Reliance Defence forms JV with Thales for IAF's Rafale jet production

The JV at Mihan wil serve offset clause pf $1 billion offset against 36 fighter jet

French defence firm Thales, a supplier of radar and electronic warfare, display systems, software, communication solution to Rafale jet fighters set up a joint venture with Anil Ambani's Reliance Defence Ltd to integrate India-specific capabilities for 36 Rafale jet fighters and maintain radars and manufacture high-performance airborne electronics. 

The Indian government signed a contract to purchase 36 Rafale fighter jets in fly-away condition for Indian Air Force in last September for $8.8 billion. The JV will also serve to leverage Dassault's offset commitment as part of the deal for the supply of 36 Rafale fighter aircraft to IAF. The Rafale deal with French aerospace major Dassault had an agreement of 50 per cent offset clause which means that Indian companies will get businesses of around 74 per cent in goods and supply. The company in which Reliance Defence will hold 51 per cent stake will develop the technology at their facility at Mihan Special Economic Zone near Nagpur.

Anil Ambani, chairman of the Reliance Group, called the "strategic partnership" with Thales yet another milestone for his company. "The strategic partnership with global leader Thales is another major milestone in our march towards best in the class manufacturing at support facilities for military hardware in India," he said. The group set up a joint venture- Dassault Reliance Aerospace Pvt. Ltd last year with Dassault after the Rafale deal.

Thales CEO, Patrice Caine said the partnership signals the company's intent to strengthen footprint in India.

An industry executive aware of the development said the JV will hire around 40 people and has around $1 billion offset obligation against the 36 Rafale jet deal. In addition to it Thales has offset obligation for the Mirage 2000 mid-life upgrade. "The JV will develop skills and activity in the region together with an Indian supply chain, train develop human capital as required with long term business intention," the executive said. He declined to give a quantum to the required capital expenditure.

Indian defence firms are setting up joint ventures with foreign firms to take benefit of the government's indigenisation plan. Under the new strategic policy, the government has decided to involve private parties more in defence production in four sectors- helicopters, submarines, fighter jets and submarines. For instance, Tat Advance Systems formed a JV with US firm Lockheed Martin to produce F-16 Block 70 fighter jet in India. Reliance itself formed a JV with Serbia's state-run defence major Yugoimport to manufacture ammunition in India