HAL or Dassault? The Battle That Reshaped India’s Rafale Deal

Recently in India, there has been renewed discussion regarding the proposed purchase of 114 Rafale fighter jets from Dassault Aviation. The major debate centers around the role of Hindustan Aeronautics Limited (HAL) in this deal.

According to earlier plans, 18 jets were to be delivered in flyaway condition directly from Dassault, while 108 aircraft were to be manufactured in India under license by HAL with technology transfer. However, several key sticking points emerged.

As per various sources, Dassault reportedly refused to take full responsibility for aircraft manufactured by HAL. Dassault expressed concerns about quality guarantees, performance standards, warranty liabilities, and potential production changes if HAL were involved as the primary manufacturer.

India, on the other hand, insisted that Dassault remain fully liable for all 126 aircraft under the original Medium Multi-Role Combat Aircraft (MMRCA) framework. Dassault preferred two separate contracts — one for the 18 flyaway jets under its responsibility, and another for the HAL-built jets. This disagreement became a major deal breaker.

Cost and efficiency concerns also played a major role. Estimates suggested that the HAL-produced Rafales could cost approximately 2.5 times more than the jets manufactured directly by Dassault. Inflation and localized production complexities were projected to significantly increase the overall cost, making it far from the cheapest option.

Historically, HAL had previously worked with Dassault on the Mirage 2000 program, and those aircraft are now undergoing upgrades. However, HAL’s overall track record has often been criticized for delays, inefficiencies, and overstaffing.

Dassault reportedly raised concerns that production delays or technology leakage — especially sensitive radar and avionics know-how potentially overlapping with platforms like the Su-30MKI or LCA Tejas programs — could damage its global reputation.

HAL maintained that it should be the prime Indian manufacturing partner, not merely an offset recipient. HAL was reportedly unwilling to participate only in offset work and wanted full production responsibility. This impasse ultimately led to the collapse of the earlier negotiations around 2015 under the MMRCA tender.

Both the UPA and NDA governments acknowledged the deadlock. Former HAL Chairman T. S. Suvarna Raju later stated that HAL was not even consulted during the later restructuring of the deal.

Subsequently, under Prime Minister Narendra Modi’s government, India signed a separate government-to-government agreement with France in 2016 for 36 Rafale jets in flyaway condition. This deal did not include local assembly but mandated a 50% offset clause worth approximately ₹30,000 crore.

Dassault clarified that the selection of Indian offset partners was its independent commercial decision and not directed by the Indian government. This was confirmed by Dassault CEO Eric Trappier, the French government, and was also referenced in proceedings before the Indian Supreme Court in 2018.

Reliance Defence entered the picture through a joint venture with Dassault (Dassault Reliance Aerospace Limited – DRAL). Alongside Reliance, other Indian companies such as Tata, L&T, Mahindra, Godrej, and even HAL participated in smaller roles within the offset ecosystem. Godrej, for example, secured around 10% of offset work related to aerostructures and components.

The DRAL facility was built in Nagpur with runway access — a strategically important aviation infrastructure point. Reliance highlighted its engineering capabilities and readiness to invest quickly in new facilities.

Meanwhile, HAL had a massive order book reportedly worth over ₹1 lakh crore and was focused on full aircraft production rather than offset participation. Statements from HAL officials indicated they were not particularly interested in being limited to offset work alone.

In summary, the core dispute revolved around responsibility, cost efficiency, production control, and industrial partnership structure. HAL wanted to be the primary manufacturing partner for full aircraft production, while Dassault preferred retaining responsibility for aircraft quality and limiting HAL’s role. This fundamental difference ultimately reshaped the Rafale procurement path taken by India.

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