Date:13/02/2008 URL: http://www.thehindu.com/2008/02/13/stories/2008021354981400.htm

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Revised defence purchase policy by April

NEW DELHI: The government is all set to revise its defence procurement policy, a top Ministry of Defence official confirmed here on Tuesday. “We would have a new policy ready by April this year,” Defence Production Secretary Pradeep Kumar said.

Briefing newspersons on the coming DefExpo that would see a record participation by western arms manufacturers, Mr. Kumar said the revamp would focus on defence offsets to ensure that Indian industries gained the know-how to design and manufacture cutting-edge defence products.

“We are confident that the Indian industry would be able to absorb the offset obligation. Foreign companies are free to choose partners from the public or the private sector. There will be no distinction,” he said.

Under the offset clause, all foreign companies bagging contracts worth over Rs. 300 crore must generate at least 30 per cent of the business in India. In the case of the mega contract for fighter aircraft, the offset obligation has been increased to 50 per cent.

Defence sources told The Hindu that the changes were cleared by the Department of Policy Promotion (DPP) in the Ministry of Industry and awaited the approval from the highest levels. The revised offset policy would allow the banking of offsets and transfer of technology, two aspects denied under the existing policy.

Mr. Kumar pointed out that the government reserved the right to raise the offset obligation to 50 per cent as done in case of the $10-billion tender for fighter aircraft.

This is the second time the government is changing the DPP since its introduction in 2002. The last revision was in 2006 during the tenure of Pranab Mukherjee as Defence Minister.

The changes are based on suggestions from companies which have or are obliged to meet offset obligations. On whether the government wanted to take measures to legalise arms agents and frame rules in the revised DPP, Mr. Kumar said: “Please wait till April.”

On the delay in registering private industries as Rakshya Udyog Ratna to enable them qualify for defence offsets, he said the idea was opposed by defence public sector unions and a consultation process was on. “The proposal is with a committee and the recommendations are being processed.”