NEW
DELHI: The defence ministry may forego the offset clause to speed up deliveries
of a Russian air defence system designed to deter Pakistani fighters and
provide a missile shield for major cities, said people with knowledge of the
matter.
India and Russia will start final negotiations
on the S 400 air defence system next month with the deal value pegged at Rs
39,000 crore. The offset clause, which fits in with the Make in India
programme, mandates foreign companies to invest at least 30 per cent of the
contract value in the Indian aerospace and defence sectors.
The S 400 is an advanced air defence system that
has already been ordered by China, which is likely to get its first deliveries
later this year. India and Russia began talks after the government accepted an
air force proposal to purchase five firing units of the system to protect both
the northern and eastern borders.
A top Russian official told ET that offsets
could delay deliveries by as much as two years.
"As far as I have heard, there is no offset
package for the programme. It is a strategic project and is very important for
the two countries," said Viktor N Kladov, director of international
cooperation at Rostec, the Russian state-owned company that controls sales of
the S 400 system. "It should not be played around with some offset
packages."
He said Russia would comply if India insisted on
an offset package. But, he said, "It may delay delivery by one-two years
and that is why a deal with no offsets package is the best choice."
According
to analysts, the offset clause typically adds 10-15 per cent to the value of a
contract on account of the domestic investment required. Also, the
non-compliance rate is very high as companies find it difficult to discharge
the offset within the rules.
Sources
have told ET that while the defence ministry has approved the purchase of five
firing units of the S 400 system for an estimated Rs.39,000 crore, two may be
ordered in the initial phase. This could be increased based on performance,
they said.
If the contract is signed within a year,
deliveries could start by 2019-20.
"One
year for the contract plus another two years for delivery. That will be the
timeframe," Kladov said. "The Indian side invited us for negotiations
in March. So, if we start negotiations in March, it will take another year to
prepare for the contract. I do hope it will happen this year or maybe first
half of next year."
China
will likely get the system this year itself after signing up to be the first
export customer. Designed to counter a variety of threats from hypersonic
cruise missiles to unmanned aerial vehicles (UAVs), airborne early warning
aircraft, stealth fighters and even precision-guided munitions, the S 400 is the
latest in a range of air defence systems that have posed a formidable threat to
western aircraft across the world.
Source :- Economic Times
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