New Delhi, Aug. 30: The government today announced a policy to buy military hardware that seeks to align Indian practices with global norms, signalling that the coffers would shortly be opened to contract some of the biggest defence deals in the world.
Defence minister Pranab Mukherjee said one of its pillars was the introduction of a new system to vet equipment offered by indigenous manufacturers who would now have a level-playing field on which to compete with global companies.
“The doors are now open for Indian industry to participate in defence research and development,” Mukherjee claimed.
The cornerstone of the new procurement system is a policy on “offsets”.
The policy was first introduced in June 2005. It stipulates that all contracts of over Rs 300 crore must source 30 per cent of the value of the contract from indigenous firms.
The new policy addresses an issue raised by industry associations CII and Ficci and says the offset benefit will apply to both defence public sector units (such as Hindustan Aeronautics), ordnance factories and Indian private sector companies.
Mukherjee said that in the 11th plan period (2007-2012), the value of offsets generated would be about Rs 45,000 crore. This means the government is looking to import arms and military hardware worth about Rs 150,000 crore in five years or about Rs 30,000 crore a year for half a decade.
This is a little less than the current allocation for capital procurement.
The new policy will be presented at an international seminar the ministry of defence will be hosting in November.
Global arms-trade watchers such as the Stockholm International Peace Research Institute (Sipri) and the RAND Corporation (based in the US) would be sending participants to the meeting where the defence ministry’s finance wing will “brand” itself “Defence Finance India”.
Mukherjee also said a no-bribery clause would be a must for all contracts worth Rs 100 crore. The condition is contained in a separate “Integrity Pact”.
The practice was introduced last year but was mandatory for contracts worth Rs 300 crore.
However, the biggest deal signed since the Integrity Pact was invoked — the Scorpene submarine deal — has provoked allegations of corruption despite strong denials by the French company and the government.