- Government is likely to soon clear a contract worth over $2.5 billion for 22 Apache attack helicopters and 15 Chinook heavy-lift choppers with US aviation giant Boeing.
- Defense sources said ,the file relating to the offset conditions for the contract was cleared by the Defense Ministry last week, and now the deal will come up for discussion in the Cabinet Committee on Security.
- The extended validity period of the price quoted by Boeing is ending this month.
- Offset policy was first introduced as part of the Defense Procurement Procedure (DPP), 2005, under which a foreign company has to invest back a portion of the deal into India.
- Usually 30 per cent of the value of a defense contract is earmarked under the offset clause in India.
- Many in the defense sector had expected the deal to be signed during last week’s visit of US Defense Secretary Ashton Carter.
- Boeing, along with the US government, had extended the validity of the price quoted by them for another three months in April hoping to wrap up the deal soon.Indian Defense Ministry had in March sought extension of the validity period on its expiry on March 31.
- The US firm had in February this year warned of a price hike if India does not finalize the contract soon.Boeing has extended the price validity for the deal at least thrice since cost negotiations concluded in 2013.
- The present Defense Procurement Policy does not allow room for increase in price once a bid has been shortlisted. In the event of the original manufacturer seeking a higher price than the one agreed upon, the tender can be terminated and a fresh one issued.
- The deal for the Apache is a “a hybrid one”, with one contract to be signed with Boeing for the helicopter and the other with the US government for its weapons, radars and electronic warfare suites.
- The US has been pushing for this contract as it will further bolster American presence in the burgeoning defense market of India.
- American companies have over the last decade bagged defense contracts from India worth around USD 10 billion, including for aircraft like P-8I, C-130J ‘Super Hercules’ and C-17 Globemaster-III.
Source:The Economic Times