Make in India: Rafale deal may take off as a joint venture between French and Indian firm - Mannu Pubby
NEW DELHI: The government could ask France's Dassault Aviation to rope in an Indian partner to jointly manufacture the next batch of its Rafale fighters in the country as a condition for landing the remainder of the contract, a move it hopes will fulfil the 'Make in India' dimension that could not be met in its off-the-shelf purchase of 36 planes last week.
Sources familiar with the matter said there were initial discussions in the government on whether to press the French firm to sign up an Indian partner and form a joint venture company in which the local firm could own up to 51 per cent stake and this firm could execute the contract to supply the remaining planes.
The sources insisted that these were initial discussions and there was no certainty a final plan would have these contours.
The Indian partner, according to these discussions, would not be restricted to state-run Hindustan Aeronautics Ltd (HAL), potentially opening up the field for private players to step into the lucrative defence and aerospace business. A consortium approach, in which a group of Indian private companies come together with HAL to constitute the Indian ownership, was also being spoken of during these discussions, the sources said, adding that the entire plan was nebulous and could undergo major changes.
The matter will be taken forward after Prime Minister Narendra Modi returns from his foreign visit, the sources said. They requested anonymity because of the sensitivity of the issue.
The selection of Dassault to supply 126 Rafale fighters to the Indian Air Force took place during the UPA regime in 2012, but the deal got bogged down by controversies and political indecision. After weeks of uncertainty and amid intense speculation that the BJPled administration could even cancel the contract, Modi, during a visit to France last week, pulled a surprise and signed the purchase of 36 planes off-the-shelf in a direct government-to-government deal, effectively junking the old UPA deal while retaining the vendor.
However, the official announcement last week made no mention about what happens to the remaining planes, prompting speculation in some quarters whether the government could look at fresh competitive bidding.
But sources said the thinking in South Block was that it did not make sense to buy planes from a new vendor as that would saddle the Air Force with a 'mix and match fleet' and having to operate multiple platforms, which was cumbersome and operationally inefficient. Besides a fresh competitive bidding scenario would take years, severely delaying the Indian Air Force's plans to raise its flying strength up to 42 fighter squadrons.
This will effectively rule out the possibility of fresh competitive bidding for the remaining contract, which was also indicated by Defence Minister Manohar Parrikar on Monday when he said a government-to-government route was better to acquire strategic defence platforms rather than competitive,global bidding.
NUMBER COULD BE REVISITED
Sources said that while the original requirement of 126 fighters for the air force stands, this number could be revisited in the coming days after a reassessment. A higher number of planes could encourage the French side, which could otherwise have reservations on ceding the controlling stake in the Indian joint venture, to set up a production base for the jets. Such an approach could counter criticism that the new Rafale deal does not give much to India in terms of technology transfer and production capabilities. Going about the remainder of the contract though the joint venture route could give the Indian private sector a chance to partake of the government's defence spending and develop manufacturing expertise in an area that has largely been the preserve of staterun firms.
The scrapping of the old Rafale deal, along with the cancellations of similar projects, is an indication that the L1, or lowest bidder based competitive bidding process, which was initiated by the UPA regime is on the way out. Some defence experts say the lengthy process of global competition has led to the stalling of many critical military acquisitions after these got bogged down by accusations of manipulations in testing or discrepancies in commercial proposals.
Officials also say that the view within the government is that the L1 system - choosing the cheapest product after it passes the basic technical evaluation - is not ideally suited to acquiring strategic and cutting edge systems for the military.
While the L1 process was promoted by the UPA government, most military acquisition plans did not see the light of day under the process. These include two attempts to buy light helicopters for the army, a proposal to purchase aerial refuelers for the air force and plans to acquire much-needed artillery systems.
The trend to cancel or do away with projects under competitive bidding continues with the NDA government with the cancelling of the light helicopter contract last year that saw Eurocopter and Kamov making it to the final zone. Most mega projects cleared by the UPA - C-17 transporters, P-8I planes for the Navy, C-130J special operations aircraft - were government-to-government purchases.
The last large tender cleared by competitive bidding was to purchase trainer aircraft from Swiss firm Pilatus in 2012. However, that too ran into trouble as the BJP government reduced the order and gave a large chunk of it to HAL.
Make in India: Rafale deal may take off as a joint venture between French and Indian firm - The Economic Times
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See what i discussed with you yesterday the same story is being now said...