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Sunday, 9 January 2011

From Today's Papers - 09 Jan 2011





PAC summons Army, IAF chiefs  New Delhi, January 8 In an unprecedented development, chiefs of the Army and the IAF will appear before Parliament's Public Accounts Committee (PAC) on Wednesday in connection with alleged irregularities in the Canteen Stores Department supplies.  Naval Chief Admiral Nirmal Verma, who has also been called along with his counterparts of the Army and the IAF to appear before the PAC, would, however, be represented by Vice-Chief Vice Admiral DK Deewan as he will be travelling to Indonesia on a "pre-scheduled" four-day visit beginning tomorrow, sources said today.  The PAC had called the Chiefs of the three Defence Services for a hearing on January 12 based on a CAG report which has pointed out irregularities in the supply chain management of rations by CSD.  The Defence Ministry, which received the communication, advised the Service Chiefs to appear before the PAC apparently to underline the committee's immense significance at a time when the government is seeking to project it as a body as important as the Joint Parliamentary Committee in the 2G spectrum issue, the sources said.  Accordingly, the PAC has been informed that Army chief General V K Singh and Air Force chief Air Chief Marshal P V Naik would be appearing before it, they said.  This would be the first time that the chiefs of armed forces would appear before the PAC as usually the Defence Secretary attends such meetings of the Parliamentary Committees along with Vice Chiefs of the Services.  However, soon after the Defence Ministry received the PAC letter, Army sources had said that the Service chiefs were unlikely to appear before the Committee and instead Vice Chiefs and Quarter Master General equivalents would represent their forces. The Army chief had also wondered if there was any "extra requirement" for the chiefs to appear before the PAC.  Highlighting the irregularities in the CSD, the CAG had said, "The existing procedure for provisioning of dry rations failed to assess the requirement realistically. The failure was mainly due to systemic deficiencies due to which different quantities were worked out at different echelons applying different parameters..."  The report had said that the risk of existence of "cartels" affecting the quantity and quality of rations is too serious to be ignored.  "The Ministry of Defence should set clear targets regarding expansion of vendor base and progress should be closely monitored. The list of vendors should be put on the website of the Army Service Corps," it had said.  As per the usual practice, the Defence Secretary attends such meetings of the Parliamentary Committees along with Vice Chiefs of the Services.  Gen Singh said on Thursday that he had no problem in appearing before PAC if the Ministry wanted it even as he wondered "if there is an extra requirement" for the Chiefs to go before the Committee.  "There are two-three issues raised by the CAG on which the PAC wants to ask or clarify various points. It depends on what the Ministry wants from us. If it wants us to go and clarify, we have got no problem in doing that," he said when asked if he would appear before the PAC. — PTI

http://www.tribuneindia.com/2011/20110109/main3.htm
Defence documents forged in $300 million deal  NDTV Correspondent, Updated: January 08, 2011 22:30 IST ad_title  New Delhi:  Imagine ordering Chinese food and then getting a pizza instead. That's exactly what could have happened to the BSF which is looking to acquire two transport aircraft in a 300 million dollar deal.  It now turns out that specifications of key equipment on the aircraft were changed and backed by forged signatures of Indian Air Force officials.    If the aircraft were acquired India would have ended up getting outdated equipment instead of some of the state of the art systems that the BSF wanted.    The documents relate to purchase of two transport planes for BSF from a Spanish firm.      * Share this on Rediff.com Rediff.com     * NDTVTwitter     * NDTVNDTV Social     * Share with MessengerLive Messenger     * NDTVGmail Buzz     * NDTVPrint   The Change in crucial technical documents was noticed by BSF during last round of negotiations.  The specifications of key safety equipment like emergency location radars were changed.  The Air Force is conducting an inquiry into the incident. The matter may be handed over to CBI.

http://www.ndtv.com/article/india/defence-documents-forged-in-300-million-deal-78041
Chiefs of Army, IAF to appear before PAC Press Trust of India / New Delhi January 08, 2011, 14:21 IST  In an unprecedented development, chiefs of the Army and the Air Force will appear before Parliament's Public Accounts Committee (PAC) on Wednesday in connection with alleged irregularities in the Canteen Stores Department supplies.  Naval Chief Admiral Nirmal Verma, who has also been called along with his counterparts of the Army and the Air Force to appear before the PAC, would, however, be represented by Vice Chief Vice Admiral D K Deewan as he will be travelling to Indonesia on a "pre-scheduled" four-day visit beginning tomorrow, sources said today.  The PAC had called the Chiefs of the three Defence Services for a hearing on January 12 based on a CAG report which has pointed out irregularities in the supply chain management of rations by CSD.  The Defence Ministry, which received the communication, advised the Service Chiefs to appear before the PAC apparently to underline the committee's immense significance at a time when the government is seeking to project it as a body as important as the Joint Parliamentary Committee in the 2G spectrum issue, the sources said.  Accordingly, the PAC has been informed that Army chief General V K Singh and Air Force chief Air Chief Marshal P V Naik would be appearing before it, they said.  This would be the first time that the chiefs of armed forces would appear before the PAC as usually the Defence Secretary attends such meetings of the Parliamentary Committees along with Vice Chiefs of the Services.  However, soon after the Defence Ministry received the PAC letter, Army sources had said that the Service chiefs were unlikely to appear before the Committee and instead Vice Chiefs and Quarter Master General equivalents would represent their forces.  The Army chief had also wondered if there was any "extra requirement" for the chiefs to appear before the PAC.  Highlighting the irregularities in the CSD, the CAG had said, "The existing procedure for provisioning of dry rations failed to assess the requirement realistically. The failure was mainly due to systemic deficiencies due to which different quantities were worked out at different echelons applying different parameters..."  The report had said that the risk of existence of "cartels" affecting the quantity and quality of rations is too serious to be ignored.  "The Ministry of Defence should set clear targets regarding expansion of vendor base and progress should be closely monitored. The list of vendors should be put on the website of the Army Service Corps," it had said.

