The ruling BJP might have capped the Rafale deal as a non-issue during the general elections and there was general acceptability of the acquisition of the fighter jet for improving our strategic competence. But now the ghost of murky deal-making has returned with the Comptroller and Auditor-General of India (CAG) finding that French aerospace major Dassault Aviation and European missile maker MBDA have defaulted on offset clauses. The report says that till date they have “not confirmed” the transfer of technology for the indigenous development of the engine for the Light Combat Aircraft (LCA) by the Defence Research and Development Organisation (DRDO) under the offset contract relating to the nearly Rs 60,000 crore deal for 36 Rafale fighter jets. Under the offset policy, a certain percentage of the deal value with foreign firms should flow into India as Foreign Direct Investment (FDI), which would eventually include technology transfer, local manufacturing of advanced components and creating jobs. Most vendors over-commit to get the contract and breaches of this nature aren’t new. But such a lapse could prove costly for the Government. According to the CAG report tabled in Parliament, as the vendor has not confirmed the transfer of this technology till date, the targets for doing so had already been delayed badly and could not be met before deadline. In its defence, Dassault Aviation has said it will eventually meet its obligation, which has slowed down in the last few months due to the pandemic. If Dassault does not make good on its commitment, then the Kaveri engine project will continue to hang fire. For the DRDO, which has been involved in the LCA project for long and has been unable to give its engine the kind of performance and thrust that it had planned, had to choose one made by the US firm GE. However, hopes of indigenisation of the project were raised again when during the Rafale negotiations, France agreed to help India work on an upgraded Kaveri engine.

Worryingly, the CAG also warned against the efficacy of our offset policy, saying it did not find a single case of foreign vendors transferring high technology to Indian industry, particularly in the defence sector, which ranked 62 out of 63 sectors receiving FDI. The failure on the part of Dassault to keep its end of the bargain would give more ammunition to the Opposition, which has also opposed and questioned Anil Ambani’s Reliance entering the deal as an offset partner for Dassault Aviation. The CAG report further said that “non-fulfilment of offset obligations by the vendor, especially when the contract period of the main procurement is over, is a direct benefit to the vendor.” This questions the Government’s ability to drive a bargain. Would this report be a can of worms?

(Courtesy: Editorial - The Pioneer)

The ruling BJP might have capped the Rafale deal as a non-issue during the general elections and there was general acceptability of the acquisition of the fighter jet for improving our strategic competence. But now the ghost of murky deal-making has returned with the Comptroller and Auditor-General of India (CAG) finding that French aerospace major Dassault Aviation and European missile maker MBDA have defaulted on offset clauses. The report says that till date they have “not confirmed” the transfer of technology for the indigenous development of the engine for the Light Combat Aircraft (LCA) by the Defence Research and Development Organisation (DRDO) under the offset contract relating to the nearly Rs 60,000 crore deal for 36 Rafale fighter jets. Under the offset policy, a certain percentage of the deal value with foreign firms should flow into India as Foreign Direct Investment (FDI), which would eventually include technology transfer, local manufacturing of advanced components and creating jobs. Most vendors over-commit to get the contract and breaches of this nature aren’t new. But such a lapse could prove costly for the Government. According to the CAG report tabled in Parliament, as the vendor has not confirmed the transfer of this technology till date, the targets for doing so had already been delayed badly and could not be met before deadline. In its defence, Dassault Aviation has said it will eventually meet its obligation, which has slowed down in the last few months due to the pandemic. If Dassault does not make good on its commitment, then the Kaveri engine project will continue to hang fire. For the DRDO, which has been involved in the LCA project for long and has been unable to give its engine the kind of performance and thrust that it had planned, had to choose one made by the US firm GE. However, hopes of indigenisation of the project were raised again when during the Rafale negotiations, France agreed to help India work on an upgraded Kaveri engine.

Worryingly, the CAG also warned against the efficacy of our offset policy, saying it did not find a single case of foreign vendors transferring high technology to Indian industry, particularly in the defence sector, which ranked 62 out of 63 sectors receiving FDI. The failure on the part of Dassault to keep its end of the bargain would give more ammunition to the Opposition, which has also opposed and questioned Anil Ambani’s Reliance entering the deal as an offset partner for Dassault Aviation. The CAG report further said that “non-fulfilment of offset obligations by the vendor, especially when the contract period of the main procurement is over, is a direct benefit to the vendor.” This questions the Government’s ability to drive a bargain. Would this report be a can of worms?

(Courtesy: Editorial - The Pioneer)