The Indian Government is going to adopt a new defense purchase policy soon,according to the sources of the Defence Ministry of India.
The policy governs the policy of purchasing worth over Rs 40,000 crores for being made for the armed forces every year and thenew policy is likely to be announced within the next couple of months.
Under pressure from the western arms suppliers who are expected to bid at an estimated cost of $ 10 billion dollars,the Indian Government has proposed to make some changes in the offset clause, hitherto being followed since 2006.The offset clause makes it mandatory for all foreign companies winning defense contracts to source 30 % of the value of the contract from India.
The revised offset policy has proposed to allow banking of offsets and include transfer of technology in offsets.Under banking,a company sourcing parts for the civilian sector from India can include this amount in offset contribution for defense equipment.
In case of TOT (transfer of technology), the transeferred technology will have a value and will be included in the offset obligation.
At present only direct offsets are allowed,having no allowance is being allowed either for TOT or banking.Already an Isreal company has entered into defense contract worth one billion with direct offset obligation.
However, the western aviation companies are dissatisfied with the offset clause, because in a business worth about 42,000 crores, 50 % offset value, i.e 21,000 crores worth business should be generated from India.
Now the Indian offcials are reconciled to bargaining on the value of TOT, after interacting with major aviation companies like Lockheed Martin,Boeing and Rafael.The other change in offset policy is to exempt software and services from licence requirements.
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