Defence Ministry planning major changes in defence procurement

[Agent_47]

NEW DELHI: The defence ministry is planning major changes in the way it procures military equipment,seeking to link the offsets policy with Prime Minister Narendra Modi's 'Make in India' campaign after foreign suppliers repeatedly failed to meet the stringent conditions and ended up blocking investments of several hundred million dollars in the sector.

The ministry is finalising a "directed offsets" policy that will require foreign companies to set up manufacturing bases in India, officials said.

They added that the move stems from an acknowledgement that the stringent offsets policy that requires foreign firms to invest at least 30 per cent of the contract value in India has not spurred domestic manufacturing to the extent desired while the overseas suppliers have accumulated over $35 million in fines over the past few years. Foreign firms were able to invest just $676 million in India between 2008 and 2014 against the mandated $1.3 billion.

Outlining the new offsets policy, Defence Secretary RK Mathur said that the government is considering a directed offsets policy,as per which the foreign vendor will be mandated to manufacture a part of the system being procured under the Make in India programme.This will be initially applicable to large contracts that involve the procurement of major platforms.

"For example, if I am buying Sukhoi, I would link it up with 'Make in India' procedure and say that the Sukhoi manufacturing company must invest in India, with Indian companies, to manufacture the spare parts or components of Sukhoi itself, "Mathur explained to a Parliament panel. The 36-Rafale fighters deal with France will be the first major programme that is likely to follow the new policy. The ministry is likely to insist that at least 30 per cent of the value of the contract be used to set up manufacturing units in India. As reported, one option is to order a larger number of Rafale fighters with an Indian joint venture partner.

Under the original offsets policy,the winning vendor had the liberty to choose its partners to discharge the offset obligations and very often ended up investing in unrelated projects - such as a wind tunnel facility as an offset for the purchase of a military transport aircraft. By taking the power of directing the incoming investments to a particular area, the ministry will have the authority to get the particular technology that it requires.

Experts believe that the existing policy has not enabled Indian companies to unleash their potential in the global market. "A limited number of Indian companies have indeed become apart of the global supply chain of OEMs(original equipment manufacturers) and can now boast of world-class infrastructure and credentials. However the impact of the offset policy has not been to the desired depth and width," said Ankur Gupta of E&YIndia.

Defence Ministry planning major changes in defence procurement; seeks to link offsets policy with 'Make in India' - The Economic Times

@sancho check out red part. If it can be done i have no problem with this off the shelf/fast track rafales.

 

[sathya]

what technology will be directed to be acquired with Rafale deal

spares ?

 

[bloo]

I think there should be a proper establishment just for reverse engineering.

 

[SanjeevaniButi]

what technology will be directed to be acquired with Rafale deal

spares ?

I hope you realize that "Spares" are just regular Aircraft parts

30% can mean anything from Engine to Radar to avionic equipments, ECM equipments etc. But its important to clearly define what 30% means. 30% by cost or 30% by weight or 30% by technology knowledge transfer.

 

[sancho]

NEW DELHI: The defence ministry is planning major changes in the way it procures military equipment,seeking to link the offsets policy with Prime Minister Narendra Modi's 'Make in India' campaign after foreign suppliers repeatedly failed to meet the stringent conditions and ended up blocking investments of several hundred million dollars in the sector.

The ministry is finalising a "directed offsets" policy that will require foreign companies to set up manufacturing bases in India, officials said.

They added that the move stems from an acknowledgement that the stringent offsets policy that requires foreign firms to invest at least 30 per cent of the contract value in India has not spurred domestic manufacturing to the extent desired while the overseas suppliers have accumulated over $35 million in fines over the past few years. Foreign firms were able to invest just $676 million in India between 2008 and 2014 against the mandated $1.3 billion.

Outlining the new offsets policy, Defence Secretary RK Mathur said that the government is considering a directed offsets policy,as per which the foreign vendor will be mandated to manufacture a part of the system being procured under the Make in India programme.This will be initially applicable to large contracts that involve the procurement of major platforms.

"For example, if I am buying Sukhoi, I would link it up with 'Make in India' procedure and say that the Sukhoi manufacturing company must invest in India, with Indian companies, to manufacture the spare parts or components of Sukhoi itself, "Mathur explained to a Parliament panel. The 36-Rafale fighters deal with France will be the first major programme that is likely to follow the new policy. The ministry is likely to insist that at least 30 per cent of the value of the contract be used to set up manufacturing units in India. As reported, one option is to order a larger number of Rafale fighters with an Indian joint venture partner.

Under the original offsets policy,the winning vendor had the liberty to choose its partners to discharge the offset obligations and very often ended up investing in unrelated projects - such as a wind tunnel facility as an offset for the purchase of a military transport aircraft. By taking the power of directing the incoming investments to a particular area, the ministry will have the authority to get the particular technology that it requires.

Experts believe that the existing policy has not enabled Indian companies to unleash their potential in the global market. "A limited number of Indian companies have indeed become apart of the global supply chain of OEMs(original equipment manufacturers) and can now boast of world-class infrastructure and credentials. However the impact of the offset policy has not been to the desired depth and width," said Ankur Gupta of E&YIndia.

