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Row over jets contract: Rafale deal a quid pro quo, says French media

Ajai Shukla/New Delhi 11 Oct 18 | 03:01 AM

French news website, Mediapart, reported on Wednesday that it had accessed an internal document from aerospace firm Dassault, which stated that partnering Anil Ambani’s defence firm was a quid pro quo to New Delhi for winning a Euro 7.8 billion contract to supply 36 Rafale fighters to the Indian Air Force (IAF).

The French website report states: “Mediapart has obtained a Dassault company document in which a senior executive is quoted as saying the group accepted to work with Reliance as an “imperative and obligatory" condition for securing the fighter contract." The executive is identified in the Mediapartreport as Loik Segalen, a senior member of the company’s aviation group, from whom the document originated on May 11, 2017."

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The joint venture referred to was Dassault Reliance Aerospace (DRAL), which Anil Ambani’s Reliance Group had formed with Dassault, with the former holding 51 per cent and the latter 49 per cent of the equity. DRAL was set up just days before Prime Minister Narendra Modi and then-President François Hollande made the shock announcement in Paris, on April 10, 2015, that the IAF would buy 36 fully-built Rafale fighters from Dassault.

Opposition parties in India have charged the National Democratic Alliance (NDA) government with “crony capitalism" — alleging that government pressure was put on Paris to discharge offset obligations — worth 50 per cent of the value of the contract, or Euro 3.9 billion — through DRAL.

This was endorsed by former French President Hollande, who told Mediapart on September 22 that the Indian government had left Paris with no choice but to do business with DRAL.

Asked by French news website, Mediapart, “Who selected Reliance as a partner and why?" Hollande responded: “It was the Indian government who proposed this service group (Reliance Group), and Dassault who negotiated with Ambani. We did not have a choice, we took the interlocutor who was given to us."

Hollande was France’s president in April 2015, and he hosted Prime Minister Modi in Paris when the latter publicly announced his decision to buy 36 Rafales from Dassault in “flyaway" (or fully built) condition.

Paris and Dassault have issued statements indicating that the decision to partner Ambani was taken by them. But none of those carefully worded statements directly contradict Hollande’s explicit allegation.

Now the Dassault document reported by Mediapart reinforces Hollande’s words.

Meanwhile, Dassault issued a denial in which it admitted the role of Loik Segalan, the Dassault manager who made the statement.

The statement read: "Within the framework of the September 2016 Inter-Government Agreement between France and India, Dassault Aviation has sold 36 Rafale aircraft to India. In compliance with the Indian regulations (Defence Procurement Procedure) and as frequent with such a contract, Dassault Aviation has committed to offsets in India worth 50 per cent of the value of the purchase. In order to deliver some of these offsets, Dassault Aviation has decided to create a joint venture. Dassault Aviation has freely chosen to make a partnership with India’s Reliance Group. This joint venture, Dassault Reliance Aerospace Ltd (DRAL), was created February 10, 2017. Other partnerships have been signed with other companies such as BTSL, DEFSYS, Kinetic, Mahindra, Maini, SAMTEL. Other negotiations are ongoing with a hundred-odd other potential partners." 

"In compliance with French regulations, Chief Operating Officer Loïk Segalen informed, May 11, 2017, the Central Works Council of the creation of the DRAL joint-venture in order to fulfil some of the offsets commitment," it added.

The Rafale deal has come under concerted attack from the Opposition parties, which have charged the Modi government with paying an inflated price for 36 Rafales; with endangering national security by cancelling an ongoing tender for 126 Rafales; and with “crony capitalism" in selecting the Reliance Group as a partner to Dassault. 

Anil Ambani has not denied benefitting from Rafale-linked offsets. However, the Reliance Group – in a series of legal injunctions issued to various media houses — has claimed that it benefited only from ^778 million worth of business, not Euro 3.9 billion. 

While all 36 Rafale fighters are being manufactured in France, an offset requirement, which is a part of all Indian defence procurements worth more than Rs 20 billion, requires French companies that build the Rafale — Dassault, Thales, Safran Aero Engines, and MBDA — to plough back 50 per cent of the contract value into Indian defence production.

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