For top contractors, 49% equity a hurdle; Rafale may get follow-on order.
India’s $10-billion single-engine fighter jet deal is believed to have hit a stumbling block over the contentious issue of transfer of technology (ToT) and equity participation. This is while negotiations are on for the purchase of more Rafale jets from France.
The two main contenders for the deal — Lockheed Martin and SAAB — have made it clear to the Defence Ministry that they will not go in for a complete transfer of technology (ToT) with 49 per cent equity participation in the joint ventures that they have inked with their respective Indian partners, sources told BusinessLine.
Under the defence foreign direct investment rules, global OEMs can invest more than 49 per cent with prior government approval. However, the fighter-jet deal has to be executed under the new ‘Strategic Partnership’ (SP) policy, and as per the norms laid out in this policy, it is the Indian entity that will have a controlling stake with 51 per cent.
The Defence Ministry is looking to acquire at least 100 of these jets for the Indian Air Force (IAF). While the US’ Lockheed Martin has offered the advanced F-16 Block 70, Swedish defence major SAAB has presented its single-engine multi-role Gripen E for the programme.
Lockheed Martin and SAAB have also joined hands with Tata Advance Defence Systems Ltd and the Adani Group, respectively, to design, develop and produce the warplanes in India under the ‘Make in India’ programme.
The issue of proprietary technology was also raised by US Secretary of State Rex Tillerson during his visit last month. He made it clear that ToT will come for a price.
The government is now looking at a follow-on order to buy more Rafale jets, which will be in addition to the 36 bought in September last year for $8.9 billion. The IAF is also keen on buying more of these warplanes, according to sources.
The decision to buy more Rafale jets from Dassault Aviation is likely to be announced during the visit of French President Emmanuel Macron in December, sources added.
However, the sources said, India has already informed the French that “not a single” Rafale will be bought in flyaway mode — they will be built in the Dhirubhai Ambani Aerospace Park, run by Reliance Aerospace Ltd and Dassault Aviation in the Mihan Special Economic Zone in Nagpur.
Dassault Aviation Chief Eric Trappier had recently said, in France, that the company is in talks with India for more orders.