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OVERSEAS BIDDERS GETTING STUCK WITH INDIAN OFFSETS

OVERSEAS BIDDERS GETTING STUCK WITH INDIAN OFFSETS
By Bulbul Singh

23 Jun 08. Even as the last date for the $10bn Medium Range Multirole Combat Aircraft (MMRCA) program is extended by the Indian government, several overseas companies are lobbying for a change in Indian Offset policy to include Technology Transfer and Banking Offsets. Some of the overseas companies are still not ready with their Offset proposals.

Sources in the Indian defence ministry said, “Some overseas bidders have again requested the Indian government to delay the last submission date for Offset bids in the by another three months.” The last date for submission of Offset bids was extended earlier from May 8, 2008 to August 4, 2008 following demands from overseas bidders.

The original Request floated the RFP in August 2007 to Eurofighter Typhoon, France’s Rafale, Russia’s MiG-35, Sweden’s Jas-39 Gripen, and U.S.-built F-16 and F/A-18 Super Hornet.

The Indian government increased the level of mandatory Offset from the current level of 30 per cent of the total contract to 50 per cent of the total contract.

The overseas companies have been finding it difficult to submit Offset proposals due to the increase and there was ambiguity in the Offset policy which led to a number of questions being raised by bidders.

Meantime, most of the bidders are still pressing for inclusion of Technology Transfer as Offset. Unless Technology Transfer is included as Offset some of the bidders are going to face problems in giving Offset bids. They will be unable to meet the Offset requirements under the present conditions as the size of the Offsets will be very large and thus the Indian domestic market is still not prepared to assimilate the Offset business which will be generated.

All the bidders have tied up with Indian entities to meet these Offset requirements. Lockheed Martin with Hindustan Aeronautics Limited, (HAL), Bharat Electronics Limited (BEL) and Tech Mahindra, owned by Mahindra and Mahindra; Boeing with Tata Consultancy Services, BEL and Wipro Technologies; Eurofighter with HAL, BEL, Larsen & Toubro (L&T) and Tata Consultancy Services; Saab with L&T, Tata Group, BEL and HAL; Dassault has tied up with Tata group, L&T and BEL; MiG Corporation has tied up with HAL and BEL, and state-owned Midhani. Sources in the Indian defence ministry said, they have been trying to resist pressure from overseas companies by sticking to direct offsets only and not including Technology Transfer.

Bidders are also demanding the inclusion of banking offsets in addition to Technology Transfer in the revised Offset Policy which is in the final stages of finalization. Under banking, a company can credit offsets from one military project and utilize it for meeting the offset obligation for another project. On banking, the Ministry is considering two options — whether to restrict banking to five years or have a 10-year validity.

The Indian government announced the Offset policy in 2005 with the aim to get state-of-the-art technologies for both, Public and Private Sectors to give major thrust to Self Reliance and boost Defence exports. A senior Indian defence Ministry official said the list of Priorities of the Offset Policy through Direct Offsets include a) Acquisition and development of state –of-the-art technologies. b) Acquisition and development of manufacturing competence to create world class defence production industry c) Export of defence industrial products, sub-systems, engineering design and testing services

The Offset Policy was further fine tuned in 2006 as the offset clause would be applicable for all procurement proposals where indicative cost is above $73m and the schemes are categorized as ‘Buy (Global)’ involving outright purchase from foreign/Indian vendors and ‘Buy and Make with Transfer of Technology’ i.e. Purchase from foreign vendor followed by Licensed Production.

However, offset has met with resistance from the defence forces on

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