The Rafale aircraft is categorised under ‘complex product systems’ (CoPS) and very few nations have ‘mastered’ the science of manufacturing military aircraft. Military airplanes are complex platforms with high performance engines, advanced composite material airframes, mind-boggling avionics, sophisticated radars, advanced combat systems, and lethal weaponry. The quantum of research and development to build an aircraft is humongous and some of these companies have invested heavily and continue to invest in R&D. India is just about showing signs of that capability with the light combat aircraft, but it has a long way to go before it can really build an aircraft from scratch.

And when on September 23, 2016, India and France inked the contract for purchase of 36 Rafale fighter jets from Dassault Aviation for $8.7 billion, it was historic for two reasons – one, the Indian Air Force would be soon increasing its squadron strength at least by two and the second reason being that it would help create an ecosystem for developing a military aircraft industrial base.

This was aptly summed up by the French Defence Minister Jean-Yves Le Drian who in an interview said: “What matters is the result: an agreement that paves the way for unprecedented industrial and technological cooperation between our two countries, including the ‘Make in India’ in which French companies will be fully involved.” The deal, indeed, has been a masterstroke by the Indian Prime Minister Narendra Modi who has been aggressively marketing to the world and also to domestic entrepreneurs on how important the ‘Make in India’ programme is, even while we may be importing products and solutions that are high technology and not readily available or not easily transferable. There is no escaping the fact that for the foreign original equipment manufacturer this would translate into big business and when there is going to be co-development and co-production it would translate into huge benefits in the aviation sector in the not so distant future.

The Chairman & CEO of Dassault Aviation, Eric Trappier said in an interview: “It is 36 at the moment. We feel that we can create a strong industrial partnership in India, we know very well the large number of aircraft that the IAF needs. Yes, of course. We will see how we can carry forward with the ‘Make in India’ initiative. We are open to manufacturing Rafales in India.”

Creating an Ecosystem

It is only now that India is talking increasingly of first developing an ecosystem for Indian aviation. This new found enthusiasm in the private sector and also the realisation of the public sector to join hands with the private sector in creating an ecosystem for aerospace are going to transform the aviation sector. The Rafale deal is going to be part of this bigger picture.

THE OFFSETS WILL BE CARRIED OUT BY FRENCH COMPANIES SAFRAN, THALES, MBDA AND DASSAULT, ALL PART OF THE RAFALE PROJECT

To build an aviation industrial base, there are several routes, but one imperative is a knowledge-base: technological for ‘make’ and production for ‘buy’. The foreign OEM certainly influences technology acquisition mode and also the course of co-development and co-production and Dassault Aviation is going to be placed in a unique position as it has long strategic relations with India, beginning with the IAF acquiring Mirage aircraft.

Technology and Capital-intensive

Fighter aircraft are not only technology-intensive but also capital-intensive, besides strong R&D foundation. They shape and enable modern industrial and economic programmes with the introduction of new technologies. The aviation sector requires a wide range of technology, in fact state-of-the-art technology across all disciplines—mechanical, electronic, computer science, materials, engineering, etc. The choice is between internal development and external development – ‘Make’ or ‘Buy’ approach and these two options are closely related with the very first stage of the aircraft industry development. According to a study ‘Buy’ is the most preferred mode of initial acquisition, as some countries begin with “maintenance shops, move next to the assembly of imported planes, and to the manufacture under licence of military planes for the local market with some eventually doing subcontract work for major aircraft producers” (Moxon 1987; Frischtak 1994).

Offsets to Spur Sector Growth

Also offset agreements are one of the most prevalent technology transfer modes in military aircraft industry. In the Rafale deal, which comes with a 50 per cent offset clause, that translates to businesses worth over 3.5 billion euros for Indian companies.

At the time of going to the press, we have news that Dassault Aviation and Anil Ambani’s Reliance Group announced the creation of a joint venture (JV) in India.

This new JV called ‘Dassault Reliance Aerospace’ will support Prime Minister Modi’s ‘Make in India’ and ‘Skill India’ policies and develop major Indian programmes with high levels of technology transfer to benefit the entire aerospace sector.

“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 ‘Make in India’ policy promoted by the Indian Government,” declared Eric Trappier, Dassault Aviation Chairman & CEO.

“We are delighted to partner a world leader in aviation like Dassault Aviation, and a visionary leader like Eric Trappier. This is a transformational moment for the Indian aerospace sectorand for Reliance Infrastructure’s subsidiary Reliance Aerospace,” said Anil Ambani, Chairman of the Reliance Group.

The venture is expected to lead to a quantum jump in aerospace manufacturing by way of setting up assembly lines and components. There are likely to be other offset partners which may open up opportunities for the micro, small and medium enterprises through sourcing and contracting. The JV, it is believed, would focus on aerostructures, electronics and engines and add to the infrastructure and supply chain in India for the aerospace sector. An integrated facility is to be set up at Reliance’s Special Economic Zone in Nagpur.

Commenting on the Rafale contract, Puneet Kaura, Managing Director & CEO, Samtel Avionics, has said: “The offset clause of 50 per cent in the Rafale deal will provide a great opportunity for indigenous manufacturers such as us who have put in years of effort in developing world-class technology within the country. It further outlines the commitment made by the Indian Government to promote the Indian manufacturing industry and support indigenisation of defence needs of the country. The future also holds a possibility for India to become a global manufacturing hub for these fighter planes in case there is successful transfer of technology.”

This means a lot of business and job opportunities in India. The offset will be spread over a period of seven years. The offsets will be carried out by French companies Safran, Thales, MBDA and Dassault, all part of the Rafale project. As per the initial agreed points, the French have offered to provide stealth, radar and thrust vectoring for missiles technologies besides others to DRDO and domestic defence firms.

The road ahead seems co-development and co-production. With business opportunities opening up in aviation, it is indeed time for the public sector and private and the foreign OEM to join hands. The Director (Operations) of HAL, S. Subrahmanyan, said that HAL was working on creating an ecosystem as it had the wherewithal. Stating that HAL was already supporting a number of Tier-II and Tier-III vendors, it would be in the larger interest if HAL started looking at Tier-I.

Air Vice Marshal P.K. Srivastava (Retd), Vice President, Defence and Aerospace Division, Larsen & Toubro Limited, said that if HAL is going to share business with private vendors then it would be a great stimulus to the aerospace sector. The vendor base was around 358 of HAL and the order inflow to the private sector was ‘a trickle’. “Unless Tier-I happens within the country, defence growth will remain where it is.”