India may allow international military contractors and technology companies to invest in new non-defence sectors to discharge contractual obligations that come bundled with big-ticket arms deals.
Shortly after inaugurating Aero India-2011 at the Yelahanka airbase, the country’s biggest aerospace extravaganza, defence minister AK Antony revealed that the government had appointed a committee to examine the scope of throwing open more areas to foreign vendors for investing in the country.
The defence ministry’s procurement rules make it compulsory for vendors to invest 30 per cent of the value of contracts worth more than Rs 300 crore in India through purchases, investments and transfer of technology, in what is known as the offset policy.
Non-defence sectors were out of bounds for international military contractors until January 2011 when the new defence procurement policy threw open civil aerospace and internal security sectors to foreign defence suppliers. This was done to provide more opportunities to defence vendors and to encourage building up of indigenous manufacturing capability.
Antony said, “There’s scope for opening some more sectors other than civil aerospace and internal security. The changes, however, will only be prospective so that no foreign supplier is discriminated against. This (offset ) is a new concept and whenever any amendments are needed, we will bring them.”
Foreign vendors are expected to plough more than $30 billion (Rs 1,35,000 crore) into India during 2010-20 as part of their offset obligations. The air force’s $10.2 billion (Rs 45,900 crore) tender for 126 medium multi-role combat aircraft (MMRCA) will alone generate indigenous commercial activity worth over $5 billion (Rs 22,500 crore).
Boeing (F/A-18 Super Hornet), Lockheed Martin (F-16 Super Viper), Eurofighter Typhoon (a consortium of British, German, Spanish and Italian companies), Dassault Aviation (Rafale), Saab (Gripen) and Russian Aircraft Corporation’s MiG-35 are angling for the air force order. Antony said, “All military contracts, including the MMRCA, would be awarded purely on merit. There will be no political interference.” He said the deal would be concluded in the next financial year,
India is investing billions of dollars in a range of capabilities including fighter planes, missiles, attack helicopters, heavy-lift helicopters, midair refuellers, maritime recoinnance aircraft, artillery guns and ultra-light howitzers. RK Singh, secretary (defence production), said, “According to industry estimates, India will spend $150 billion (Rs 6,75,000 crore) on military and civil aircraft by 2030.”
The airshow, held every two years, offers foreign vendors a platform to showcase newest equipment and technology. It is modelled on the lines of UK’s Farnborough International Airshow, one of the world’s most iconic aviation events.