MMRCA deal a shot in the arm for industry

Chennai/Bangalore: The impending $12 billion contract to buy 126 Medium Multi Role Combat Aircraft (MMRCA) by the defence ministry from Dassault, is set to be a game changer for the Indian aerospace and defence industries with as much as $6 billion worth of offset contracts expected to flow to Indian companies.
This deal, as and when signed, ensures that Dassault along with its two major suppliers Thales and Safran Group would place offset contracts on Indian vendors amounting to minimum of 50 per cent of the value which in this case could be $6 billion and this obligation would be co-terminus with fulfilment, which is 12 years span. Hindustan Aeronautics Limited (HAL) would be the lead production agency and would be in charge of assembly of the aircraft and engines. It would commence production by T+4 years. It would produce 20 aircraft a year at steady state (T+9 years) and deliver all 108 made in India by the 12th year. However, components, subsystems and services can be procured by the vendor (Dassault) or its OEMs from any Indian Defence Industry of their choice.
The three companies that constitute the vendor team, i.e. Dassault, Thales and Safran, have traditionally a strong presence and relationship with Indian companies. For example, the Safran group has already invested a lot in India through companies like Safran Engineering Services, Snecma HAL, Turbomeca India engines in aerospace and Morpho Detection, Smart Chip Ltd in homeland security and more such inflows are expected.
“As per Defence Procurement Procedure (DPP) 2006 on which the contract is quoted, only HAL, a few defence PSUs and about 60 Indian Companies licensed by DOFA (Defence offset Agency) are eligible to share this offset pie and all procurement should be defence related only, with full value addition in India. However if the proposed new DPP 2012 or its immediate release in 2011 are applicable it would widen the catchment area including any product or Direct services relating to Defence, Commercial Aerospace or Homeland Security performed by any company of vendors choice licensed or otherwise. Also the offset obligation can be shared by Dassault or its main OEMs — Thales and Safran Group in a pro-rated basis. Retrospecting the new 2012 to this contract would definitely be a game changer,” said Sampath Ravinarayanan, an industry expert, having served on the Board of Air India, Indian Airlines, Airbus Engineering India among others.
08/02/12 Raghuvir Badrinath/Business Standard

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Categories: Foreign Feb 2012, Indian Aviation- In General Feb 2012