Private sector to gain, Rafale deal likely to have a 30% offset clause

The over $ 6 billion deal for 36 Rafale jets is likely to have a 30 per cent offset clause valuing to nearly $ 2 billion that the Indian private industry will be eyeing.

By PTI | Updated: Apr 14, 2015, 06.34 PM IST

Private sector to gain, Rafale deal likely to have a 30% offset clause

NEW DELHI: The over $ 6 billion deal for 36 Rafale jets is likely to have a 30 per cent offset clause valuing to nearly $ 2 billion that the Indian private industry will be eyeing.

Even though speculation had risen whether the clause would be included in the government to government deal, Indian as well as French sources said that there will at least 30 per cent offset clause.

Offset policy was first introduced as part of the Defence Procurement Procedure (DPP), 2005, under which a foreign company has to invest back a portion of the deal into India.

The DPP, 2013 indicates that the objective of the Defence Offset Policy is to leverage capital acquisitions to develop Indian defence industry by fostering development of internationally competitive enterprises.

It also aims to do it by augmenting capacity for research, design and development related to defence products and services besides encouraging development of synergistic sectors like civil aerospace and internal security.

The offset clause will work out to be around $ 2 billion. During the government to government talks, the offset obligation will also be finalised, defence sources said.

They pegged the deal at over $ 6 billion including the cost of the 36 aircraft, armament and spares.

Sources pointed out that previous government to government sale route also had offset clauses.

"The private sector will substantially gain from the offset part of the Rafale deal," a senior executive of a leading corporate group said.

The criticism against the government to government deal between India and France for 36 Rafale jets was that it does not bring manufacturing and jobs to India.

Sources said the government is likely to insist Dassault Aviation, the manufacturers of Rafale, to rope in the Indian private sector, a global chain supplier to Dassault and its associates.

Defence Minister Manohar Parrikar had yesterday insisted that the deal for 36 Rafale jets does not mean that 'Make in Indian' programme has been set aside.

He said everything will depend on the quantum of the jets that India would eventually be interested in, besides the 36 and the terms and conditions agreed to once the negotiations start.

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