Rafale Deal: Apart From French President’s Letter, Modi Government Also Has Rs 1,500 Crore Bank Guarantee For Offset 

India has a Rs 1,500 crore (€185 million) bank guarantee from Dassault Aviation as a safeguard against any violation of the offset deal, The Economic Times has reported.

This clause was invoked at the behest of Indian officials, who argued that it was crucial to protect the country's interest. It mandates that five per cent of the total offset, the amount which a foreign equipment manufacturer is required to invest in India when it signs a deal, was to be used in case of Dassault's non-performance.

The government has also used this clause in the various government-to-government deal with the US, the daily’s report says.

Also, this clause is line with the 2013 defence procurement procedure, compiled under the Congress-led United Progressive Alliance (UPA) government. According to it, “the vendor shall be required to furnish a performance bond equal to 5% of the offset obligation, which is required to be fulfilled during the period of the main procurement contract.”

The Union Defence Ministry would have the right to cash the €185 million bank guarantee if it feels that Dassault has not kept its end of the deal.

The question of guarantee arose after the government told the Supreme Court during the hearing in the Rafale case that it does not have a sovereign assurance for the deal under which it is acquiring 36 fighters from Dassault Aviation.

It had, however, obtained a ‘Letter of Comfort’ from the French government. Attorney General K K Venugopal noted in the Supreme Court that, “there is no sovereign guarantee but there is a letter of comfort from France dated September 25, 2015 which says that if there is any exigencies, it would be taken care of by them (France).”

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