pankajs wrote:Clearly, the OEM is allowed Invest in a JV with an Indian enterprise for manufacture and/or maintenance of eligible products or services. Is is also allowed to invest in 'kind' in terms of TOT to Indian enterprises.
That Dassault-ADAG JV fits the bill as conceived by the Defence Offset guideline and in my view is a "strategic" enough "partnership" between an OEM and its Indian partner with joint manufacturing for offset purposes to begin with. It also has ambitions to scale up to make the Rafale fully from this facility in future if it get orders beyond the initial 36 crafts. It also aims at creating a local eco-system around this facility.
Further, from the same Defence Offset guideline.
OEM is allowed to choose its own offset partners. Till now the whole thing seems to be within the parameters defined by the policy. On that count at least there should be no cause for concern.
The Defence Offset guidelines are just guidelines. They are not part of any legislation and do NOT limit the govt from applying more stringent norms. Hence the 50% offset requirement, as opposed to the 30% stated under the guidelines.
It was well within the govt's power to have mandated that Dassault partner with a local entity that had at least modicum of experience and financial stability (as opposed to an entity starting from scratch).
As things stand, and as said in my previous post, the SP model was critical to getting the Indian pvt sector running as a viable alternative, and now lies in tatters.
The Indian defence industry cannot accommodate a plethora of private sector players in addition to the DPSUs. The scale isn't there. Even the US with its colossal market worth hundreds of billions of dollars has only three competing players in the aerospace sector, and just one or two in most other segments.
Whatever business the RDAL JV manages to garner, now or in the future, comes at the cost of the existing players like TASL which have gotten screwed over despite investing precious time & resources, over the years, in capacity building. There is already an industrial eco-system in place (Bangalore-Hyderabad belt), a second one isn't required and if set up will only end up cannibalize the existing one which isn't exactly strained for capacity.
1. DRDO's share of the offset is 30+% may go up to 50%. Seems like the TOT portion of the offset will fully be absorbed by DRDO.
2. Dassault's share of the offset pie from DRAL JV is between Rs 1,260 and Rs 1,428 crore and given that this is a 49:51 Dassault:ADAG JV , the number for ADAG would be similar, no where near massive!
3. ADAG and Dassault are individually investing about Rs. 750 cr or so each for the current phase.
The ToT component equals 60% of the ₹30,000 crore offset requirement (30% of the deal value). Most of which will go to DRDO.
Dassault is investing ₹840 crore of the Indian taxpayers' money in the DAAL facility at MIHAN. That's capex. That does not translate to revenues of just ₹1250-1400 crore (disregard India Today's 'could be' speculation).