Reliance-Dassault JV to execute defence offset obligations

04 Oct 2016 | Written by Supriya Kaur; Edited by Vaneet Randhawa

Reliance Defence will be Dassault Aviation's Indian strategic partner and they will enter into a Dassault-Reliance joint venture (JV) called 'Dassault Reliance Aerospace'.

The JV between the two companies will fulfill and 'execute defence offset obligations' that arose from the purchase of 36 Rafale fighter jets worth Rs. 59,000 crore.

This is considered to be the largest offset contract in India's history.

In context: Reliance Defence bags massive offset deal

'Dassault Reliance Aerospace' joint venture

India recently acquired 36 Rafale fighter-jets from Dassault Aviation for Rs. 50,000 crore. The deal contained a 50% offset clause which mandated that 50% of the deal-value will be re-invested into the Indian defence ecosystem. The 'Dassault-Reliance-Aerospace' JV was formed to execute this offset obligation.

DetailsMajor milestone for Reliance Defence

The announcement of the JV is a major milestone for Reliance Defence (R-Def) which was formed less than a year ago by the acquisition of Pipavav Defence.

According to a press release, R-Def will "develop major Indian programs with high levels of technology transfer".

Anil Ambani stated that the JV was a "transformational moment for the entire Indian aerospace sector and for Reliance Aerospace."

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What is an 'offset agreement'?

Countries demand offset-agreements to gain economic benefits when large portions of the government's budget is spent towards buying defence equipment from foreign suppliers. Under offset-terms, foreign suppliers often agree to transfer technological know-how or use local suppliers to build equipment they're selling to the government.

04 Oct 2016Reliance-Dassault JV to execute defence offset obligations

Big win for 'Make in India'

Eric Trappier, Dassault Aviation Chairman & CEO said, "The formation of this JV with Reliance Aerospace led by Anil Ambani's Reliance-Group illustrates our strong commitment to establish ourselves in India and to develop strategic industrial partnerships under the Indian Government's 'Make-in-India' policy."

Contract Terms Reliance - Dassault Offset Contract

Dassault will invest 50% of deal-value in the Indian defence industry to boost technological innovation.

30% will be invested in the aerospace industry whereas the remaining 20% will be invested in manufacturing spares for Rafale fighter-jets.

The JV will focus on aerostructures, electronics and engines; Reliance will set-up a manufacturing facility in Nagpur and this will be part of Dassault's global supply chain.

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Scope of JV: Promoting Research & Development

Reliance Defence said, "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 Defence Minister Manohar Parrikar."

DetailsDefence offset obligations: Other companies share the pie

R-Def is expected to execute a significant portion of the Rs. 20,000 - 30,000 crore offset obligations of the Dassault deal.

However, Bharat Electronics, Noida- based Samtel and other defence companies may also participate in fulfilling offset-obligations.

According to analysts, other companies may see contracts come their way either in the form of outsourcing or other joint-ventures, likely to be announced shortly.

29 Jan 2017CCI gives its nod to Reliance-Dassault joint venture

The Competition Commission of India (CCI) announced that it had approved the joint venture between French aircraft manufacturer, Dassault Aviation SA and Anil Ambani-led Reliance Group.

The fair trade regulator shared the announcement of the approval on Twitter.

With this the company can proceed with the deal where Reliance Aero will hold a 51% stake and 49% will be held by Dassault.