India will have revised defence purchase norms by mid-May

April 21st, 2008 - 12:51 pm ICT by admin  

New Delhi, April 21 (IANS) India will enunciate by mid-May its revised norms for purchasing military hardware after bringing these in line with the best international practices, an official said. “The Defence Procurement Procedure (DPP) is currently being fine-tuned and should be announced by the second week of May,” the official told IANS, speaking on condition of anonymity.

The DPP, enunciated in 2006 had, for the first time, laid down in detail the measures to be followed in future for purchasing military hardware. It contains three critical elements: an offsets clause, no single-vendor purchases, and compulsory transfer of technology (ToT) in all big-ticket deals.

Of these, the offsets clause under which 30 percent of all defence deals worth over Rs.3 billion has to be reinvested in India’s defence industry has become a matter of major concern.

Responding to this, Defence Minister A.K. Antony has said: “We have received a number of suggestions. We are seriously applying our minds to this and fine tuning the procedures.”

According to Antony, the offsets policy was “at a nascent stage and is still evolving”.

“Discussions are going on with regard to few important issues like banking of credits, transfer of technology, licensing requirements for the software industry and the like,” the minister said in February.

“I am sure that the discharge of offsets will give the necessary fillip to the participation of the private sector in a big way,” he added.

A number of foreign defence manufacturers say the offsets clause is restrictive as it narrows down their options. They say they would like the scope widened to enable them to invest in other sectors as well.

They also point out that the clause is subjective, as in the case of an Indian Air Force (IAF) tender for 126 combat jets floated last September, the offsets provision has been arbitrarily raised to 50 percent.

According to Secretary (Defence Production) Pradeep Kumar, the new DPP would address many of these issues.

“The choice of where to invest the offsets obligation would be left to the foreign vendor. As for the percentage of offsets, this would depend on the size of the contract,” he has pointed out.

The defence ministry estimates that Indian industry would have to absorb Rs.500 billion ($12 billion) worth of offsets in the next five years as the armed forces aggressively pursue their modernisation drive.

“I am very confident Indian industry, both in the public and private sectors, will be able to absorb this,” Kumar maintained.

A committee headed by former finance secretary N.S. Sisodia had studied the suggestions received on reworking the DPP and had also visited some countries to study the systems in place there.

The committee had submitted its report to the defence ministry earlier this year.

Sisodia, who now heads the government-sponsored Institute of Defence Studies and Analyses (IDSA) think tank, has also served as secretary (defence production).

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