New Delhi, Oct 24 : Defence Minister A.K.Antony today said that the private sector participation in defence production has been allowed and foreign direct investment is allowed upto 26 per cent.
Addressing the National Seminar on defence offsets being organised by the Institute for Defence Studies and Analyses (IDSA) here, Antony said that private sector will henceforth require industrial licence only if it is stipulated under the requirement for defence industry.
He asserted that under defence procurement procedure the off set policy have been revised and some improvements including introduction of offset banking, list of defence products and relaxation of industrial licensing requirement are some of its highlights.
The latest revision was carried out recently and has been in vogue since September 1, 2008. India's offset provision applies to all Capital Acquisitions categorised as "buy (Global)" or "Buy and Make with Transfer of Technology", where the estimated cost of the acquisition proposal is Rs. 300 crore or more.
A minimum offset of 30 per cent of the indicative cost is required in such acquisitions. The offset obligations of the foreign vendors can be met either through investment in our domestic defence industrial infrastructure, including defence R and D, leading to Joint Ventures, co-development and co-production of defence items, or through purchase or execution of export orders for defence goods and services produced by Indian defence enterprises, both in public and private sector.
Antony said a dedicated single window agency known as Defence Offset Facilitation Agency (DOFA) has been set up to facilitate offset related work.
He made it clear that mandate of the agency is to interact with various stake holders, assist in implementation of policy apart from suggesting improvement to make it more comprehensive.
Referring to offsets which have become a common feature of international arms trade, the Minister said the offset obligations of foreign vendors in India can be met either through investment in the domestic defence industrial infrastructure including research and development and co-production of defence items.
"The policy and the procedural framework for rapid transformation of defence capabilities will be further strengthened," he added.
Offsets are today a common feature of international arms trade. It is estimated that offsets and related forms of counter-trade constitute five to thirty per cent of global trade. More than 100 countries use the mode of offsets in their arms contracts. Business and trade analysts put the exact volume of defence offsets at the global level at over five billion dollars each year.
The United States, the biggest arms exporter in recent times, is one of the largest providers of offsets. In 2006 alone, it signed nearly 3.5 billion dollars worth of offset contracts with more than 20 companies located in 12 different countries.
At the global level, the threshold of defence offsets, that is the minimum value of the contract at which offsets apply, is as low as 0.5 million dollars, where as offsets as a percentage of the value of arms contract is more than 100 for some countries.
India's defence offset policy has been promulgated as part of Defence Procurement Procedure. The offset policy has undergone two revisions since it was first promulgated in 2005.