India to buy 126 fighter jets by year-end

The government will finalise the proposal to purchase 126 aircraft by the year-end, Defence Minister Pranab Mukherjee said in Mumbai.

Speaking at the meeting organised by the Indian Merchants' Chamber on 'The role of the private sector in defence preparedness', the minister said, "The ministry will send a request for the proposal for acquisition of 126 fighter jets by the year-end."

India is, however, insisting on technology transfer, whereby after purchasing the aircraft - F16 from US, Mirage 2005 from France and Grippen from Sweden - the know-how for manufacture these should be imparted to domestic defence players.

He added that while making a defence purchase, the offset clause should be applicable, indicating that a minimum 30 per cent of the cost should be offset by domestic production.

"The ministry of defence has already put in place an offset policy to leverage the country's position as a large buyer and this has been incorporated in the Defence Procurement Procedure 2005, which has come into effect from July 1," Mukherjee said.

On the private sector's involvement, he said of the total purchases worth around Rs 5,500 crore (Rs 55 billion) made by the defence PSUs, approximately Rs 1,200 crore (Rs 12 billion) was obtained from the private sector engaging small, medium and large scale industries.

Similarly, the ordinance factory board outsource their production to the extent of Rs 1,900 crore (Rs 19 billion) to the private industry.

Anticipating foreign investment under the permissible level of 26 per cent, a number of major private sector companies have obtained letters of intent or industrial licences for manufacturing a wide range of defence products.

"I am told that till now 23 such letters of intent have already been issued," he said.

Of the 40 recommendations made by the Vijay Kelkar Committee report on defence procurement, 21 have been accepted, five will be reviewed for modification and the rest are still under consideration.

The ministry of defence has put in place an empowered committee to look into the remaining issues.

In the defence budget for 2005-2006, there is a provision for Rs 83,000 crore (Rs 830 billion) of which the capital heads is Rs 34,375 crore (Rs 343.75 billion).

A significant amount from this is set aside for import purposes and the minister pointed out that this trend needs to be reversed.