With the government seeking revised offset proposals from the six contenders for the medium multi-role combat aircraft (MMRCA) deal by April 15, a comprehensive defence offset policy is in the offing and is likely to be released early next month.
?The new policy will seek to do away with any ambiguity currently there,? say defence ministry sources.
According to industry sources, ?A letter has been sent by the government to all the vendors seeking revised offset proposals on Monday evening. This is an indication that the things are back on track.?
The detailed policy is expected to concretise the opening of the civil aviation and internal security in more certain terms, so that there will be no room for confusion, added sources. The defence offsets policy is likely to bring in $10 billion during the 11th Five-Year Plan period (2007-11).
Talking to FE, sources said, ?The changes are likely to provide invitations to offer offsets proposals to be issued to only those vendors who are validated as technically qualified by the respective service. The shortlisted vendor will be invited for opening of their respective commercial bids.?
Currently, both technical and commercial offsets proposals need to be submitted by all vendors competing in a tender. Under the current policy the technical offsets proposals are examined and validated by the Technical Offsets Evaluation Committee, and the commercial offsets are submitted as sealed proposals, to be opened only when the respective commercial offer for the vendor is opened.
According to sources, the changes are being designed to help the MMRCA tender process, which is governed by the Defence Procurement Procedure (DPP) 2006 and plans to seek a legal route for approval to implement the revision with retrospective effect.
Nidhi Goyal, director, Deloitte in India, said, ?In a medium multi-role combat aircraft deal for the supply of 126 state-of-the-art fighter jets to the Indian Air Force, the selected supplier would require to meet offset obligation of 50% of the foreign exchange component of the value of the total deal of $10.8 billion. Out of which an estimated offset business to an extent of $ 4 billion is likely to be generated for the Indian industry.?
Adding, ?It is expected to stimulate growth in the Indian defence industry which should be able to absorb the cutting edge technologies to acquire domain expertise in aerospace manufacturing and defence electronics. Further, with other big ticket procurements such as maritime aircrafts, helicopters, sea-hawks, anti-submarine warfare in military aerospace segment, business for the Indian i ndustry atleast to the tune of $8 billion is likely to flow over a period of 5-10 years.?
Also, discussions are going on between the government agencies as well as industry bodies about the eligibilty of a wholly-owned subsidiary of a foreign company, though India registered, for offsets. It would need to modify its share holding pattern and bring it to 74% Indian Holding for it to be eligible for offsets, unless special dispensation to it is permitted by the government.