Defence ministry sets up panel to suggest ways to ease procurement

With the upcoming $10 billion contract for medium multi role combat aircraft in mind.

With the upcoming $10 billion contract for medium multi role combat aircraft in mind,the Defence Ministry has constituted a committee to suggest changes in the stringent offset policy that would,among other things,ease the procurement procedure for the contract. The committee,which has been given three months to complete a report,comes as the race for the contract enters its final stages and contenders are pulling all strings to stay ahead.

It is learnt that US President Barack Obama has also written to Prime Minister Manmohan Singh,hoping that the two American fighters would be considered for the contract.

The committee,headed by DG (Acquisition) Vivek Rae,will study the existing offset policy and suggest changes and arrangements in view of demands from the industry,in particular apprehensions that domestic defence manufacturing sector is still not prepared to absorb the money that is expected to flow in because of offset rules. As per estimates,the value of offset contracts is expected to exceed Rs 10,000 crores in the 11 th Plan.

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As the MMRCA tender is set to enter the next stage of negotiations,it is believed the committee will suggest ways to bridge gaps between the older DPP 2008 under which the tender was floated and the new policy of 2011 that has liberalised offsets.

Among other things,the committee will examine suggestions that transfer of technology a key requirement in most contracts should also be considered for meeting offset obligations. There have been industry requests that the acquisition of technology be considered for meeting offset obligations and would bring down the acquisition cost for the government. The committee is expected to suggest ways for valuation of foreign technology to make it eligible for meeting offset obligations.

This comes after the ministry made concession in offset policy after requests from the industry that was finding it difficult to implement obligations that require foreign vendors to invest at least 30 percent of the cost of all major contracts in Indian defence industry.

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