Economy

Reliance Defence Wins Big in Aftermath of Rafale Deal

According to sources, while Bharat Electronics, Samtel and other defence companies will get a piece of the Rafale offset money, it is Reliance Defence that will execute a decent portion of the Rs. 30,000 crore that will flow in.

A Rafale fighter jet. Credit: Reuters

A Rafale fighter jet. Credit: Reuters

New Delhi: Anil Ambani-led Reliance Defence has been chosen as Dassault Aviation’s Indian strategic partner and will form a joint venture that will “be a key player in the execution of offset obligations” that arise from the recent purchase of 36 Rafale fighter jets.

The 36 fighter jets that were acquired by India recently were purchased for almost 8 billion euros and came with a 50% offset clause: this offset clause ensures that 50% of the deal’s amount needs to be invested into the Indian defence ecosystem.

The joint venture announced today is a major feather in the cap of Reliance Defence: Although it was formed over a year ago with the acquisition of Pipavav Defence, the Dassault JV will represent its first, official and major defence order.

Reliance Defence, according to a press release issued, will be one of the primary Indian partners that will “develop major Indian programs with high levels of technology transfer” as a result of the Rafale offset clause. The joint venture, according to Reliance executives, will indirectly benefit the entire aerospace sector.

“The proposed strategic partnership between Dassault and Reliance will also focus on promoting research and development projects under the IDDM program (Indigenously Designed, Developed and Manufactured), a new initiative of India’s Defence Minister Manohar Parrikar,” the statement read.

Ambani, in a statement, announced that this was a transformational moment for the Indian aerospace sector and for Reliance Infrastructure’s subsidiary Reliance Aerospace.

The Wire had earlier reported how in early 2015, three companies were in talks with Dassault and the Indian government for possible co-production opportunities that could have arisen from the Rafale deal. The three companies were Bharat Electronics, Noida-based Samtel and Reliance Defence Systems.

Not just Reliance

According to sources, while Bharat Electronics and Samtel and other defence companies will also a piece of the offset money, it is Reliance Defence that will execute a decent portion of the Rs. 20,000 – Rs. 30,000 crore that will flow in as a result of the Rafale deal.

“This is obviously a great step forward. However, the four companies that have offset obligations are Dassault, Thales, MDBA and Saffra. So it is likely that the technology transfer component and platform-specific work-share components will be distributed across a broad-base and a variety of companies,” Rahul Gangal, Partner, Roland Berger, a Munich-based strategic consulting firm told The Wire.

According to analysts, the work distributed to other companies could come in the form of simple outsourcing or even other joint-ventures, which should be announced shortly.

  • K SHESHU BABU

    It is evident that defence sector is being slowly and surely handed over to private players and Ammani might be the major beneficiary in ‘make in india’ with a large share of the deal.

  • 3Idiots

    Because Ambani funded his election and it is payback time.