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India Exempts Some Arms Deals From Offsets

India Exempts Some Arms Deals From Offsets

By VIVEK RAGHUVANSHI, NEW DELHI


As of last month, India no longer requires industry offsets when buying arms or defense gear from other governments, but does require technology transfer in such offset-exempt deals, an Indian Defence Ministry procurement official said.
In 2005, India overhauled its policy on arms import deals worth more than $71 million, requiring the foreign vendor to invest 30 percent of the contract’s value in private or state-owned enterprises in India.
New Delhi expects offsets, including the new technology provisions, to bring $1.25 billion to such enterprises over the next five years, said Kiran Chadha, who runs the Defence Ministry’s Defence Offset Procurement Agency. The value of technology offsets will be calculated by a Defence Ministry team.
Chadha said the new provisions would bring to India missile technologies, electronic warfare and other kinds of technology.
The first offset contract under the new provisions was signed in March, a $15 million purchase of Elta medium-power ground radars. The Israeli firm will buy $5 million in components from private Indian companies Larsen & Toubro and Astra Microwave of Hyderabad.

Russia Stands To Gain

Indian sources said Russia would likely benefit most from the offset exemption because most Indo-Russian contracts are negotiated between the two goverments.
Last month, the upcoming purchase of 30 Sukhoi Su-30MKI combat jets was exempted. Future deals to co-produce a fifth-generation fighter jet and the Multirole Transport Aircraft will also likely receive exemptions.

It is not clear whether exemptions will cover contracts negotiated through the U.S. Foreign Military Sales program, as the Indian government is still examining the issue.
A Defence Ministry official said that officials are still calculating the offset for the $700 million purchase of 197 Eurocopter AS 550 C3 Fennec helicopters for the Indian Army. Eurocopter beat out Bell Helicopter’s Bell 407.
The official said the Indian government has accepted the demands of private companies, which asked to be treated the same — as far as being the beneficiaries of offsets — as state-owned firms Bharat Electronics Ltd., Hindustan Aeronautics Ltd., Bharat Earth Movers Ltd. and Bharat Dynamics Ltd.
The 2005 offset policy left confusion about what kinds of investment could be offered as an offset, so in late 2006 the Defence Ministry set up the Defence Offset Facilitation Agency to help facilitate the policy.
The Defence Ministry will not allow joint ventures in energy infrastructure and water to count toward offset requirements because they don’t directly benefit local defense companies.

DefenseNews.com - India Exempts Some Arms Deals From Offsets - 04/20/07 12:10

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