India and France are still negotiating the latter’s offer in terms of New Delhi’s offset clause regarding the multi-billion dollar deal to purchase 36 French Rafale aircraft.
Talking to FE on condition of anonymity, highly placed sources said: “The French company Dassault Aviation has offered 17-18 technologies as part of its offsets obligation in various sectors, including civil aviation, homeland security and partially services for the deal which is being negotiated under DPP-2013.”
However, this could create further delay in the process as the ministry of defence (MoD) has so far failed to form a team to evaluate the respective proposals made by vendors for the transfer of technology. The methodology for evaluating and comparing the value of the respective proposals for transfer of technology also remains unformulated and unclear, sources revealed.
This process is expected to be time-consuming as there are no parameters that can be referred to while putting a cost to the technologies being offered. Earlier, the French side had rejected India’s demand for a 50% offset clause, citing sharp cost escalation, but offered to participate in ‘Make in India’ projects to carry forward the talks. There is also a strong lobby of small and medium French enterprises that is against industrial offsets and sees it as a threat to the competitiveness of the French defence industry.
Due to India’s insistence on the offset clause, tweaking of weaponry technology and plans to set up two bases for Rafale fighter planes would lead to cost escalation, which New Delhi is pushing to bring down to around 7-8 billion euro. “While the government is keen to bring down the costs of the aircraft to as low as euro 7-8 billion, there is no way France will give a fully loaded aircraft at that price. India might be forced to then pay just for the platform and for add-ons pay extra money,” a senior official explained.
Offset policy was first introduced as part of the Defence Procurement Procedure (DPP), 2005, under which a foreign company has to invest back a portion of the deal into India.