NEW DELHI/PARIS - Dassault Aviation said it picked India's Reliance Defence as a partner for a big military combat deal on its own, countering a French online media report that said the Indian government insisted on the firm as a condition of the contract.
Indian Prime Minister Narendra Modi's purchase of 36 Rafale planes in a deal estimated to be worth $8.7 billion has become a political controversy and on Thursday his rivals seized on the revelations by Mediapart as further evidence of wrongdoing.
The deal has faced scrutiny both on the price and the decision to choose billionaire Anil Ambani's Reliance as a local partner with no aeronautical expertise instead of the state-run Hindustan Aeronautics which has a long history of making planes.
The French news outlet said it had obtained a Dassault company document in which a senior executive is quoted as saying the group agreed to work with Reliance as an “imperative and obligatory” condition for securing the fighter contract.
Under India's defence procurement rules, any company selling equipment must invest at least 30 percent of the contract in India as part of an "offset" clause to help build a domestic manufacturing base and reduce the country's dependence on imports.
Mediapart's report appeared to corroborate former French President Francois Hollande's comments last month that New Delhi had put pressure on Dassault to choose Reliance as the offset partner in a deal worth millions of dollars to Indian company.
The deal was sealed when Hollande was in office.
But Dassault in a statement late on Wednesday denied Delhi had a role in the choice of the partner.
It said it had committed to investing 50 percent of the contract value to benefit the local economy and for that purpose had entered into a joint venture with the private Indian firm.
The joint venture, Dassault Reliance Aerospace Ltd (DRAL), was created in February last year and the foundation stone for the plant was laid in October in Maharashtra.
"Dassault Aviation has freely chosen to make a partnership with India's Reliance Group," it said. The plan is to produce parts for Dassault's Falcon 2000 business jets and, in a second step, components for the Rafale combat aircraft that the Indian military is buying to upgrade.
The company said it had trained an initial team of managers and workers and the first Falcon components will be delivered by the end of the year.
India picked the Rafale plane to replace its ageing fleet of Russian aircraft from a field that included Lockheed Martin F-16, Saab's Gripen, the Eurofighter Typhoon, Boeing 's F/A-18E/F Super Hornet and the Russian MiG-35.
The leader of the main opposition Congress party, Rahul Gandhi, said Modi had been silent on the allegations of wrongdoing in the deal.
"PM should come clean on the Rafale deal. He came to office with the express purpose of eliminating corruption and now we have a clear case of wrongdoing before us," Gandhi told reporters while the party distributed copies of the French report.
The defence ministry said it stood by its position that the government had no role to play in Dassault's selection of its local partner. Modi could not be reached for comment but members of his party have repeatedly derided the opposition saying they were undermining national security.
Reliance did not respond to a request for comment.
(Reporting by Sanjeev Miglani; Editing by Nick Macfie)