Unconfirmed the transfer of technology
- The Comptroller and Auditor General (CAG) said, “French aerospace major Dassault Aviation and European missile maker MBDA have till date “not confirmed” the transfer of technology for the indigenous development of engine for the Light Combat Aircraft (LCA) by the Defence Research and Development Organisation (DRDO), under the offset contract relating to the Rs. 60,000 crore deal for 36 Rafale fighter jets.”
- This Report was presented in Parliament on 23rd September
What did the report said?
- The report on offset clauses in defence deals observed that in October 2019, the Ministry of Defence (MoD) informed that the vendor had not yet been able to confirm their capability for doing the requisite upgradation.
- The report added, “Thus, it is not clear if this technology transfer will take place, and there is need for MoD/DRDO to identify and acquire the right technologies in order to comply with the directions of Defence Acquisition Council (DAC) given in September 2016.”
- In September 2015, Dassault Aviation and MBDA initially proposed to discharge 30% of their offset obligation in the Rafale deal by offering high technology to the DRDO, and as per the contract, acquisition of technology by the DRDO is envisaged, subject to discussions between the vendor and the DRDO.
Six new technologies
- In April 2016, the DRDO identified six new technologies to be obtained from the firms under the offset obligations, but the vendors “did not agree on transfer of five technologies as most of them were not within the vendor’s core competence”.
- The sixth proposal of the DRDO was to obtain technical assistance for the indigenous development of an engine (Kaveri) for the LCA, which also has not been confirmed so far.
- “In many cases, it was found that the foreign vendors made various offset commitments to qualify for the main supply contract but later were not earnest about fulfilling these commitments,” the CAG observed, giving the Rafale deal as an example.
- To develop the Indian defence industry and bring in high technologies, the offset policy for defence deals was adopted in 2005 for all defence capital imports above ₹300 crore under which the foreign vendor is required to invest at least 30% of the value of the contract in India.
- The Rafale deal signed in September 2016 has a 50% offset clause to be discharged by the four French partners — Dassault Aviation, MBDA, Safran and Thales.
- Dassault Aviation has set up a joint venture with Anil Ambani’s Reliance Defence — Dassault Reliance Aerospace Limited — in Nagpur to manufacture components for the former’s civil jets.
The MoD informed the CAG that the offset obligations of the vendor are to start from September 23, 2019 and the first annual commitment would have to be completed by September 23, 2020.
