Article Posted on : - Jun 08, 2015

The Chinook helicopter.

NEW DELHI (PTI): Government is likely to soon clear a contract worth over US$ 2.5 billion for 22 Apache attack helicopters and 15 Chinook heavy-lift choppers with US aviation giant Boeing.

Defence sources said the file relating to the offset conditions for the contract was cleared by the Defence 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 Defence 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 defence contract is earmarked under the offset clause in India.

Many in the defence sector had expected the deal to be signed during last week's visit of US Defence Secretary Ashton Carter.

"The Apache and Chinook deal was separate from the broader agenda of Carter's visit. It (deal) should be completed soon," the sources said.

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 Defence 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 did not finalise the contract soon.

Boeing has extended the price validity for the deal at least thrice since cost negotiations concluded in 2013.

Incidentally, the present Defence 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, defence officials said.

The deal for the Apache is "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 defence market of India.

American companies have over the last decade bagged defence contracts from India worth around US$ 10 billion, including for aircraft like P-8I, C-130J Super Hercules and C-17 Globemaster-III.