubted if the ToT for a key engine would even take place, and pointed out that several offset contracts built into multiple defence deals have “not yielded the desired results”.

The critical observations were part of CAG’s scrutiny of the status of a raft of offset contracts — including the September 2016 Rafale deal — between 2005 and 2018.

India’s offset policy stipulates that in all capital purchases above ₹300 crore, the foreign vendor has to invest at least 30% of the value of the purchase in the country to boost indigenous capabilities. In the case of the Rafale deal this was 50%.

According to the CAG report, the defence ministry stated as recently as October 2019 (the first Rafale was handed over in France on October 8, 2019) that the vendors had not yet been able to confirm their capability for technology transfer.

“In the offset contract relating to 36 Medium Multi Role Combat Aircraft (MMRCA), the vendors M/s Dassault Aviation and M/s MBDA initially proposed (September 2015) to discharge 30% of their offset obligation by offering high technology to DRDO.

The DRDO wanted to obtain Technical Assistance for the indigenous development of engine (Kaveri) for the Light Combat Aircraft. Till date the Vendor has not confirmed the transfer of this technology,” said the report.

HT has reviewed parts of report and a press release issued by CAG.

CAG also said that DRDO should identify the right technologies for transfer, while sharply criticising foreign vendors who made several offset commitments to qualify for a contract but were later not earnest about fulfilling their commitments. Foreign vendors have to select Indian firms as their offset partners to fulfil their obligations.

To be sure, in case of the Rafale deal, the DRDO’s offset share worked out to 30%, while 20% has been allocated to the private sector, including Dassault Reliance Aerospace Ltd (DRAL) -- Dassault’s joint venture (JV) with Anil Ambani’s Reliance Group. CAG did not pick any loopholes as far as the 20% allocation to the private sector, and asked the defence ministry to get more details about its progress.

The report said the defence ministry stated in October 2019 that the vendors had not been able to “confirm their capability to carry out the requisite upgradation”.