CAG releases report about Dassault offset obligations

Updated: Oct 3, 2020

Meghna Venkatesh 26th September 2020

Dassault Aviation is yet to meet its obligations as a part of the Rafale deal made in September 2016. The firm said that operations have slowed down since March due to COVID-19, but will eventually live up to the agreement. This delay could have potential operational consequences for the Indian Air Force (IAF).

A Rafale fighter jet made by Dassault Aviation (Source: Times of India)

India signed a deal with France in September 2016 for thirty-six Rafale jets that are designed and manufactured by Dassault Aviation — a French aerospace firm. MBDA, a European Arms manufacturing company, along with Dassault Aviation in September 2015, proposed to release 30 per cent of their offset obligations by contributing to the Defence Research and Development Organisation (DRDO) with high technology. However, both firms have not followed up with this obligation, as mentioned in a report by NDTV. 

The first batch of Rafale jets arrived on 29th July 2020 and officially inducted on 10th September 2020. The report released by The Comptroller and Auditor General of India (CAG) on 23rd September 2020 heavily criticised the policy for offsets by the Defence Ministry. As a part of Foreign Direct Investment (FDI) under the offset policy, a certain percentage of the deal value with foreign firms should be passed to India — including technology transfer, advanced components, and creating jobs in the long run. 

According to Times Now, the CAG stated that “DRDO wanted to obtain technical assistance for indigenous development of engines (Kaveri) for the Light Combat Aircraft. Till date, the vendor has not confirmed the transfer of this technology.” The top auditor said that ‘the desired result’ has not been generated from the policy of offsets. The report has also asked for a review of the policy and how the Defence Ministry is implementing it. Solutions need to be identified to overcome any constraints faced by foreign suppliers or the Indian industry in leveraging the offsets.

The inter-government deal between India and France for thirty-six Rafale jets is worth ₹58,000 crores, reported the New Indian Express. The DRDO has been part of the Light Combat Aircraft ‘Tejas’ project since the beginning but has seen very little success. The engine ‘Kaveri’ was developed in India but did not hold up to the performance-thrust level that was planned for the fighter-jet. India decided to go ahead with an engine made by GE, an American firm. France had agreed to help India work on a potential upgrade of the ‘Kaveri’ engine that could replace the present American engine, but it has come to a standstill. 

The CAG has pointed out that the Indian industry has not received any advanced technology from the foreign vendors and the offset policy needs to be reviewed in detail.  

(Source: NDTV, TimesNow, Indian Express) Edited by Satvik Pandey

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