Saturday, December 15, 2012

Manufacturing Details Stall Franco-Indian MMCRA Negotiations


Negotiations for the sale of 126 Rafale combat aircraft to India have run into obstacles related to offsets and the role of Hindustan Aeronautics (HAL). (Photo: Dassault Aviation)
December 14, 2012, 12:40 PM
More than 10 months after India chose the French Rafale to meet its $15 billion medium multi-role combat aircraft (MMRCA) requirement, contract negotiations are mired in issues related to offsets, the transfer of technology and the role of Hindustan Aeronautics (HAL). The Press Trust of India quoted industry sources as saying that Dassault has requested from the Indian Ministry of Defence the freedom to decide the proportion of work to be done by HAL, versus private Indian companies. Last February, Dassault signed an MoU with Reliance Industry, India’s largest private-sector company, for collaboration in manufacturing.
At a French parliamentary hearing on December 4, Dassault Aviation CEO Charles Edelstenne expressed “relative optimism” about the progress of talks. “It’s a complicated country, the negotiations are tough, but there is a desire to wrap up on both sides,” he added. Of the 126 aircraft envisioned, 18 are to be delivered as flyaways and the rest to be manufactured in India, with final assembly by HAL.
An official told AIN that HAL needs to define a partner that will facilitate Tier 2 and 3 suppliers, or assume that responsibility itself. Proponents of HAL say that the government-owned company has far more experience in selecting suppliers for high-technology defense projects than private companies such as Reliance or Tata.
One vendor noted that since India lacks the appropriate level of avionics and engine production capability, “there is no clarity on how value can be added by Indian industry and 50-percent offsets absorbed.” The MMRCA project does not fall within the new and more liberal defense offsets policy that permits them to be sourced from adjacent sectors such as homeland security and commercial aviation.
Elections are looming in 2014, and while reports have indicated the contract could be signed early next year, the government, fearing reprisals from opposition parties, is unlikely to proceed unless matters are ironed out in the next few months. One defense official suggested to AIN that if decisions are deferred beyond the election, the MMRCA requirement might be cut to around 60 aircraft as newer solutions–such as the Indo-Russian fifth-generation fighter aircraft, and unmanned combat air vehicles–become available.


  1. My point is that the aircraft would have to be manufactured by HAL though some of the major systems could be manufactured in newly set up joint venture with private sector companies in India (like Reliance and Tatas etc.). But the Indian private companies should be given the responsibilities for manufacture of spares and product support and they will no doubt outsource some of the minor work to SMEs and ancilliaries -- what HAL has been doing for decades.The Government has to look at offsets clause as the means of acquiring technology to assist in future design and development (and not look at them as FDI for acquiring simulators etc, as seems to have been done and has been rightly criticised by the CAG. Hence it is critical that 50% of the contract amount must be invested in R&D and manufacture by private sector to supply spare parts and systems/sub-systems. HAL is already a huge organisation and is setting up another division. It should become more of an integrator rather than a manufacturer.

    Jasjit Singh, Air Commodore (retd)
    Director General, Centre for Air Power Studies
    P-284, Arjan Path,
    Subroto Park
    New Delhi - 110010 (India)

  2. Thank You Sir.
    The point to be cleared now is how much technology has really being acquired. And if not, why not? It should be incumbent on the govt to release the figures.

  3. The key issue neelam is that defence offsets whilst sound good and locks in the technology partner to india, having the right implimentation partner who can support with ensuring high level reliability is imperative. I firmly believe the CEMILAC can define the steps for this however do note that even dassault is in effect an assembler, and not the manufactuer; Dassault done produce messier dowty, or Thomsom CSF or Snecma or any major component.

    Reliance by themselves being assemmbler is fine, but for this to work, reliance would need to to enter seperate deals with the major component manufacturers and i dont tihnk that would happen anytime time soon.

    Licence production of the airframe is acceptable, its the other service providers 'buy-in' you require.