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More lies on Rafale deal exposed: Defence Procurement Procedure was violated in choosing Anil Ambani as offset partner

Anil Ambani

The Indian authorities has discovered itself in one other spot of hassle after a French web site launched a key doc that proved that the choosing Anil Ambani, Prime Minister Narendra Modi’s billionaire pal, was obligatory for the Rafale deal to undergo. That is exactly what Former French President Francois Hollande had informed the identical web site a couple of weeks in the past. In the meantime, Defence Minister Nirmala Sitharaman has arrived in France, prompting Congress President Rahul Gandhi to conclude that her go to to guard Modi in the rip-off.

Though, Dassault Aviation was fast to make clear that there was no strain on the corporate to decide on Ambani as the Indian offset partner, information seem to contradict their assertion.

A Press Launch from Defence Ministry on 7 February, this yr says “…no Indian Offset Partner for the 2016 deal for 36 Rafale Aircraft has been so far selected by the vendor (DA) because as per the applicable guidelines, DA is free to select the Indian Offset Partners and provide their details at the time of seeking offset credits, or one year prior to discharge of offset obligation.”

Defence Minister Nirmala Sitharaman stored saying “Absolutely no procedure has been violated”. And a Press Launch from Dassault Aviation on 21 September 2018 says “This offsets contract is delivered in compliance with the Defence Procurement Procedure (DPP) 2016 regulations. In this framework, and in accordance with the policy of Make in India, Dassault Aviation has decided to make a partnership with India’s Reliance Group.” I

n one other press launch, Ministry of Defence, on 22 September 2018 stated “As per Defence Offset Guidelines, the foreign Original Equipment Manufacturer (OEM) is free to select any Indian company as its offset partner.” Additional, it provides “As per the guidelines, the vendor is to provide the details of the offset partners either at the time of seeking offset credit or one year prior to discharge of offset obligation, which in this case will be due from 2020.”

Allow us to attempt to analyse the primary coverage doc – The Defence Procurement Procedure (DPP) – to seek out out whether or not the Narendra Modi authorities and Dassault Aviation adopted the set tips of DPP as they declare.

(Janta Ka Reporter in its three half collection final had first uncovered the rip-off in the acquisition of Rafale jets from the French firm Dassault aviation.  (You possibly can learn them right here Half 1 and Half 2 and Half three).

DPP got here in to pressure in 2005 with the goal of creating the defence procurement extra clear by following a set tips. Most of the clauses have been amended through the years to enhance the transparency and scale back the time-frame of the purchases. One of many necessary points of the DPP, since its inception, is the Offset Coverage.

Because it was identified earlier, Dassault Aviation claimed via a press launch that they “created” the Joint Enterprise with Reliance Aerostructure Restricted – an organization included on 24 April 2015 – in April 2015 itself. If so, then DPP 2013 was in drive, not DPP 2016 as claimed by Dassault Aviation as a result of DPP 2016 got here into impact solely after 28 March 2016 – almost a yr after they created the JV.

A clause in DPP 2013 (para eight.2 of appendix D, Chapter 1) learn “The TOEC (Technical Offset Evaluation Committee) will scrutinise the technical offset proposals (excluding proposals for technology acquisition by DRDO as per para 8.3) to ensure conformity with the offset guidelines. For this purpose, the vendor may be advised to undertake changes to bring his offset proposals in conformity with the offset guidelines. The TOEC will be expected to submit its report within 4-8 weeks of its constitution.”

On 5 August 2015, Modi authorities amended this clause to “The TOEC will scrutinise the Technical offset proposals (excluding proposals for technology acquisition by DRDO as per para 8.3) to ensure conformity with the offset guidelines. For this purpose the vendor may be advised to undertake changes to bring his offset proposals in conformity with the offset guidelines. During TOEC, the vendor is expected to provide details pertaining to IOP (Indian Offset Partner) wise Workshare, specific products and supporting documents indicating eligibility of IOPs in addition to conformity with other clauses in the offset guidelines. If the vendor is unable to provide these details at the time of TOEC, the same may be provided to DOMW (Defence Offset Management Wing) either at the time of seeking offset Credits or one year prior to discharge of offset obligation through that IOP…..”

For this reason the Modi authorities and defence minister are repeatedly saying “As per the guidelines, the vendor is to provide the details of the offset partners either at the time of seeking offset credit or one year prior to discharge of offset obligation, which in this case will be due from 2020.”

More lies uncovered

This is only one clause that was amended, which continues as it’s in DPP 2016. This amended clause itself says, eligibility ought to be “on conformity with other clauses in the offset guidelines”. And the issue lies precisely there.

Appendix A to Chapter II “Defining attributes of the ‘Buy (Global)’ category”, para 6 titled “Defining attributes of the ‘Buy (Global)’ category” elaborates in clause (b) as “The requirement is of strategic nature and/or of long term nature. A single foreign vendor or all foreign vendors of the same country can provide equipment/system/platform; under this circumstance, the following may be ensured: Clause (i) “Buy (Global) under Government to Government arrangement.” Clause (iv) says “Requirement of ToT (Transfer of Technology) /MToT (Maintenance ToT) as required/likely to be made available may be factored.”

