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'Defence Offset Supplies are Deemed Exports'
A major effort is in progress in the Defence Ministry (MoD) to tweak its defence procurement and production policies for 2014, with key officials engaging the Indian industry to help better involvement of private sector, sources said here on Tuesday.
Among the proposals that have come up for discussing in the meetings, initiated by acquisition and production departments and wings of the Defence Ministry, include “treating all Indian supplies to the MoD while fulfilling OEM’s offsets obligations as deemed exports.”
Under the clause in the Defence Production Policy-2011, a foreign Original Equipment Manufacturer (OEM) winning a contract over Rs. 300 crore should mandatorily plough back at least 30 per cent of the amount in the Indian defence, aerospace and internal security sectors, either through direct purchases of equipment or components and capacity building.
“This proposal, it was felt by the industry, would encourage them to become competitive. Foreign original equipment manufacturers (OEMs) see Indian industry as grossly non-competitive. To avoid duties and taxes, the foreign OEMS have to import subsystems and component costing them for transportation and associated risks,” explained an industry source. “Further taxes and duties eat into offsets obligation. Under ‘deemed exports’, the Indian industry offering offsets would become more competitive by getting export benefits in taxes and duties,” source said. However, since this could be termed as sector-specific and may lead to similar demands from other sectors, it was felt at the meeting that the proposal may not be acceptable to the ministries of Finance (MoF) and Commerce and Industry (MoCI). “Hence an alternative would be suggested by the defence industry to the MoD,” another source said.
The meetings with the MoD officials are being held under the National Manufacturing Competitiveness Council (NMCC) initiative and these have been chaired by MoD officials, including Defence Production Secretary G C Pati.
These interactions are being held to discuss measures required to operationalise the Defence Procurement Policy 2011, issues related to transfer of technologies of the Defence Research and Development Organisation (DRDO), taxation and procurement, upcoming fast-track procedure amendments.
Another suggestion with regard to ‘deemed exports’ was the MoD issuing certificates to Indian suppliers to claim reimbursement from the Directorate General of Foreign Trade (DGFT).
Link - 'Defence Offset Supplies are Deemed Exports' -The New Indian Express
A major effort is in progress in the Defence Ministry (MoD) to tweak its defence procurement and production policies for 2014, with key officials engaging the Indian industry to help better involvement of private sector, sources said here on Tuesday.
Among the proposals that have come up for discussing in the meetings, initiated by acquisition and production departments and wings of the Defence Ministry, include “treating all Indian supplies to the MoD while fulfilling OEM’s offsets obligations as deemed exports.”
Under the clause in the Defence Production Policy-2011, a foreign Original Equipment Manufacturer (OEM) winning a contract over Rs. 300 crore should mandatorily plough back at least 30 per cent of the amount in the Indian defence, aerospace and internal security sectors, either through direct purchases of equipment or components and capacity building.
“This proposal, it was felt by the industry, would encourage them to become competitive. Foreign original equipment manufacturers (OEMs) see Indian industry as grossly non-competitive. To avoid duties and taxes, the foreign OEMS have to import subsystems and component costing them for transportation and associated risks,” explained an industry source. “Further taxes and duties eat into offsets obligation. Under ‘deemed exports’, the Indian industry offering offsets would become more competitive by getting export benefits in taxes and duties,” source said. However, since this could be termed as sector-specific and may lead to similar demands from other sectors, it was felt at the meeting that the proposal may not be acceptable to the ministries of Finance (MoF) and Commerce and Industry (MoCI). “Hence an alternative would be suggested by the defence industry to the MoD,” another source said.
The meetings with the MoD officials are being held under the National Manufacturing Competitiveness Council (NMCC) initiative and these have been chaired by MoD officials, including Defence Production Secretary G C Pati.
These interactions are being held to discuss measures required to operationalise the Defence Procurement Policy 2011, issues related to transfer of technologies of the Defence Research and Development Organisation (DRDO), taxation and procurement, upcoming fast-track procedure amendments.
Another suggestion with regard to ‘deemed exports’ was the MoD issuing certificates to Indian suppliers to claim reimbursement from the Directorate General of Foreign Trade (DGFT).
Link - 'Defence Offset Supplies are Deemed Exports' -The New Indian Express
