First Right Of Refusal to Indian Companies in Defence Procurement: Report

  India plans to give first right of refusal to domestic companies in defence equipment purchases in a set of far reaching changes planned for its procurement policy in the wake of the AgustaWestland helicopter bribery scandal.

  The first right of refusal will be available for Indian government owned companies and also privately owned companies owned by Indian entities, the Times of India newspaper reported quoting unnamed sources in India's Ministry of Defence (MoD).

   India is the second biggest importer of defence hardware in the world after Saudi Arabia. It imports billions worth hardware every year and has a nascent indigenous defence industry which manufactures a few second tier components. While government companies have the capability to deliver whole systems such as aircraft, tanks, ships, radars and artillery guns, the private sector does not have the means to manufacture whole systems. Indian defence products have time and again failed trials by its armed forces. Cases to point are the light combat aircraft (LCA), the Arjun Tank and several radars and other equipment which are yet to be fully accepted by the forces despite taking decades to develop.

   The report said that the MoD has discussed the prospect of making procurment from local companies (called buy-and-make) as the top category for procurement. Only of domestic companies cannot make by themselves will it call for global tenders.  

  “It could be a knee jerk reaction”, said an industry source to defenseworld.net. Local companies, both government owned and private ones, simply do not have the capability to provide world class equipment, he added.  

   India is also likely to modify its offsets procedures so that software and consultancy services will nolonger quality as offsets. This follows allegations that a part of the bribery amount was routed by AgustaWestland to entities in India under the guise of software contracts.