MMRCA deal: Negotiations between defence ministry, Dassault run into fresh hurdle

Jan 05 2013, 18:36 IST
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MMRCA negotiations run into fresh hurdle (Reuters) MMRCA negotiations run into fresh hurdle (Reuters)
SummaryDassaults request to let it decide HALs project work share turned down by Defence Ministry.

Negotiations between Frances Dassault Aviation and the Defence Ministry for the $ 10.4 bn (Rs 45,000 crore) Medium Multi-Role Combat Aircraft (MMRCA) tender to acquire 126 fighter aircrafts for the IAF have hit another roadblock.

Highly placed sources told FE, the ministry of defence has turned down Dassaults assertion that if it is given the overall responsibility of the project, it should be given the freedom to decide on the quantum of work to be shared between Hindustan Aeronatics Limited (HAL) and private companies in the programme. Dassault had made this point in a letter to the Defence Ministry late last year along with a demand that the ministry define HALs role in MMRCA.

While rebuffing Dassaults contention, the ministry has also highlighted that the RfP for the tender issued in 2007 clearly outlines role of HAL as the projects lead-integrator and changes at this stage cannot be permitted.

Soon after Dassault emerged the lowest bidder (L-1) beating its rival Eurofighter on life cycle costs, the French company signed a memorandum of understanding (MoU) with Reliance Industries to work together in Indian defence and security sectors. Industry sources indicated that, The French company are anxious to start work with Reliance Industries Ltd under the MoU that was inked in 2012 June.

The latest development adds to a long list of hurdles negotiations have faced since Dassaults selection as L-1 in January last year.

According to official sources, the negotiations have dragged on for so long also due to issues related to MMRCAs 50% offsets requirement and transfer of technology. The French, it appears, are unwilling to transfer cutting edge technology such as that of the electronically scanned AESA radar while citing lack of maturity of the Indian defence industry to absorb such critical technologies as an excuse.

There is a strong lobby of small and medium French enterprises which is against industrial offsets and sees it as a threat to the competiveness of the French defence industry. Early last year, Patrick Colas des Francs, chief executive of Coges, the trade show organizer for the Eurosatory land systems exhibition reportedly said, Offsets are a threat to small and medium-sized companies. This is a real problem. "Offset deals not only take production work away from French subcontractors and suppliers, but also provide accelerated access to knowledge and skills that allows companies in the client country to compete in world markets," he said.

Acknowledging that negotiations between the two sides

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