Indian government is expected will release a newly amended defence offset policy pertaining to the $10.6-billion contract for 126 medium multi role combat aircraft (MMRCA) by next week. This will ensure the much-needed clarity for the vendors of the MMRCA deal as well as speed up the earmarking of the MMRCA candidate.
According to sources, the potential contenders of the MMRCA are expected to be revealed by next month once the reshaped offset policy is released next week. Also, the policy will shape the opening up of the civil aviation and internal security in a clear manner. The six contenders for the MMRCA contract had pointed out that the offset obligations are hard to fulfill since they had been hiked to 50 per cent of the contract value. The Defence Ministry has assured that the offset guidelines will change for the MMRCA and that the changes are being designed to help the MMRCA tender process. At present, a revision of the offset policy is being envisaged within the legal frameworks for approval.
The release of the new offset guidelines will set the ball rolling for commercial negotiation of the MMRCA contract. It is expected that the amendment in offset is likely to provide invitations to offer offsets proposals for those vendors who are validated as technically qualified by the respective service. Currently, offset proposals of the contenders are being examined by the Technical Oversight Committee (ToC) of the Indian Defence Ministry. In addition, the commercial negotiations can only be carried out with vendors who pass technical Qualitative Requirements implying that a fighter must first technically qualify before the commercial negotiation is carried out.
In the MMRCA deal, the selected supplier was required to meet offset obligation of 50 per cent of the foreign exchange component of the value of the total deal of $10.6 billion. Also being discussed, is the eligibility 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 per cent Indian holding for it to be eligible for offsets, unless special dispensation to it is permitted by the government.
As for the IAF, it has already assessed MMRCA competitors against 660 technical benchmarks and has provided its recommendations to the Ministry of Defense. The IAF has evaluated the fighters' sensors and avionics, weapons, aerodynamic effectiveness, and mission performance. The transfer of technology and the cost entailed will also play a decisive role.