Reiterating that the Union government had no role in the selection of offset partner in Rafale deal, the defence ministry said unnecessary controversy is being created over the issue.
The defence ministry claimed that the reported statement by former French president Francois Hollande "needs to be seen in its full context, where the French media has raised issues of conflict of interest involving persons close to the former president. His subsequent statements are also relevant in this regard".
In a carefully worded statement, the defence ministry said it had no role in the selection of Reliance Defence as the offset partner.
The ministry said the offset policy was formally announced for the first time in 2005 and has been revised several times.
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To leverage its huge arms imports in order to develop a strong indigenous industry, a flow-back arrangement is made in defence contracts, which is widely known as offsets, and constitutes a certain percentage of the contract value. "The key objectives of the defence offset policy is to leverage the capital acquisitions to develop Indian defence industry by fostering development of internationally competitive enterprises, augmenting capacity for research and development in defence sector, and to encourage development of synergistic sector like civil aerospace and internal security. The offset can be discharged by many means such as direct purchase of eligible products/services, FDI in joint ventures and investment towards equipment and transfer of technology," the defence ministry said, while adding that as per defence offset guidelines, the foreign original equipment manufacturer (OEM) is "free to select any Indian company as its offset partner".
Defence ministry said as per the guidelines, the vendor is to provide the details of the offset partners either at the time of seeking offset credit or one year prior to discharge of offset obligation, which in this case will be due from 2020.
However, taking the debate to a different level, the defence ministry mentioned media reports of February 2012, which suggest that Dassault Aviation, within two weeks of being declared the lowest bidder for procurement of 126 aircraft by the previous government, entered into a pact for partnership with Reliance Industries in defence sector. Dassault Aviation signed an MoU with Mukesh Ambani-owned Reliance Industries for defence offsets and manufacturing. But, in June 2014, the MoU lapsed with no forward movement on Rafale negotiations.
Defence sources claimed that, in March 2015, Anil Ambani incorporated Reliance Defence after his elder brother Mukesh Ambani decided to withdraw from defence sector.
Meanwhile, reacting sharply to Rahul Gandhi's remarks on Prime Minister Narendra Modi (desh ka chowkidaar chor hai), Union minister Ravi Shankar Prasad said, "Never before in the history of independent India, has a party president used such words for a PM. We can't expect anything else from Rahul Gandhi. He has no quality or ability. He is there due to his family."
The CPI also joined the opposition chorus in demanding the resignation of PM Modi and Defence Minister Nirmala Sitharaman over the Rafale controversy after Hollande's statement. The CPI also urged the Chief Justice of India to suo motu order a Supreme Court-monitored probe into the entire deal.