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.