Dassault, India tussle over supply chains

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BANGALORE, India, Jan. 11 (UPI) -- India's defense ministry reiterated that Hindustan Aeronautics Ltd. will remain lead integrator for producing 108 Rafale fighters under the medium multirole combat aircraft contract.

Replacing HAL as integrator would jeopardize the procurement process carried out to secure the $15 billion deal with Dassault Aviation in France that was signed in January 2012.

The MMRCA contract called for final and exclusive negotiations with Dassault before production begins.

Under the tender issued in 2007, the first 18 of 126 of the twin-engine delta-wing fighters will be supplied by Dassault from its facilities in France. The remaining 108 will be produced under license by HAL at its Indian factories.

A deviation from the tender issued for the project would need to be approved by the Defense Acquisition Council and legal issues could arise, ministry sources told the Press Trust of India.

The ministry issued its statement after coming under pressure from Dassault to clarify the role of HAL so the French manufacturer could explore options for working with other companies.

Defense officials said it would convey final details of the relationship to Dassault and HAL this month, the PTI report said.

HAL is a Navratna company -- a government business -- and has 19 production and overhaul divisions and 10 research and development centers in India, the company's Web site said. It has 33,000 employees of which around half have "more than a decade of aircraft industry experience."

Dassault has been pressing the government for more freedom to choose its supply chain partners in light of a deal it signed -- shortly after getting the MMRCA contract -- with India's Reliance Industries Ltd. for working together in defense and homeland security agreements.

"Dassault Aviation, a major player in the global aerospace industry, has entered into a memorandum of understanding with Reliance Industries, for pursuing strategic opportunities of collaboration in the area of complex manufacturing and support in India," officials of the two companies told PTI shortly after Dassault landed the MMRCA deal.

The PTI report said Dassault had told the ministry that if it had overall responsibility for the project, it should have the freedom to decide on the proportion of work done by HAL and other private companies.

In February the PTI reported that Dassault must reinvest 50 percent of the worth of the deal back into Indian defense sector.

The aerospace and security division of the Reliance Industries is headed by Vivek Lall, who has been closely associated with the MMRCA deal while spearheading the campaign for Boeing in the deal.

Dassault won the hard-fought MMRCA contract by beating EADS with its Eurofighter Typhoon, Boeing with its F/A-18E/F Super Hornet, Lockheed Martin's F-16, the Russian-made MiG-35 and the Gripen from Swedish firm Saab.

The loss was a blow to EADS which less than two months before, in December 2010, had lost out to Lockheed Martin's fifth-generation fighter F-35 Lightning II in a major Japanese military contract.

Japan chose the F-35 also over Boeing F/A-18 Super Hornet in a deal estimated at around $7 billion for 42 planes.