The indigenous aerospace and internal security industry today received a major boost, as the government announced major changes in its defence procurement policy that are likely to encourage investments worth billions of dollars in these sectors.
Under the Defence Procurement Policy (DPP), 2011 announced today, the scope of offsets has been enhanced to “include civil aerospace, internal security, training within the ambit of the eligible products and services for discharge of offsets obligations,” Defence Minister A K Antony said in the foreword of the policy.
In the present offsets policy, foreign vendors bagging deals worth over Rs 300 crore had to invest 30 per cent of contract's worth into the defence sector only. The new changes will allow them to invest in related sectors such as civilian aerospace and industry, developing weapons and equipment for internal security roles.
These changes were being sought by foreign vendors as with a very limited defence industrial base in the country, they were finding it hard to get eligible partners to work within India.
The demand had the support of Indian chambers of commerce, as the country is looking to sign various big-ticket defence deals in the near future, likely to result in offsets deals worth over Rs 50,000 crore and it would have been difficult for the indigenous industry to absorb them.
“The list of eligible offsets will now covers most aspects of civil aerospace, including both fixed and rotary wing aircraft, air frames, air engines, aircraft components, avionics... A wide range of weapons and services for counter-terrorism have been included in the list of products under internal security,” the minister added.
Hoping the policy changes will provide a wide range of offset opportunities to vendors, Antony hoped this would encourage building of indigenous manufacturing capability in crucial areas.
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The minister said the policy had been refined based on the inputs and feedback from the defence industry, both Indian and foreign, and is aimed at expediting and simplifying contractual and financial provisions.
“The policy also aims to establish a level-playing field for the Indian defence industry, both public and private sector,” he added.
Antony said policies regarding the ship-building procedures have also been refined with an aim to “encourage participation of private shipbuilding industry in India in defence contracts”.
“These guidelines will provide a level-playing field for Indian shipyards and promote indigenisation and self-reliance in warship construction,” he added. Under the Ministry policy, the capital acquisitions by the defence forces have been broadly classified under four categories including 'buy', 'buy and make', 'buy and make (Indian)'; and 'make'.