NEW DELHI: India on Monday allowed foreign vendors to use transfer of technology to fulfil their offset credits, easing the policy aimed at developing the indigenous industry. The government also increased the time for bank offset credits to seven years, from the present two-year limit within which foreign vendors have to execute their offset obligations after the execution of contract obligations.
These were two of the several changes that were made to the guidelines that determine India’s policy on defence offsets.
Under its defence procurement procedure,India imposes counter-trade obligations on original equipment manufacturers (OEMs) awarded defence contracts worth more than Rs.300 crore by way of transfer of critical technologies and production of components in India.
These changes are significant as they come just days after reports that army chief General V.K. Singh had written to Prime Minister Manmohan Singh regarding obsolescence in the equipment used by the armed forces.
“The revised (offsets) policy recognizes transfer of technology (ToT) as eligible for discharge of offset obligations,” said a defence ministry statement. “Investment in kind in terms of ToT must cover all documentation, training and consultancy required for the same. The ToT should be provided without licence fee and there should be no restriction on domestic production, sale or export. The offset credit for ToT shall be of 10% of the value of buy-back by the OEM (original equipment manufacturer) during the period of contract, to the extent of value addition inIndia.”
Deba Ranjan Mohanty, senior fellow at the Delhi-based Observer Research Foundation, said: “The inclusion of transfer of technology within the ambit of offsets is a good thing. It would bring in a great degree of clarity to the companies on the kind of technologies they can bring into India.”
“The fact that the banking period has been increased from two to five years is a logical step forward. It basically means that foreign vendors will now get longer to execute their offset obligations. This is good because defence contracts typically take quite long to be executed,” Mohanty said.
The offset policy aims to develop the local defence industry.
The revised policy has also made a distinction between the equity and the non-equity route that is investment in “kind” by OEMs for discharge of offset obligations.
Amid reports of irregularities in defence deals, defence minister A.K. Antony on Monday met army chief Singh and directed the army to streamline its acquisition process to fix accountability in case of delays in procurement, PTI reported, citing ministry officials.
He asked ministry and army officials to examine the possibility of shortening “the time taken for technical evaluations and trials”, PTI said.
In a related development, the Central Bureau of Investigation (CBI) questioned Ravinder Rishi, chairman of the Vectra Group. This is the second time the agency has questioned Rishi, who holds a British passport, over alleged financial irregularities in the supply of trucks to the 1.3 million strong Indian Army.
“We have some evidence and his presence in the country is needed till the investigation is over,” said a senior CBI official, who spoke on condition of anonymity. “He has also denied all the allegations levelled against him during the questioning.”
Vectra Group declined to comment on the development.
CBI had on Friday registered a case against him and the firm.
The agency said that unknown officials of state-owned Bharat Earth Movers Ltd entered into a criminal conspiracy with one of the owners of a UK-based company having a name similar to a Czech company, which was a manufacturer of military trucks.
“The agreement…was fraudulently assigned to the said UK-based company,” the statement said. “In this manner, vehicles worth thousands of crores have been supplied to (the) Indian army… Unknown officials of the defence PSU allowed change of currency from dollar to euro and, further, by not levying the liquidated damages, thereby causing a further loss of approximately Rs.13.27 crore,” the agency had said in a statement.
The CBI official cited above said it would soon send a letter rogatory, a legal document seeking information, to Czech Republic.