The bombshell of former French President Francois Hollande’s reported statement about Indian government proposing Reliance as Dassault’s partner company for offset contract set off a spate of claims and denials.

While the French government and Dassault aviation sought to refute Hollande’s claim, the former President stood by his statement, reported NDTV.

France’s Ministry of Europe and Foreign Affairs said that the French government had no role to play in choosing partner companies in India for the purpose of offsets contracts in the Rafale deal.

The French government clarified that they were not involved in the choice of Indian partners. The French government said their role was just to ensure the delivery and quality of the aircraft. “The French government is in no manner involved in the choice of Indian industrial partners who have been, are being, or will be selected by French companies,” the French government said.

Dassault Aviation also reacted, issuing a statement to say, “This offsets contract is delivered in compliance with the Defence Procurement Procedure (DPP) 2016 regulations. In this framework, and in accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group. This is Dassault Aviation’s choice…”

Francois Hollande’s reported statement

France’s former President Hollande had reportedly told French media that the Indian government proposed Reliance Defence as the partner for Dassault Aviation in the Rs 58,000 crore Rafale deal and France did not have a choice.

The former French President’s remarks contradict the Indian government’s claim that the deal between Dassault and Reliance was a commercial pact between two private parties and the government had nothing to do with it.

The deal for 36 Rafale aircraft in a government-to-government agreement was announced by Prime Minister Narendra Modi on April 10, 2015 during his visit to Paris, which led to the cancellation of the 126 aircraft deal being negotiated by the previous government. The deal was eventually signed on September 23, 2016 in Delhi between then Defence Minister Manohar Parrikar and his French counterpart.

The Congress has been accusing massive irregularities in the deal, alleging that the government was procuring each aircraft at a cost of over Rs.1,670 crore as against Rs.526 crore finalised by the UPA government when it was negotiating procurement of 126 Rafale jets.

According to Mediapart, a French language publication, Hollande said the original deal was to be 126 aircraft, “but with the change of government (in India in 2014), the Indians reformulated their proposal, which was less attractive for us, since it was 36 aircraft only. But the manufacture was planned in France, contrary to the previous proposal. So we lost on one side, but we won the other.”

Opposition parties, including the Congress, have also alleged that undue favours had been granted to Ambani’s firm in this deal, a company without any defence manufacturing experience.

The report in ‘Mediapart’ quoted Hollande as saying, “It was the Indian government that proposed this service group, and Dassault which negotiated with Ambani. We had no choice, we took the interlocutor who was given to us.”

Asked who selected Reliance as a partner and why, Hollande replied, “We had no say in this regard.” Dassault Aviation, the makers of Rafale, had chosen Reliance Defence as its partner to fulfill offset obligations of the deal.

Offset clause and Reliance

Under the offsets clause, France is to invest 50 per cent of the total order cost in local contracts in India, worth Rs 30,000 crore, as per an Indian Express report. The offset obligations of the deal are to be discharged from September 2019 to September 2023, as per the contract.

The Rafale offset was the first project of this magnitude won by Reliance Defence, which placed it at the centre of a major political row. The government has been maintaining it did not have any role in selection of the offset partner by Dassault.

In a statement, the Ministry of Defence had stated on February 7 that “no Indian Offset Partner for the 2016 deal for 36 Rafale Aircraft has been so far selected by the vendor (DA) because as per the applicable guidelines, DA is free to select the Indian Offset Partners and provide their details at the time of seeking offset credits, or one year prior to discharge of offset obligation.”

The opposition parties have also alleged that the Reliance Defence was formed just 12 days before the announcement of the Rafale deal by the prime minister on 10 April 2015. The Reliance group has rejected the charges.

