"What If Offset Partner Runs Off?" Why Supreme Court Asked This On Rafale

In a four-hour hearing on the Rafale jet deal on Wednesday, the Supreme Court questioned the government's stance that it had no role in the offset clause, which is the focal point of the opposition's charge of corruption in the Rs 59,000 crore contract. Rafale-maker Dassault has not yet submitted details of its offset partner, the government told the Supreme Court.

"The vendor will inform the offset partner to us. So far there is no information on this," said Additional Secretary Defence Apurva Chandra, to questions from the judges.

The judges also asked the defence ministry why the offset guidelines were changed in 2015.

The court is hearing petitions asking for an investigation amid allegations that the government scrapped a deal for 126 Rafale jets negotiated by the previous UPA government and opted for a not-so-lucrative new contract for 36 jets just to help Anil Ambani's debt-hit defence company bag an offset partnership with Dassault.

In the previous deal, the joint venture was to be signed with Mukesh Ambani's Reliance Aerospace Technologies. But Reliance Aerospace Technologies decided to exit the defence sectors and the business passed on to Anil Ambani's Reliance Defence, though there was no official handover. When the court asked about the change in 2015 under the new government, the Defence Ministry officer explained that the offset contract runs concurrently with the main deal. 

The government said a political issue was being made out of the offset partner. "We have already said the government has no role in the selection of the offset partner," said Attorney General KK Venugopal.

Justice KM Joseph questioned: "If the offset partner runs off, what happens? What about the country's interest? What if the offset partner doesn't do any production?" The court said the government "can't separate" the main contract from the offset contract. "It may not be in the country's interest if the offset contract is executed later because that may lead to delay in production by the offset partner," the court said.

The court also asked if the deal was protected by a sovereign guarantee from France, to which the government said Paris had provided a "comfort letter". 

Reports suggest the deal had been stalled over Paris' refusal to be a sovereign guarantor. In the case of government-to-government deals with the US, Washington stands guarantee to ensure the contract is executed without a hitch.

The offset clause means that in exchange for landing the Indian contract, Dassault has to invest half the value of the deal - about 30,000 crores - in Indian firms. Anil Ambani's Reliance Defence was chosen as one of those "offset" partners and is to manufacture plane parts - though not for the 36 jets ordered by India.

Yesterday, Dassault rubbished Congress president Rahul Gandhi's allegation that the French aeronautics major had chosen Anil Ambani's company in order to bag the fighter jet order. "We chose Ambani by ourselves. We already have 30 partners other than Reliance," Dassault CEO Eric Trappier told news agency ANI.

Disclaimer: NDTV has been sued for 10,000 crores by Anil Ambani's Reliance Group for its coverage of the Rafale deal.