The Hindu : Front Page : Defence procurements to go on fast track

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Saturday, Aug 02, 2008
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Defence procurements to go on fast track

Sujay Mehdudia

Focus on transparency: Antony

Will ease licensing conditions for private players
Allows foreign players to bank offsets on contracts

NEW DELHI: Putting the process of acquisition of advance weapons systems on the fast track, ensuring total transparency in purchases, easing the licensing conditions for private sector players and allowing foreign players to bank offsets on contracts are the highlights of the new Defence Procurement Procedure (DPP) unveiled by Defence Minister A.K. Antony here on Friday.

The policy, which will come into effect from September, promises the vendors advance information on procurements before floating tenders and seeks to enhance the financial powers of the Army, Navy and Air Force headquarters and also that of the Defence Secretary.

The policy comes close on the heels of the government preparing a shopping list that is likely to touch a whopping $30-50 billion over the next five years.

Releasing the DPP-2008, Mr. Antony said the provision to bank offsets was introduced to secure greater engagement of global industries in promoting the Indian defence industry.

Under the offset policy, all foreign firms have to invest 30-50 per cent of the contract value in India on all deals worth over Rs. 300 crore.

The policy now stands revised with foreign multinational companies allowed to park money with banks in anticipation of future contracts, so that they need not have to manage money for the offset policy when the deal is clinched.

The companies have been given leverage to discharge the banked offset credits in lieu of request for proposals (RFP) within two financial years from the date of approval.

It also allows foreign companies to create surplus offset credits that would remain valid for the subsequent two financial years after the conclusion of the contract. The Indian industry is allowed to participate in the offset programmes of foreign players.

The new offset rules will not apply to a number of defence deals to be contracted in 2008, including the $10-billion deal to purchase 126 fighters, $2-billion contract for purchase of over 384 helicopters and mega deals for buying hundreds of heavy artillery guns.

Mr. Antony said the country needed most modern weapons system at a faster speed.

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