India tweaks rules for friendly countries for defence exports

In a recently issued order, the ministries of defence and external affairs said the friendly countries can buy defence equipments like Offshore Patrol Vessels (OPV) manufactured in India at the same price as Indian armed forces have bought them for.

India has tweaked rules to allow friendly countries to use lines of credit or soft loans given to them to buy Indian defence equipment. The move is aimed at boosting exports, according to two officials aware of the development. In a recently issued order, the ministries of defence and external affairs said the friendly countries can buy defence equipments like Offshore Patrol Vessels (OPV) manufactured in India at the same price as Indian armed forces have bought them for.

The third Coast Guard Offshore Patrol Vessel (OPV) at L&T Shipyard, Kattupalli near Chennai.(PTI File)

“Whatever the Indian Navy or Coast Guard has paid for the OPV, a friendly foreign country, using line of credit, can buy the OPV at the same price,” said a defence ministry official on condition of anonymity. The official said the acquisition processes are lengthy and cumbersome, and negotiations with Indian manufacturers for them takes time. “Allowing friendly countries to buy platforms at the prices at which they been sold to Indian armed forces will cut down the negotiation process.” Over the years, India has extended soft loans worth about a billion dollars to Afghanistan, Sri Lanka, Vietnam, and Bangladesh. Utilisation of the soft loans has not been encouraging, officials said.

Initially, the new procedure will apply to Defence Public Sector Units and Ordnance Factory Boards. “Once this gains acceptance, we have plans to extend it to the private sector as well,” the official said. As per the new procedure, a friendly country can write to the ministry of external affairs indicating what it wants to buy from India. The MEA, after checking with the ministry of defence, will inform the country whether a similar item has been bought by the Indian armed forces and at what price .“A price escalation quotient will be applicable in case the platform was acquired earlier,” a second official on condition of anonymity. “The new procedure will ensure that there is pre-discovered price available for new buyers. And, importantly, it is the price paid by our own forces,” he added.

The change in the procedure will not prevent the countries from buying equipment through tenders followed by the negotiations with vendors.

“The option is available to countries,’’ the second official said. India imports much of its defence equipment, but it also excels in manufacturing some of it. Indian forces use transport helicopters like the Advanced Light Helicopters or Dhruv, manufactured by HAL.