Appendix D to Chapter II of DPP 2016 is Defence Offset Tips. Para four particulars the “Indian Offset Partner”. Clause four.1 reads “Indian enterprises and institutions and establishments engaged in the manufacture of eligible products and/or provision of eligible services, including DRDO, are referred to as the Indian Offset partner (IOP).”

If Dassault Aviation says they selected Reliance as their offset partner as per the DPP 2016, that’s in clear violation of the coverage as on the time of Dassault choosing Reliance Aerostructure Restricted (RAL), RAL was not engaged in the “manufacture of eligible products and/or provision of eligible services” and was existed solely on papers.

Para 7 explains the “Submission Of Offset Proposals”. Clause 7.2 explains: “The Technical and Commercial offset proposals have to be submitted by the vendor by a date to be specified in the RFP, which would normally be 12 weeks from the date of submission of the main technical and commercial proposals. Exact date as calculated and given in the RFP or intimated later by the Technical Managers will be binding. The technical and commercial offset proposal should be submitted in two separate sealed covers to the Technical Manager of Acquisition Wing.”

Clause eight.four titled “Commercial Evaluation” explains: “The Commercial Offset Offer will contain the detailed offer specifying the value of the total offset commitment components, with a breakdown of the details, phasing, IOPs and banked offset credits if any proposed to be utilised. The commercial offset offer will be opened along with the main commercial offer after the TOEC report has been accepted by the DG (Acquisition).”

Clause eight.5 begins with “The CNC (Contract Negotiation Committee) for the main procurement case will verify that the Commercial Offset Offer meets the stipulated offset obligations.”

Clause eight.6 says: “All Offset proposals will be processed by the Acquisition Manager and approved by Raksha Mantri, regardless of their value. Offset proposals will also be incorporated in the note seeking approval of Competent Financial Authority (CFA) for the main procurement proposal for information of the CFA. The offset contract will be signed by the Acquisition Manager after the main procurement proposal has been approved by the CFA. Signed copies of the offset contract will be made available to DOMW (Defence Offset Management Wing).”

Lie or easy disregard to tips?

All these factors make it amply clear that if the Modi authorities and Dassault Aviation adopted the DPP as they declare, Dassault Aviation should have submitted the small print of its meant offset partner together with the monetary and technical obligations it’ll fulfill as properly as its Indian Offset Partner. The DPP is obvious that the seller is free to selected his IOP. However the authorities’s declare that they don’t seem to be conscious who Dassault’s IOP is both a lie or exhibits they didn’t comply with the rules as prescribed in DPP.

Appendix D to Chapter II, Clause three(b) reads: “Foreign Direct Investment in joint ventures with Indian enterprises (equity investment) for the manufacture and/or maintenance of eligible products and provision of eligible services. Such investment would be subject to the guidelines/licensing requirements stipulated by the Department of Industrial Policy and Promotion(DIPP).” Additional, clause four.2 says “The IOP shall, besides any other regulations in force, also comply with the guidelines/licensing requirements stipulated by the DIPP as applicable.”

Based mostly on these clauses, will probably be fascinating to see the principles stipulated by DIPP (Division of Industrial Coverage and Promotion) and whether or not Dassault Aviation and its JV partner RAL adopted them or not.

Dassault Aviation says its JV with RAL was created in April 2015. An inventory of commercial licenses issued by DIPP since January 2001 to July 2018 exhibits RAL received the license solely on 22 February 2016 – 10 months after the JV was created. The License issued to RAL exhibits RAL’s handle as Survey Quantity 589, Taluka Jafrabad, Village Lunsapur, Amreli District, Gujarat and the licence is for ““manufacturing and upgrade of airplanes and helicopters specially designed for military applications.”

The Industries (Improvement and Regulation) Act 1951 Chapter three,  part 11A — Regulation of Scheduled Industries — reads: “The owner of an industrial undertaking not being the central government which is registered under section 10 or in respect of which a license or permission has been issued under section 11 shall not produce or manufacture any new articles unless — (a) In case of an industrial undertaking registered under section 10, he has obtained a license for producing or manufacturing such new article; and (b) In case of an industrial undertaking in respect of which a license or permission has been issued under section 11, he has had the existing license or permission amended in the prescribed manner.”

However, the above talked about press launch from Dassault Aviation dated 21 September 2018 says: “Dassault Aviation and Reliance have built a plant in Nagpur for manufacturing parts for Falcon and Rafale aircraft.” An article revealed in Occasions of India on 28 September 2018 mentions Dassault – Reliance JV – Dassault Reliance Aerospace Restricted (DRAL) – manufacturing nostril cones for Falcon enterprise jets, which is in clear violation of the license issued to RAL. And there’s no proof for DRAL taking a brand new license to fabricate elements for non army aircrafts.

Additional, taking an industrial license displaying an tackle in Gujarat and procuring land in Maharashtra on the idea of that license is once more in violation of DIPP guidelines.

Most significantly, Dassault Aviation making a JV with an organization which didn’t have a legitimate industrial license on the time of crating the JV to fulfil its offset obligation is weird  to say the least and authorities’s declare of not understanding the IOP of the seller lack credibility and appears to be an effort to save lots of face from extra embarrassment.

(Writer could be rached on Twitter by way of )

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