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Nagpur SEZ to host Rafale offset manufacturing (Relevant for GS Prelims)

An integrated facility will be commissioned by the Reliance Anil Dhirubhai Ambani Group and its French partner Dassault in Nagpur in the next few months for the execution of offset contracts of the just-concluded deal for 36 French fighters. A significant part of the whopping Rs. 30,000 crore offsets would be executed through the joint venture, Dassault Reliance Aerospace.

According to industry sources, the new facility will come up in the Reliance Special Economic Zone (SEZ) in Nagpur, and it would be fully operational within the next 12 months.

What is Offset Clause?
Last month India and France concluded a €7.87-billion deal for 36 Rafale multi-role fighter jets in a fly-away condition.  There is a 50 per cent offset clause under which French industry will invest half the contract value back in the country which is expected to develop some expertise domestically in the aerospace sector.

Officials said 74 percent of the 50 percent offset value should be exported from India. This is expected to result in Euro 3 billion over the next 7 years. 

How 50% of the contract value will be invested in India?
Four French companies which have a major stake in the Rafale deal — Dassault Aviation, Thales, Safran and MBDA — will execute offsets worth about Rs. 30,000 crore as per their share. The Dassault-Reliance JV will only execute a part of the offsets. 

The first three companies individually have about 25-30 percent share in the aircraft which will also be the case in executing the offsets. Another 10 percent is held by several other French companies based on their contribution. MBDA is the weapons manufacturer which is also part of the contract.

As per the agreement about 30 percent of the Rs. 30,000 crore i.e. about Rs. 9,000 crore has to be invested in Reseach & Development (R&D) along with the Defence Research and Development Organisation (DRDO) for technology development.



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