Defence Offset Guidelines – A Long Overdue Tweak
The 5th August amendment to the offset guidelines exemplifies how difficult it is to let go of unnecessary controls.
- Amit Cowshish
- August 27, 2015
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The 5th August amendment to the offset guidelines exemplifies how difficult it is to let go of unnecessary controls.
Recommendations that defence procurement be handled by the military brass, ministers stay out of defence deals, and an external procurement agency be set up to handle procurement and focus on indigenization are indeed extraordinary.
There are also grey areas to the extent that the professional and hierarchical relationship which the Consultants will have with regular IFS officers is yet to be clearly outlined.
Converting the Services` HQs as departments of the government within the scope of Allocation of Business Rules, with responsibility to Parliament for obtaining defence appropriations, may be in the long-term interests of the country.
MoD will have to make sure that no weapon system is purchased unless an arrangement is made for sustained supply of ammunition, not necessarily through the OFB.
MoD will have to make sure that no weapon system is purchased unless an arrangement is made for sustained supply of ammunition, not necessarily through the OFB.
It is time the MoD considered creating structures and organizations that are not an intrinsic part of the ministerial set up to implement the production and procurement policies once these are formulated by the ministry.
Policymakers need to ask themselves ‘What Really Makes Offsets Tick?’ in order to develop an objective framework based on sound principles repeatedly noticed in the offset regulations of ‘The Smarter Lot’ of countries and in the process avoid committing the seven ‘original sins’ that a poorly-designed offset policy may entail.
MoD will do well to set up a crack team of experts from all fields to work out the terms of the proposed IGA keeping in view the larger picture of what happens after these 36 aircraft are inducted.
A loosely articulated idea of making India a defence manufacturing hub cannot work unless it is backed by a comprehensive blueprint, efficient procedures, meticulous implementation, trained and responsive manpower, continuous monitoring and quick decision-making.
The bad news in this year’s defence budget is that it does not recognise that things are not going in the right direction but only the beaten track. And the poor track record in fully utilising the resources allocated for ‘Modernisation’ is the worse news.
One area where the 2015-16 defence budget is likely to hurt the most is in capital acquisition, which has already been under acute pressure in recent years due to the overwhelming share of the ‘committed liabilities’ arising out of contracts already signed
It is a fairly simple exercise to estimate what the defence budget will be given available indicators. My assessment is that the Budget Estimate for defence is likely to be around Rs. 250,000 crore, with 105,000 crore for Capital Expenditure and 145,000 Crore for Revenue Expenditure.
There is an urgent need to conceptualise a policy framework as to what Make-in-India implies so far as defence production is concerned and how it is different from the existing policy framework.
The ‘Make in India’ drive of Prime Minister Narendra Modi offers a way of improving the country’s self-reliance in defence production. But for the MII to succeed in the defence manufacturing sector, the government needs to address some legacy issues.
If reports about the diversion of INR 13,000 crore from the capital segment of the defence budget to the revenue heads are true, it is an indication of the growing strain on the revenue budget.
Of Agents and Agency Commission in Defence
It is difficult to visualise how the Russian offer to make LUH in India could be actualised unless the government invokes ‘strategic considerations’ for making it in India or signs an inter-governmental agreement for that purpose.
It is necessary to evolve a long term strategy keeping in mind all the aircraft acquisition programmes, review the factors that contribute to determining the right numbers and begin the process of building a long term partnership with the private industry.
Replacement of the Avro is an approved requirement. Scrapping the on-going process could delay acquisition of the transport aircraft by at least a year or two as it would inevitably involve revisiting the qualitative requirements (QRs) before restarting the tendering process.