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Press Releases
Let DOFA Execute Defence Offset Guidelines : ASSOCHAM
Saturday, August 15, 2009
The
Associated Chambers of Commerce and Industry of India (ASSOCHAM) has called for
empowering Defence Offset Facilitation Agency (DOFA) with regulatory power to
facilitate defence purchases and procurements as it would work a proper catalyst
for being unbiased and stand-alone entity to conclude future defence
deals.
In a Paper brought out by ASSOCHAM on Defence Procurement Policy
and submitted to Defence Ministry, the Chamber President, Mr. Sajjan Jindal
said, “empowering single defence offset authority will result in consistent
interpretation and implementation of offset guidelines”. The operational
structure will allow the prime contractor to focus on
priorities of offset
guidelines and avoid confusion that can result when different bodies have
responsibility for evaluation and implementation of offset programmes, pointed
out Mr. Jindal.
The ASSOCHAM has further emphasized that DOFA, which
currently works under patronage of Defence Ministry need to be authorized to
involve Indian Inc. to participate in defence deals, as in next 4-5 years,
domestic defence market would grow over US$ 700 million.
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 defence
sector and thus, it should be empowered to regulate this sector by making
suitable recommendations to highest authorities.
According to ASSOCHAM, “India’s
arm imports alone would rise to US$ 30 billion by 2012 for which DOFA, armed
forces in consultation with Indian Inc. should work out a comprehensive strategy
to ensure that defence imports happen at extremely competitive
rates”.
The Chamber has recommended that 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.
The
ASSOCHAM Chief pointed out that the worth of Indian defence sector is US$ 5-8
billion annually and if Indian economy continues to grow at a steady rate of
close to 7%, its spending would exceed 3% of GDP in future. This could be used
to finance additional capital outlays for modern equipment. Currently, around
2.5% of national GDP is spent on defence.
India is
the world’s largest importer of defence articles as its services buy over US$ 6
bn worth of military hardware. As compared to India, Saudi
Arabia and China are the next two large
armament buyers in the developing world.
The paper highlights the fact
that in 2001, the Indian government opened up the defence production industry by
allowing 100% investment by private sector firms and at the same time, also
allowed FDI of 26% in select areas in the defence production. This needs
to be further accelerated to 49%, says Mr. Jindal 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 USD10 billion
during the 11th five-year plan period as every foreign company is required to
spend 30% 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’s element in defence sector would accelerate.
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.
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.
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