Thursday, June 13, 2024

Dassault Aviation Eyes Full Control Of DRAL Amid Reliance Defence’s Cash Crunch

By Staff Correspondent

In a move highlighting the financial hurdles Anil Ambani’s Reliance Defence reportedly faces, French aerospace and defence giant Dassault Aviation has initiated discussions to purchase the stake in their shared venture, Dassault Reliance Aerospace Limited (DRAL). The joint venture (JV), situated in Nagpur, has recently stagnated due to insufficient funds for its expansion, sources within the industry revealed.

Currently, Reliance Defence holds 51% of the venture, with Dassault Aviation owning the remaining 49%. The partnership was established in 2016, shortly after India signed a €7.878 billion agreement for 36 flyaway Rafale jets, with plans for DRAL to produce the complete Falcon business jet in Nagpur. However, the financial turbulence facing Ambani has said to have derailed these ambitions.

With India allowing 100% foreign direct investment (FDI) on a selective basis, Dassault Aviation seems to be confident about receiving the required clearances to proceed with the buyout. Initially considering an alternate Indian partnership, Dassault Aviation has now resolved to proceed solo.

Located within Nagpur’s MIHAN Special Economic Zone (SEZ), the DRAL facility has been tasked with creating parts for the Rafale fighters, but the rate of production has waned, insiders have noted. Despite being initially constructed to manufacture Falcon jet components, the factory shifted its focus in 2019, beginning the production of Rafale parts.

The shift in manufacturing focus was a part of the offset obligations included in the 2016 Rafale contract, mandating that half the contract’s value be invested back into India. If Dassault Aviation secures the contract to manufacture an additional 114 fighters for the Indian Air Force (IAF), it has expressed interest in expanding its manufacturing capabilities in India.

As the IAF faces a significant drop in squadron numbers, it is reported to be considering issuing a tender for 114 new fighters. Currently operating 36 Rafale, the IAF is expected to decommission its MiG 21s, Jaguars, and MiG 29s by 2029-30, leaving it significantly under its sanctioned strength of 42 Squadrons.

Concurrently, the government plans to purchase 26 Rafale Marine, a naval variant with higher ‘Make in India’ components than the IAF variant. Despite the prospect of the Nagpur facility undertaking all the manufacturing for these new aircraft, the relatively small numbers are unlikely to enable a more extensive indigenous development programme.

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