Make DOFA regulator for defence purchases: Assocham

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New Delhi, Mar 30 (UNI) The Defence Offset Facilitation Agency (DOFA) should be empowered with regulatory power to facilitate defence purchases and procurements as it will work as a catalyst for being unbiased and stand-alone entity for concluding future defence deals.

The suggestion has been mooted in a Paper on Indigenisation&Import : Win-Win Situation' by the industry chamber Assocham, emphasising that DOFA which currently works under the patronage of Defence Ministry need to be expanded and authorised to involve Indian Inc to participate in defence deals.

Based on feedback the chamber said in the next 4-5 years, domestic defence market would grow over 700 million dollars.

Since the new Defence Offset Policy calls for larger private sector participation in defence purchases and procurement including imports, DOFA is the right body that can have parleys with Indian industry to strengthen and indigenise the defence sector and therefore, it should be empowered to regulate this sector by making suitable recommendations to the highest authorities.

The Paper which has already been submitted to the government also says that India's arm imports alone would rise to 30 billion dollars by 2012 for which DOFA, armed forces in consultation with Indian Inc have negotiations so that defence imports are done qualitatively at much competitive rates.

The Chamber has recommended that the manpower at DOFA should be substantially increased to reflect the growing importance of Indian defence industry and the ever-growing role of the private sector in it as the body is deemed to be more accessible to Indian Inc.

Commenting on the Paper, the Assocham President Venugopal N Dhoot said the Indian defence sector is established to be worth 5-8 billion dollars annually.

If the Indian economy continues to grow at current momentum, Indian defence spending is projected to increase from 2.8 to 3 per cent of the GDP in the future and this increase would be used to finance additional capital outlays for modern equipment, he added.

India is the world's largest importer of defence articles as its services buy over 6 billion dollars worth of military hardware.

As compared to India, Saudi Arabia and China; the next two large armament buyers in the developing world, notched up defence deals valued between just 2-3 billion dollar each in 2006.

The paper highlights the fact that in 2001, the Indian government opened up the defence production industry by allowing 100 per cent investment by private sector firms and at the same time, also allowed FDI of 26 per cent in select areas in the defence production.

This needs to be further accelerated to 49 per cent, said Mr Dhoot as it would help procurement of latest technologies as per provisions of latest Defence Offset policy.

The Defence offsets policy is expected to bring in 10 billion dollars during the 11th five-year plan period as every foreign company is required to spend 30 per cent of the value on offsets goods or services purchased from Indian defence companies and if DOFA is conferred upon with powers of regulator, the FDI element in defence sector would accelerate, said the chamber.

It has been stated that as India has a large industrial base, offsets will further develop its technical and manufacturing potential and they will also help to increase investments in domestic research and development.

The policy is also expected to hugely benefit the Small and Medium Enterprises and is conducive for the private companies to have a larger presence in the defence set up.

Mr Dhoot said that host of Indian companies can get the benefit of offset policy and such a scenario will further boost country's economy in the near future.

The offset policy is expected to generate market-entry opportunities for private companies, to invest in research and development and manufacturing of defence goods.

Currently about 70 per cent of the procurement in value terms, is from foreign sources because the Indian public sector cannot deliver in terms of quality or speed on either research or production.

Only about 30 per cent of the orders placed in India - or 9 per cent of the total - goes to the private sector.

The government has set a 70 per cent target for procuring its defence requirements from indigenous sources by 2010.

For achieving this target the government is mainly relying on private players.

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