Defence Ministry introduces changes in policy to attract more foreign players!!!

To open new horizons for the Indian Defence and aerospace manufacturing sector, the Defence Ministry has introduced some major retrospective changes in the offset policy. The move, as reported by Economics Times, will provide more flexibility to the foreign companies in choosing partners and allocating work shares.

As per the new policy, which covers all defence contracts with offset obligations, the ministry suggests an investment of minimum 30% of the contract value into the Indian defence manufacturing sector. Also, the ministry has now allowed foreign companies to change their Indian partners.

Earlier, any such changes require an approval at multiple levels and after that were finalized by the high powered Defence Acquisition Committee (DAC), the deciding authority, which now has been changed to the Secretary, Defence Production. The changes, which were planned three years in advance due to a long process, are now much easier and flexible.

With the amendments, foreign companies will now be able to select partners and contracts at the 'execution stage', instead of a few years in advance.

These amendments, with retrospective effect, should clear most bottlenecks in offset execution on the ground as well as spur high-technology work flowing into the country for the purpose of discharging offsets. OEMs will be far more comfortable in proposing work-packages, that if required it is not an insurmountable task to change the same," Ankur Gupta of Ernst and Young India told ET.

Industry experts say that a prime reason for a deadlocked offset policy — close to $4.5 billion of work has been signed under offsets since 2008 but less than a quarter has actually been executed — was the requirement of providing detailed work-packages at the time of the submission of initial bids itself.

"The time gap between the signing of the contract and the freezing of offset work share could easily stretch to 2-4 years and by that time the requirements of the companies would change as technology evolves swiftly," an industry insider said.

Image: indiatimes