Govt seeks increased mileage from big deals

The government is working on a policy to extract greater political and economic mileage from all government and public sector purchases of over Rs 100 crore.

Though the revised norms on counter-trade - being finalised by a committee of secretaries headed by Cabinet Secretary BK Chaturvedi - would not be mandatory, efforts would be made to link all such large purchases to address the country's geo-political and economic concerns, senior government officials told Business Standard.

The details of the proposal are being worked out by the ministry of external affairs in consultation with other government agencies. Officials in the finance and commerce ministries, however, said the threshold should be raised from Rs 100 crore to at least Rs 500 crore, if not more.

While the existing counter-trade norms do not lay down a specific percentage, the usual practice was to get trade or investment benefits of at least 30 per cent of the deal size from the country concerned.

In case of the Indian Airlines fleet acquistion, the counter trade was to the extent of 40 per cent and the government would try for a similar benefit from the United States and Boeing if the $7-billion deal is opened for further negotiations.

Officials said in return for India's participation in the European Union's Galileo satellite programme, the 25-member trade block had promised to source equipment worth $150 million from Indian companies.

The new guidelines would also try to ensure that in addition to direct offset benefits, the purchases would be supplemented and complimented by commodity trade undertaken by state-owned agencies like the State Trading Corporation and the MMTC, they added.

"The present share of counter-trade needs to be enhanced as internationally, there have been instances where the percentage of counter trade is 100 per cent of the deal size," said an official.

There was also a view that the present guidelines did not provide for a monitoring mechanism or an agency to ensure that the counter trade was being undertaken by the right individual agencies in the desired manner.