Friday, July 15, 2011

EXCLUSIVE! Defense Offset Capitation Committee for MMRCA

Neelam Mathews
July 15, 2011

The government is not taking the MMRCA contract lightly. A Defense Offset Capitation Committee for the MMRCA set up last week is being headed by Chief of Defense Staff Vice Admiral Shekhar Sinha and deputy chiefs among other members. 

The committee will evaluate whether Indian business partners chosen for offsets by OEMs are well capitalized, Aerospace Diary learns.

“This is a great step forward,” says a private industry observer adding the liability on Indian partners presently is too little.

“Should a company declare bankruptcy, it would impact the offsets plan,” adds the official.

Interestingly, an example is cited of an OEM having signed a JV with one of India’s largest groups though no legal entity exists in its name!

This is the first time the government is verifying whether Indian companies are committed to becoming good offset partners. “The government is saying if you want a viable industry put your money upfront. This doesn’t mean invest without contract. It means simply,commit resources," says an analyst.

Aerospace Diary learns Joint Secretary (ES) called for a meeting today to discuss Project Management activities, Supply Chain Management and Contractual Supply obligations for defense equipment / contracts as valid offsets and their providers as IOP. The mode of providing Financial Services through intermediaries to SMEs in defense (for valid products) as allowable offsets, is also being discussed.

The meeting, Aerospace Diary learns, was deferred to another date.

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