Defence policy levels field for Indian firms

Even as India gets ready to send requests-for-proposals for the purchase of 126 combat aircraft worth nearly $15 billion, the indigenous industry has been given a level-playing field in the new defence procurement policy.

Under the policy, announced today, excise, sales tax and other local levies will be subtracted while comparing the prices offered by the indigenous suppliers with those offered by the foreign vendors.

To promote indigenous research, development and design, a mechanism under which companies and the defence ministry will share development costs will be ensured.

"Multi-disciplinary integrated project management teams will be nominated for each project. The teams will assess the response from the developing agencies," Defence Minister Pranab Mukherjee said.

At least two respondents would be shortlisted. For selection, both would be asked to develop prototypes, which would be subjected to technical and field trials. If both develop a prototype, the contract for minimum order quantity would be awarded to the lowest bidder.

The minister said the policy would bridge a critical gap in the defence procurement procedures and pave the way for increased participation of Indian industry in the sector.

Mukherjee said decisions to acquire weapons urgently would be taken in a "collegiate manner" by the defence acquisition council (DAC).

The new policy lays down that in all defence contracts worth more than Rs 100 crore, it would be mandatory for both sellers and buyers to sign pre-integrity pacts to avoid corruption and use of undue influence.

The policy also ensures offsets in all deals worth more than Rs 300 crore. The seller will be given two options, that is, he will be able carry out direct purchase or execute export orders for the Indian defence units.

The policy says all suppliers of equipment take offsets in the shape of maintenance, overhaul and upgrade of the systems and direct foreign investment in the Indian defence industries.