http://www.business-standard.com/india/news/chiefsarmy-iaf-to-appear-before-pac/121586/on
Muddled defence offsets policy  How far have we gone away from the original goal of defence offsets  It is all muddled up now. When the defence offsets policy was first announced in 2005 by the ministry of defence, its purpose was intended to promote defence industrial capability through transfer of technology, increased investment in R&D and licensed production. Minimum offsets of 30% of the value of the transaction was proposed for every defence deal greater than Rs 300 crore. As the offsets policy got revised — or shall we say refined — over the years under the Defence Procurement Procedures [DPP] of 2005, 2006 and 2008, it did not alter the basic purpose of the offsets.  Under the DPP-2008, it was specified that the Defence Offset Facilitation Agency (DOFA) shall not consider civil infrastructure and such technologies that are otherwise easily available in the open market while making certification under Appendix D to DPP-2008. This change was perhaps brought about on account of certification of DOFA under the previous regulation of infrastructure and technologies that were not related to defence and were easily available in the open market. It also reaffirmed the belief that the government was willing to forsake economy in the acquisition of weapons for the long-term goal of creating a defence-industrial base through the induction of technology, co-production, license production, export potential generation under the DPP.  However, under the DPP-2011 announced earlier this week, the scope of offsets has now been enhanced to “include civil aerospace, internal security, training within the ambit of the eligible products and services for discharge of offsets obligations,” as stated by Defence Minister A K Antony in the foreword of the policy. These changes were being sought by foreign vendors as with a very limited defence industrial base in the country, they were finding it hard to get eligible partners to work within India.  But this constraint of limited defence industrial capacity to absorb the offsets were known to the government from day one. And it was primarily driven by the limitation of 26% FDI cap in defence manufacturing in India which was put in place in 2001. Despite a proposal by the Union Commerce Ministry to increase the FDI cap in defence manufacturing from the existing 26% — which has brought in a grand total of Rs 70 lacs as FDI in defence so far —the proposal has been rejected outright by the Defence Ministry.  A mere 26% stake in a joint venture is not an attractive prospect for the foreign firms to make greater profit than their investments would make elsewhere.  By increasing their stake in such collaborations, these foreign firms can be made willing and enthusiastic partners. An example of how higher stakes in companies can help add value to the offsets policy is the Boeing purchase of 34 per cent of Aero Vodochody, a Czech firm, as an offset deal. Boeing’s subsidiary Ayers bought LET Kunovice, a Czech aeroplane manufacturing firm, with plans to move part of the production line for its own planes to LET Kunovice.  Moreover, as 26% is the upper ceiling on the equity that a foreign vendor can invest in India, it has to find an Indian company that is willing to raise the balance 74%. It is extremely difficult to find an Indian partner willing to provide resources for such a high level of investment. For a defence deal worth Rs 10,000 crore, 30% offsets would translate into an obligation of 3000 crore under offset. If the foreign vendor decides to use a JV as the sole means of fulfilling its 30% , then it will have to find an Indian partner or partners willing to invest 8538 crore in the JV. The JV thus formed will involve a total investment of 11,538 crore in a highly complex defence venture which is practically not sustainable due to the high risk involved.  Any offsets policy to succeed should be able to create a stake for the foreign vendors to continue operating in the country, upgrading their systems along the way and in the process make it a win-win situation for both the parties. Rather than dilute the whole purpose of the offsets policy because of lack of capacity in the Indian defence manufacturing sector to absorb the obligation under the offsets, the government should have increased the FDI cap in defence manufacturing from the existing 26% to enhance the ability of Indian defence industry to absorb the offsets. This would put in place a system that can optimise the benefits of an offsets policy that in the first place comes at a cost.  Defence offsets are neither free lunches nor freebies. There is an economic cost to offsets. Depending on the economic conditions prevalent in the offset applying country, its industrial base or its capacity to absorb technology, vendors hike the cost of their product to compensate for the inefficiency inherent in the nation seeking offsets. Therefore, an offset implementing country pays more for the import of defence items than it would otherwise have to do if it did not impose mandatory offset obligations. If the stated purpose of the defence offsets policy has been dispensed with by the government now, it would be far more prudent for the government to go ahead and scrap the offsets policy altogether.  In conclusion, the current muddled policy proposals serve no purpose whatsoever. The government should either enhance the offsets absorption capacity by increasing the FDI cap in defence manufacturing or scrap the offsets policy altogether

http://pragmatic.nationalinterest.in/2011/01/08/muddled-defence-offsets-policy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PragmaticEuphony+%28Pragmatic+Euphony%29&utm_content=Google+Reader


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