NEW DELHI — The Indian government imposed a fine on French company Dassault Aviation last month over delays in offset obligations that were part of a 2016 deal for 36 Rafale fighters, Defense News has learned.
The French and Indian governments signed the €7.8 billion (U.S. $8.8 billion) contract in September 2016. Under the arrangement, 50% of the contract value was to be offset and executed by Dassault Aviation and its partners Safran and Thales in seven years’ time.
To implement the offsets, the three firms teamed with more than 70 Indian companies and the Defence Research and Development Organisation. A senior defense scientist in India said DRDO is seeking from French businesses several technologies related to stealth capabilities, radar, aerospace engines, thrust vectoring for missiles, and materials for electronics.
An Indian Ministry of Defence official told Defense News that the penalty will come from the €185 million bank guarantee funded by Dassault Aviation as a safeguard against contractual violations. The official spoke on the condition of anonymity because the person was not authorized to speak to the media.
The official would not share the value of the penalty imposed on Dassault Aviation, nor would the individual detail problems hindering implementation of the offset obligations.
Under MoD policy, original equipment manufacturers can discharge offsets by purchasing related goods or services from Indian suppliers, by making a foreign direct investment in India’s defense industry, or by transferring advanced technology.
When asked for comment, the French Armed Forces Ministry referred Defense News to Dassault Aviation, which did not return requests for comment.
French Armed Forces Minister Florence Parly and Indian Defence Minister Rajnath Singh met Dec. 17 to discuss ways to increase bilateral defense cooperation. During the 3rd annual dialogue, the MoD pointed out that several French defense companies were not cooperating in the transfer of technology to DRDO.
The MoD source said French businesses have been claiming the Indian firms who were expecting to receive technology transfers do not meet the necessary core competencies.
“It is well known that the original equipment manufacturers have been facing difficulty in discharging their offset obligations. This may partly be on account of the policy,” said Amit Cowshish, a former financial adviser for acquisitions at the MoD.
He recommended the ministry meet with OEMs, ascertain difficulties their facing and then take corrective action.
Vivienne Machi in Stuttgart, Germany, contributed to this report.
Vivek Raghuvanshi is the India correspondent for Defense News.