Former HAL chief’s statement

In an oblique justification of the government not pressing for the offset contract being given to state-owned Hindustan Aeronautics Limited (HAL), Defence minister Nirmala Sitharaman had also raised questions about the public sector company to produce Rafale fighter jets. Howvere, T Suvarna Raju, who was heading HAL till three weeks ago, told HT on September 19 that the public sector undertaking could have built Rafale fighters in India had the government managed to close the original negotiations with French aerospace firm Dassault Aviation for 126 fighters and that there was a work-share agreement between the two companies. However, he admitted that it would have cost HAL more to make the aircraft. Former air chief AY Tipnis told HT that HAL may have found it challenging to build the Rafale.

Now, as allegations flew thick and fast after Hollande’s statement, a defence ministry spokesperson tweeted that the report “is being verified” and that “neither GoI (government of India) nor the French Government had any say in the commercial decision.”

Defence Minister Nirmala Sitharaman, who was in Cairo when Hollande’s bombshell came, called off  her visit to France for a meeting with her counterpart there this week, reported The Indian Express.

French government’s statement

As Hollande’s statement set off an intense verbal war in India, the French government came out with a statement refuting the former President.

“The intergovernmental agreement signed on 23rd September 2016 between the French and Indian governments for supplying India with 36 Rafale aircraft concerns the obligations of the French government solely with regard to ensuring the delivery and quality of this equipment,” it said.

Further stating that the French government is in no manner involved in the choice of Indian industrial partners who have been, are being, or will be selected by French companies, France said, “In accordance with India’s acquisition procedure, French companies have the full freedom to choose the Indian partner companies that they consider to be the most relevant, then present for the Indian government’s approval the offsets projects that they wish to execute in India with these local partners so as to fulfil their obligations in this regard.”

“As it happens, agreements have already been signed by French companies with many Indian firms, both public and private, under the framework of Indian laws.”

Dassault Aviation

In a statement, Dassault Aviation said it has decided to make a partnership with the Reliance Defence in accordance with the policy of ‘Make in India’.

Providing clarifications regarding the contract, Dassault Aviation said, “This contract is a government-to-government agreement, it provides for a separate contract in which Dassault Aviation commits to make compensation investments (offsets) in India worth 50 per cent of the value of the purchase.”

It added, “This offsets contract is delivered in compliance with the Defence Procurement Procedure (DPP) 2016 regulations. In this framework, and in accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group. This is Dassault Aviation’s choice as CEO Eric Trappe=ier had explained in an interview published in MINT newspaper on April 17, 2018. This partnership has led to the creation of the Dassault Reliance Aerospace Ltd (DRAL) joint venture in February 2017.Dassault Aviation and Reliance have built a plant in Nagpur for manufacturing parts for Falcon and Rafale aircraft.”

Ten days after India sealed the government-to-government agreement on the Rafale deal, Reliance Defence and Dassault had announced a joint venture (JV) in the aerospace sector and a year later, the foundation stone of a manufacturing facility was laid in Mihan, Nagpur.

Dassault Aviation provides the following clarifications regarding the contract signed in 2016 for 36 Rafale aircraft to India:

1. This contract is a government-to-government agreement. It provides for a separate contract in which Dassault Aviation commits to make compensation investments (offsets) in India worth 50% of the value of the purchase.
2. This offsets contract is delivered in compliance with the Defence Procurement Procedure (DPP) 2016 regulations. In this framework, and in accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group. This is Dassault Aviation’s choice, as CEO Eric Trappier had explained in an interview published in MINT newspaper on April 17, 2018. This partnership has led to the creation of the Dassault Reliance Aerospace Ltd (DRAL) joint-venture in February 2017. Dassault Aviation and Reliance have built a plant in Nagpur for manufacturing parts for Falcon and Rafale aircraft. The Nagpur site was chosen because of the availability of land with direct access to an airport runway, an essential condition of aeronautic activities.
3. Other partnerships have been signed with other companies such as BTSL, DEFSYS, Kinetic, Mahindra, Maini, SAMTEL,… Other negotiations are ongoing with a hundred-odd other potential partners.
4. Dassault Aviation is very proud that the Indian authorities have selected the Rafale fighter.