In keeping with the overall leitmotif of India’s economic and technological sophistication, the Ministry of Defence has unveiled the much-awaited revised policy for defence purchases.
Effective September 1, 2008, Defence Procurement Policy or DPP 2008, envisages the long-term goal of indigenisation of India’s defence requirements. Towards this, the policy provides for a private company to have an industrial licence only if stipulated under the licensing requirement for the defence industry, issued by the ministry of commerce.
The salient distinguishing feature of DPP 2008 over DPP 2006 is the introduction of “Banking of defence offsets”. This needs to be understood against the background of the emerging reality of India with its own captive market for defence products, is fast becoming an attractive and favoured destination to forge strategic alliances towards more cost-effective production. Banking of offset credits will allow foreign vendors to bank credit and claim it as an offset against defence contract(s) signed subsequently.
Additionally the policy provides that where the foreign vendor in collaboration with its Indian JV partner is bidding for a defence procurement contract and offers indigenously developed product, to an extent of at least 50%, there the offset obligation would not be applicable. It is legitimately expected that this Win-Win proposition will secure greater engagement of global industries in promotion of indigenous defence industry in India.
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