Wednesday, April 20, 2011

Procedural additions to offsets policy soon, says Pallam Raju

Neelam Mathews
April 20, 2011
Time: 11:15 P.M IST

Even as the Offset policy guidelines were expanded to include civil aerospace, internal security and training in January, further additions are now expected. “There will be changes (to be announced) in April,” Minister of State for Defense M.M Pallam Raju told Aerospace Diary at the 2nd National Manufacturing and Innovation Summit.

This was reaffirmed by Vivek Rae, Director General Acquisitions, who said the MoD was “modifying offset guidelines in the near future.”

The “revised” procedures in the DPP 2011 will include transfer of technology, which Raju confirmed was “a ticklish issue,” but needed to be addressed. It is also likely that the offsets banking time-lines will be extended from two to five years.

Raju was emphatic that the Medium Multi Role Combat Aircraft (MMRCA) order would not be covered under the DPP 2011. When asked if not including the around $10billion project under DPP 2011 would be counterproductive to help give a boost to the Indian defense industry, Raju said: “There are many other large projects in the offing.

“We are reviewing the offsets policy every year to include best practices to expand the defense industrial base in India,” he added.

Eligible offset obligations will now cover most aspects of civil aerospace including aircraft, air engines, aircraft components, design, engineering services. A wide range of weapons and services for counter-terrorism have been included in the list of products under internal security.

According to the Ministry of Civil Aviation, the Indian aerospace industry needs investment of between US $ 200 to 300 billion from 2009- 2034. “The thrust now… is on Modernization of Airports, Communication, navigation and surveillance systems for Aircraft management and facilities for Maintenance Repairs and Overhaul (MRO) of aircraft and subsystems,” said Raju.

According to Raju, the value of offset contracts is likely to be over Rs 10,000 crores in the 11th plan. Twelve offset contracts valued at Rs. 9,943 crores have already been signed (Indian private industries Rs. 6,464 crores and DPSUs/OF's- Rs. 3,430 crores). Over 35 Indian companies, both in public and private sector, would be recipient to the offset benefits. In addition, Rs. 4,818 crores are at CNC stage and Rs. 31,839 crores are at TOEC/TEC/RFP stage.

Despite an effort by government officials to convince delegates that efforts were being made to bring the private sector into the fold of defense contracts, there remained a cynicism. “The government now needs to show its intent through action,” an OEM told Aerospace Diary.

“India needs to focus on how to create raw material supply…partnering with the local industry is the key to the (growth and) future of India,” said Dinesh Keskar President Boeing India. the company has an offsets obligation of over $2billion in India.

“India has never concentrated on materials technology. Without that, manufacturing cannot take off,” added an official.

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