Anil Ambani’s Reliance has 10 percent offset in Rafale, says Dassault CEO Eric Trappier

Dassault Aviation’s joint venture with Anil Ambani’s Reliance represents around 10 percent of the offset investments under the Rafale jet deal. This was said by Dassault CEO Eric Trappier to AFP.

In a statement, Dassault released a transcript of what it said was Trappier’s interview with AFP in which he was asked about the status of the offsets.

“Signing an offset contract is a requirement of Indian law (Defence Procurement Procedure). The implementation of offsets is an obligation and, under the Indian regulation, the choice of the partners belongs to us,” Trappier was quoted as saying.

“In full compliance with this regulation, Dassault Aviation, therefore, decided to set up the DRAL joint venture with Reliance and build a plant in Nagpur, which should enable us to meet about 10 percent of these offset obligations. We are in negotiations with about a hundred Indian companies and partnerships have already been concluded with about thirty of them,” he was quoted as saying.

He said what is called ‘offset’ in English is usually translated into French as ‘compensation’ or ‘contrepartie’. With regard to the staff and trades unions organisations, Dassault Aviation uses the term ‘obligation contractuelle d’offset’ or ‘obligation contractuelle de compensation’, he said.

Dassault negotiated for years with Hindustan Aeronautics Limited (HAL) for the order, with the jets being jointly built in India. But those talks were cancelled after Prime Minister Narendra Modi took office. That is when he decided to purchase the jets directly from France.

Asked why Dassault chose Reliance over HAL as its partner, Trappier said that Dassault Aviation decided to establish a long-term presence in India through DRAL, a joint enterprise in which governance is provided by an Indian Chief Executive Officer and a French Chief Operating Officer.

“Dassault Aviation, therefore, exercises technical and industrial control over the operations, applying its standards and its flexibility. This JV will produce parts for the Falcon 2000 and Rafale. The choice of the Nagpur site, in central India, was dictated by the availability of land with direct access to an airport runway,” he was quoted as saying.

Dassault on Wednesday said it had ‘freely chosen’ to form a joint venture with Anil Ambani’s Reliance.

However, the stance of Dassault was contradicted recently by former French president Francois Hollande, under whose watch the Rafale deal was signed. Hollande said that France had no choice but to join with Reliance after it was pushed by the Indian government.

Under Indian defence procurement rules, foreign companies winning contracts must ‘offset’ or reinvest half the total value — in this case around eight billion euros — in joint ventures or purchases with Indian firms.

Defence Minister Nirmala Sitharaman while speaking at a briefing in Paris reiterated the government’s claim that it had no idea that Dassault Aviation would team up with Reliance Group, run by Anil Ambani.

Several reports say Dassault was forced to choose Reliance by Prime Minister Narendra Modi, despite it having almost no experience in the aviation sector.

Also Read: Rafale deal: Dassault document shows Reliance joint venture was mandatory