Event ReportsPublished on Oct 12, 2006
Minister of State for Defence Production Hon. Rao Inderjit Singh inaugurated, on October 12, 2006, a national seminar on "Public Private Partnership in Defence: Problems and Prospects", hosted by Observer Research Foundation (ORF), New Delhi.
Minister inaugurates national seminar on Defence
Minister of State for Defence Production Hon. Rao Inderjit Singh inaugurated, on October 12, 2006, a national seminar on "Public Private Partnership in Defence: Problems and Prospects", hosted by Observer Research Foundation (ORF), New Delhi. Delivering the key-note address, the Minister said: "The climate that has been created is conducive for formation of joint ventures for co-development and co-production of defence both for cost-effective production in India and for export."

Mr. R. K. Mishra, Chairman, ORF, pointed out that even though the Defence Ministry had, ten years ago, set the goal of achieving 70 per cent self-reliance in defence production, a mere 30 per cent has been achieved till now. He said the thrust of the Indian defence procurement effort must be on building a capable and reliable defence industrial base, and all processes and procedures, including offsets, must be tailored to towards this goal. 

He also suggested that Parliament should periodically, preferably every two-three years, review the progress made in achieving self-reliance in defence production. 

Gen. V.P. Malik, former Chief of the Army Staff, presently President, ORF Institute of Security Studies, made his concluding observations at the day-long seminar which had discussed, in detail, "impacts of reforms in Indian Defence Industrial sector and the key issues in the public-private partnership in defence."

Among others, the speakers included Maj. Gen. H.S. Sehgal, defence scientist and Advisor to OR Chairman, Dr. Amitav Mallik, Air Comde. Jasjit Singh, Lt. Gen. Vinay Shankar, Commander A. Ghosh and P.K. Rastogi, Additional Secretary (DP).

Noting that global players like Airbus Industries, Lockheed Martin, Snecma and Boeing are outsourcing work orders to Indian companies because of the excellent technical skills possessed by the country's technical personnel, as well as because of global competitiveness, the Minister said India has emerged as an attractive and favoured destination for foreign/multinational firms to forge alliances for cost-effective production of defence systems. 

The Minister also said that the Government earnestly wants to achieve maximum synergy between the public and private sectors in order to create a competitive defence technology edge and strengthen the defence industrial base in the country. 

The Minister noted that, following the opening-up of the defence industry in May 2001 to the private sector, including permitting 26 per cent foreign direct investment (FDI), the Government had given 29 letters of intent/industrial licences to the private sector for producing of a variety of defence systems. 

"Out of the total purchases of around Rs. 8265 crore made by defence PSUs during 2005-06, approximately Rs. 2077 crore were obtained from the private sector," the Minister said. 

"Similarly, during 2005-06, outsourcing by Ordnance Factories was to the extent of Rs. 2529 crore to the private industry. In the same period, the extent of outsourcing by the Ordnance Factories from the private sector was 69 per cent." 

The Minister said that, in order to give a fillip to the Indian Defence industry, an 'offset' provision of 30 per cent of indicative cost of capital acquisition has been incorporated in Defence procurement procedures. 

According to the procedure for implementing 'offset', foreign suppliers shall be at liberty to select Indian defence industries in the public sector, as well as licensed defence industries in the private sector, to meet their 'offset' obligation. The 'offset' obligation can also be met through FDI in Indian defence industries for industrial infrastructure or services, co-development, joint ventures and co-production of defence systems. 

The Minister said, "It was estimated that approximately US$ 10 billion-worth of offset benefits are likely to accrue to the Indian defence industry for capital acquisitions in the 11th Defence Plan."

The government has also constituted a selection committee for selecting and identifying Indian industries of proven excellence and capable of contributing in defence production. "Such industries will be named as "Raksha Udyog Ratnas," the Minister said. 

Though the Minister commended the DRDO for its significant contribution to defence research and development (R&D), he emphasized that "there is still a long way to go".
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