With the rupee sinking against the dollar, the domestic private sector connected with the defence industry has sought protection against exchange rate fluctuations in the contracts they undertake.
“It has been done in the past so it is nothing new. RBI publishes certain rates. Some agreed rates are decided right at the beginning. Whatever the difference in the agreed rate and what prevails on the day the contract is incurred is compensated. The Government takes over sovereign risk. This is commonly done in several contracts. There have been cases in the refinery and fertiliser sectors. Public sector has always had this (cover),” the Chairman, Federation of Indian Chambers of Commerce and Industry, Defence Committee, Mr M.V. Kotwal, said.
He added that industry would not have sought this cover in normally stable situation.
Transparency
In an effort to bring about transparency in the defence sector, FICCI has suggested that a Joint Secretary in charge of private sector be made part of the Committee of Acquisition.
The FICCI Secretary General, Dr Rajiv Kumar, said that the suggestion has been made in writing and that this one structural change would make an “entire difference.”
Issues relating to taxation are almost among the other issues that the Committee wants the Government to look at.
“If there is an order which the PSU wins and subcontract to another company which is not a DPSU, they are able to pass on the duty exemption to that company. But the exemption is not available to the private sector if it wins the contract,” FICCI officials pointed out.