4 APRIL 2015: new amendments to defence procurement policy in 2 months

Ø  President Pranab Mukherjee signed on Friday the new Land Acquisition Ordinance recommended by the Union Cabinet on March 31. The earlier ordinance, which could not be converted into law, will lapse on April 5. The government move drew a sharp response from the Congress, which decried the government’s “disregard” for parliamentary democracy and Prime Minister Narendra Modi’s “obstinacy to favour some capitalists”.

Ø  BJP spelt out the ‘Panchamrit’ or five pillars of the Narendra Modi government’s foreign policy: ‘Samman’ or dignity and honour; ‘Samvad’ - greater engagement and dialogue; ‘Samriddhi’ - shared prosperity; ‘Suraksha’ - regional and global security; and ‘Sanskriti evam sabhyata’ - cultural and civilisational linkages.

Ø   In line with the government’s assurances to streamline defence procurements, the Defence Ministry is set to bring about major changes in offset provisions in the new Defence Procurement Procedure (DPP) 2015, to be released in the next two months. Offset obligations were introduced in 2005 to develop the defence industrial base in the country. It stipulates that for deals worth over Rs. 300 crore, the Original Equipment Manufacturer (OEM) has to reinvest 30 per cent of the contract value in the country. One of the key changes in the DPP will be an option to migrate from offset obligations to ‘Buy and Make’ category, sources said. Under the new provision, the value of Foreign Direct Investment by the OEM and the eligible products being manufactured in India will be counted against offset obligations. This will provide a boost to ‘Make in India’ programme in defence and bring in greater FDI, sources said. Of the 24 contracts signed between 2007 and 2013, total offset obligations were close to Rs. 30,000 crore. Ninety per cent of them under-performed their targets and annual offset obligations remained unfulfilled, the sources observed. In addition, the cost of contract goes up as OEMs charge for technology transfer and also significantly slowed the procurement process while no meaningful technology was accrued.