Defence Ministry planning major changes in defence procurement; seeks to link offsets policy with 'Make in India' - The Economic Times

@sancho check out red part. If it can be done i have no problem with this off the shelf/fast track rafales.

We bought P8 aircrafts and Boeing was demanded to invest 30% back into Indian industry, that's why parts like the weaponbay door are now build by HAL or other JV partners, which is the same as they are planing now, just by calling it officially Make in India.

The rest of the plan is wishful thinking, no foreing company will set up production facilities in India for huge costs, just to produce minor parts, of small deals. That was even the benefit of diverting the production to Indian players, which resluts in the same outcome, but at less investments.

Wrt to the Rafale deal, again it means a HUGE LOSS for India, from what we was meant to get in the MMRCA tender. Check the Rafale thread, where I pointed out the difference between Rafales with offsets only and getting Rafale produced in India and including critical techs.

I really hoped Parrikar will come up with something new, but this would be disappointing for the new DPP.

what technology will be directed to be acquired with Rafale deal

spares ?

Nothing useful anymore, since all the main systems would be produced abroad and only minor parts will be diverted to India, because Dassault is not bound to provide 50% of the value of the deal, including critical techs, but only 30% of what they want.
The best parts might be those, that are currently not in production, since no other customer ordered it. The IRST for example, which is a requirement for IAF, but not available at the moment. So instead of AESA radar and engine techs, we might end up just with that and some airframe parts.

 

[Agent_47]

Wrt to the Rafale deal, again it means a HUGE LOSS for India, from what we was meant to get in the MMRCA tender. Check the Rafale thread, where I pointed out the difference between Rafales with offsets only and getting Rafale produced in India and including critical techs.

I really hoped Parrikar will come up with something new, but this would be disappointing for the new DPP.

I was talking about the first 36 contract.Second should big (90 or 108) and should have all those stuff mentioned in the RFP.
MMRCA RFP should be the guideline for negotiating second contract.

We thought there will be no talk about offsets in the first contract,looks like we are wrong in a good way.

 

[sancho]

The 36 is not a deal with Dassault, but with French government, which means you can't ask Dassault for offsets for them, other than assembly of kits or as said the production of parts we require, but that are not in production right now. But then again, that's nothing compared to what the MMRCA was about!
The only benefit the 36 deal offers, is that we are not dependent on Dassault reducing the costs, since French government decides how much they want for them (same reason why I said that we can get EFs cheaper from the 4 partners right now). That's why these 36 are probably cheaper than 36 flyaway as part of the 126 deal, but won't come with the same benefits either.
The larger contract is the more important one and only worth it, if licence production as planned from the start is included. If that also will come only as a follow on deal of the earlier, we won't get any critical techs and production to India, if at all an assembly line for the engines, which is what we have for the RD33 MK engines for the Mig 29Ks at the moment. All in all a huge mess now.

P.S. We won't get the 36 any faster either, since the production line is still at 11 per year and French government has to divert some fighters to Egypt now too. There was one squad reserved for India that was ment to be produced between 2016 and the end of 2017. The question is, where do they get the fighters for the 2nd squad and when will it be available?

 

[SanjeevaniButi]

The 36 is not a deal with Dassault, but with French government, which means you can't ask Dassault for offsets for them, other than assembly of kits or as said the production of parts we require, but that are not in production right now. But then again, that's nothing compared to what the MMRCA was about!
The only benefit the 36 deal offers, is that we are not dependent on Dassault reducing the costs, since French government decides how much they want for them (same reason why I said that we can get EFs cheaper from the 4 partners right now). That's why these 36 are probably cheaper than 36 flyaway as part of the 126 deal, but won't come with the same benefits either.
The larger contract is the more important one and only worth it, if licence production as planned from the start is included. If that also will come only as a follow on deal of the earlier, we won't get any critical techs and production to India, if at all an assembly line for the engines, which is what we have for the RD33 MK engines for the Mig 29Ks at the moment. All in all a huge mess now.

P.S. We won't get the 36 any faster either, since the production line is still at 11 per year and French government has to divert some fighters to Egypt now too. There was one squad reserved for India that was ment to be produced between 2016 and the end of 2017. The question is, where do they get the fighters for the 2nd squad and when will it be available?

Rubbish, the deal will be signed only when Dassault can provide list of what will be manufactured in India as part of "Make in India" initiative and satisfy the 30% offset clause.ons

Since the negotiations for MMRCA is already complete, the list of ToT is already available. The most logical conclusion will be that the 30% will include equipments and parts that are required during maintenance andfrequent changes.

The French govt. cannot arbitrarily decide the price either. The price will be the benchmark price that is already established as per the latest Rafale purchase by the french govt.

I was talking about the first 36 contract.Second should big (90 or 108) and should have all those stuff mentioned in the RFP.
MMRCA RFP should be the guideline for negotiating second contract.

We thought there will be no talk about offsets in the first contract,looks like we are wrong in a good way.

