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Foreign suppliers can choose industries for offsets
Friday, 13 October 2006, 19:30 IST
NEW DELHI: In its clearest enunciation of the newly introduced offsets clause in defence deals, the Indian government said Thursday foreign arms suppliers could fulfil this obligation in the industry of their choice - with the government only monitoring the manner in which this was done.
"According to the procedure of implementing the offsets policy, the foreign supplier shall be at liberty to select Indian defence industries in the public as well as licensed defence industries in the private sector to meet their obligation," Minister of State for Defence Production Rao Inderjit Singh declared.
He was addressing a seminar here on "Public-Private Partnership in Defence: Problems and Prospects" organised by the Observer Research Foundation.
"The offsets obligation can also be met through foreign direct investment (FDI) in Indian industries for infrastructure, services, co-development, joint ventures and co-production," the minister clarified.
"The obligation can be discharged by FDI in Indian organisations' defence R&D," he added.
The offsets clause applies to all defence deals worth over 
3 billion and mandates that 30 percent of the amount has to be reinvested in India. However, there was considerable confusion over the manner in which this obligation was to be fulfilled.
Some prospective suppliers had been told they could only invest in the agency they were selling to. This had led to considerable heartburn among the suppliers, who complained they were being unnecessarily tied down.
An international conference on offsets being held here next month would enable the government to further fine-tune the implementation of the policy.
The government estimates that $10 million of offsets benefits will accrue to Indian industry for capital acquisitions to be made in the 11th Five-Year Plan (2007-11) period.
"This will open up new avenues for growth within the country in terms of industry participation, technology upgradation and employment and throw open business opportunities for the Indian industry in the defence sector," the minister noted.
Speaking about public-private sector participation, Singh said 19 private companies had been issued licences/letters of intent to manufacture a range of equipment ranging from bullet-proof vests, to light armoured vehicles, to unmanned aerial vehicles.
He pointed out that of the 82.65 billion purchases made by defence public sector units (DPSUs) in 2005-06, approximately 20.77 billion was from the private sector.
During the year, the private industry earned 25.29 billion through outsourcing by the Ordinance Factories, the minister added.
The Defence Research and Development Organisation (DRDO) was also engaging a number of private companies in the development of defence products, particularly components, assemblies and sub-assemblies.
"In some cases, total product development has been taken up through private industry," Singh stated.
Some of the major DRDO projects in which the private sector had successfully participated were the Tejas light combat aircraft (LCA) and missiles like the Prithvi, BrahMos and Nag, as also the multi-barrelled rocket system, he pointed out.
Source: IANS
3 billion and mandates that 30 percent of the amount has to be reinvested in India. However, there was considerable confusion over the manner in which this obligation was to be fulfilled.
Some prospective suppliers had been told they could only invest in the agency they were selling to. This had led to considerable heartburn among the suppliers, who complained they were being unnecessarily tied down.
An international conference on offsets being held here next month would enable the government to further fine-tune the implementation of the policy.
The government estimates that $10 million of offsets benefits will accrue to Indian industry for capital acquisitions to be made in the 11th Five-Year Plan (2007-11) period.
"This will open up new avenues for growth within the country in terms of industry participation, technology upgradation and employment and throw open business opportunities for the Indian industry in the defence sector," the minister noted.
Speaking about public-private sector participation, Singh said 19 private companies had been issued licences/letters of intent to manufacture a range of equipment ranging from bullet-proof vests, to light armoured vehicles, to unmanned aerial vehicles.
He pointed out that of the 82.65 billion purchases made by defence public sector units (DPSUs) in 2005-06, approximately 20.77 billion was from the private sector.
During the year, the private industry earned 25.29 billion through outsourcing by the Ordinance Factories, the minister added.
The Defence Research and Development Organisation (DRDO) was also engaging a number of private companies in the development of defence products, particularly components, assemblies and sub-assemblies.
"In some cases, total product development has been taken up through private industry," Singh stated.
Some of the major DRDO projects in which the private sector had successfully participated were the Tejas light combat aircraft (LCA) and missiles like the Prithvi, BrahMos and Nag, as also the multi-barrelled rocket system, he pointed out.
Source: IANS