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National
Insistence on FDI in domestic defence industries relaxed Aim is to expedite decision-making, says Antony NEW DELHI: The Defence Ministry has effected a subtle but significant shift in the Defence Procurement Procedure (DPP) 2011. It has enlarged the ambit of the offset policy by including civil aerospace, internal security and bringing training in the list of eligible products and services. It has relaxed insistence on foreign direct investment (FDI) only in domestic defence industries. The DPP has an inbuilt offset clause that requires the manufacturers in the category of ‘Buy' and ‘Make and Buy” for acquisitions over and above Rs. 300 crore to invest 30 per cent of the estimated cost in indigenous defence industries. The DPP makes it clear that FDI could be made in Indian industries against specific mention in the DPP-2008 that it should be in the Indian defence industries. The new DPP includes training services or equipment like simulators that were not part of the previous DPP. The change is significant as the country is going in for large-scale acquisition, including the 126 Medium Multi Role Combat Aircraft, in which simulators are an important component. Clause under attack The offset clause has been under attack from the Western manufacturers on the ground that it is rigid and that the Indian defence industries did not always have the technical competence required to meet such obligations. In his preface, Defence Minister A.K. Antony said the scope of the offset policy guidelines was expanded and the list of eligibility would cover most aspects of civil aerospace, including aircraft (both fixed wing and rotary), air frames, air engines, aircraft components, avionics, aircraft design and engineering services, aircraft material, technical publications, flying training and technical training institutions. One of the arguments advanced by the Western manufacturers is that some Indian companies are supplying components manufactured in India for civil aircraft and this investment by the foreign manufacturer be counted as eligible for defence instead of insisting that separate investment be made in the defence industry. Mr. Antony said a wide range of weapons and services of counter-terrorism were included in the list of products under “internal security.” He admitted that the changes would provide a wider range of offset opportunities to vendors participating in defence procurement and encourage building up of indigenous manufacturing capabilities in crucial areas. The DPP-2011, he said, refined the earlier document based on the experience of procurement agencies and feedback from the defence industry — both Indian and foreign. The aim was to expedite decision-making and simplify contractual and financial provisions, besides establishing a level playing field for Indian private and public sector companies.
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