Companies

Reliance Defence corners offset contracts worth ₹21,000 crore on Rafale deal

Amrita Nair Ghaswalla Updated on January 12, 2018

anil-ambani-Rafale



Even as BEL, Bharat Dynamics Ltd, Samtel and other defence companies, are readying to get a slice of the estimated ₹30,000 crore Rafale offset contract, Reliance Defence has already walked away with a major chunk of the deal.

The Rafale offset contract is India's biggest ever. With two joint ventures in a row related to the $8.8-billion Rafale aircraft, Anil Ambani's Reliance Group is looking to target business worth ₹21,000 crore as part of the offsets.

Last year, Reliance Aerostructure had entered into a 51:49 joint venture with Dassault Aviation. The new JV with Thales will help the Indian major execute Thales’ offset obligation amounting to $1billion.

The Thales JV capital is under discussion. Both Thales and Reliance Defence refused comment on the investment.

Sources indicated that there were several initiatives planned between both the companies to ramp up the JV capabilities. These included identifying and qualifying for the Indian defence supply chain, as also incorporating training and development of human capital.

Split offset

Both the JVs are to be located in the Special Economic Zone of Mihan, Nagpur, at Reliance Defence's upcoming greenfield facility.

Last September, the Indian government signed a contract to purchase 36 Rafale fighter jets in fly-away condition.

The deal incorporated 50 per cent offset clause, ensuring that 50 per cent of the deal's amount will be invested in the Indian defence ecosystem. The first of the Rafale jets from France are to be delivered by September 2019, whereas the entire lot will be delivered over the following 30 months.

In order to fulfil the mandatory offsets under the deal, France is to invest 30 per cent of the total order cost in India's military aeronautics related research programmes and 20 per cent into local production of Rafale components.

The offsets are to be carried out by French companies Dassault, Safran, Thales and MBDA, all part of the Rafale project.

The government-to-government deal for the French twin-engine has Dassault as the prime contractor, with French multinational company Thales supplying the radar and electronics.

The estimated ₹30,000 crore offset clause is divided among these four companies. Sources indicated that the biggest chunk would be with Dassault, with a share of ₹15,000 crore.

While Thales has an offset obligation of ₹6,500 crore, Safran has an offset obligation of around ₹5,500 crore, and MBDA has ₹3,000 crore offset obligation.

The Thales JV with Reliance Defence inculcates a long term strategy to serve the defence needs of the country.

The JV plans to have a team of 40 people to begin with and will initially work within the framework of offsets commitments as part of the 36 Rafale combat aircraft contract.

However, Thales also has another $800 million to $1 billion offset obligation against the Mirage 2000 Upgrade.

Thales is yet to announce the offset partner for this.

Published on June 21, 2017
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