36 will probably be all we will ever buy. It is unlike that we will go for more. That will only happen if PAK FA does not materialize. Modi's visit to Russia in the net few months will determine the next course of action.

 

[Agent_47]

36 will probably be all we will ever buy. It is unlike that we will go for more. That will only happen if PAK FA does not materialize. Modi's visit to Russia in the net few months will determine the next course of action.

There will be atleast 4-5 more sqd, let me explain why:

• IAF have a serious requirement for a MMRCA in serious numbers, which cannot be fullfilled by MKI,LCA mk2 or even FGFA.
• It will be foolish to induct a costly fighter in small numbers since it will become a maintenance headache for a AF which already operates more than five different aircrafts. commonality in numbers reduces maintenance costs.(Look at current fleet, least numbered M2K have in 3 sqds)
• It will totally negate the so called "Make in India" efforts.

Since the negotiations for MMRCA is already complete, the list of ToT is already available. The most logical conclusion will be that the 30% will include equipments and parts that are required during maintenance andfrequent changes.

You will not get ToT for just 36 aircrafts.Thank them if we can manage 30% offset for a fast track procurement.
Let me reminded you the MMRCA is dead so does the RFP. We can only negotiate for a meaningfull ToT in the second batch if there is enough numbers.

The French govt. cannot arbitrarily decide the price either. The price will be the benchmark price that is already established as per the latest Rafale purchase by the french govt.

No, bro. We can get cheaper deal because the French govt gives us rafales at fly away costs for which they brought for french AF with the similar configuration and without ToT.
You should do some research before calling senior members 'rubbish'.

 

[sathya]

India and France to discuss Rafale Trainers and additional option Clause | idrw.org

additional rafales clause, is the thing to look for
as we will be definitely ordering that.. after the initial 36..

Nothing useful anymore, since all the main systems would be produced abroad and only minor parts will be diverted to India, because Dassault is not bound to provide 50% of the value of the deal, including critical techs, but only 30% of what they want.
The best parts might be those, that are currently not in production, since no other customer ordered it. The IRST for example, which is a requirement for IAF, but not available at the moment. So instead of AESA radar and engine techs, we might end up just with that and some airframe parts.

i think the DIRECTED offset is made just to change that into 30% of what we want that they can offer ..
that needs to be seen..

 

[sancho]

Rubbish, the deal will be signed only when Dassault can provide list of what will be manufactured in India as part of "Make in India" initiative and satisfy the 30% offset clause.ons

Since the negotiations for MMRCA is already complete, the list of ToT is already available. The most logical conclusion will be that the 30% will include equipments and parts that are required during maintenance andfrequent changes.

Which are 2 differnt things!!!

Offsets is dependent on what the vendor is ready to divert, which can only be a small part, since the main production remains in their facilities.
MMRCA ToT on the other side, was far more diverse, since we demanded the licence production of the whole fighter in India.

So while both will be accounted under the Make in India slogan (since both give us production parts), only the the licence production under ToT will get us anything of value!

The French govt. cannot arbitrarily decide the price either. The price will be the benchmark price that is already established as per the latest Rafale purchase by the french govt.

Of course they can, since they own these Rafales already, as already paid for the fighters. Besides, since it's in their interest that Rafale finally gets some export, they reduced the costs for Egypt and India in this case, while Qatar pays a way bigger price tag, since they are dealing directly with Dassault.
The same happens plenty of times with several defence products btw, EF's were sold to Austria, Saudi Arabia and Oman in similar conditions, diverted from partner orders, A400 orders from German and Spain, will be diverted for export customers under G2G deals.


36 will probably be all we will ever buy. It is unlike that we will go for more.

Doubtful, the government either scraps the deal completely if Dassault still doesn't move in the larger tender, or they will take them and place a small follow on order (18 or 36) and fill the gaps with Russian fighters possibly. In either case, it's a major disappointment for India!

i think the DIRECTED offset is made just to change that into 30% of what we want that they can offer ..
that needs to be seen..

But that's the problem, we can't demand what parts will be diverted to India, if the production of the whole fighter won't. All we can ask for is, that the offsets must have a direct relation to the product we order, but that doesn't give us what we want. The C17 deal got offests into windtunnels projects in India (which btw should be pretty valuable for the Indian aviation industry and future projects), while the same deal under the new clause, might had demanded parts of the C17 to be produced in India. But that doesn't mean we suddenly get something valuable, that only means that Boeing could have diverted the production of some spares to India. Similarly, under the MMRCA we demanded AESA radar to be not only part of the fighter, but to be licence produced in India under ToT. That however is not possible just with an offset clause, directed or not. Thales as I said earlier, will remain with the AESA production in France mainly, while they might be open to divert the IRST production to India, since they closed the line.

 

[axisofevil]

I think there should be a proper establishment just for reverse engineering.

I agree but some idiots will argue its against our f-king image...

 

[sathya]

Thales as I said earlier, will remain with the AESA production in France mainly, while they might be open to divert the IRST production to India, since they closed the line.

Will that help in tejas mk 2 getting the IRST?