Indian defence minister AK Antony believes that an increased emphasis on indigenous arms purchases will help eliminate corruption in arms deals.
"The government is going to have a second look at both the defence procurement procedure and defence production policy and amend it in a manner so that the industry can take more interest in defence production," he said in an address to an armed forces seminar.
He noted that for the immediate future, New Delhi will be obliged to deal with foreign firms in order to meet its defence needs, but that the country's offset programme will assist the development of India's domestic defence industry.
"The public and the private sectors have to synergise their competencies in creating capabilities for technologies in niche areas," he says. "This would promote self-reliance and foster our endeavour towards modernisation."
"It is important that the private sector emerges as a major player, fully geared to meet various operational requirements of our armed forces with requisite knowledge, expertise and wherewithal. It is extremely relevant to appreciate each other's concerns, strengths and opportunities which are thrown up in this process. A strong and vibrant partnership between the public and private sector is crucial for delivering the much-needed defence technological upgradation."
In 2012, India issued a new Defence Procurement Procedure, providing foreign defence contractors a more flexible offset regime with increased use of multipliers for specific technologies and offset banking.
It also listed several key technology areas including hypersonic flight technologies, low observable technologies, and nano technology-based sensors and displays.
Industry observers question the willingness of foreign firms and governments to share intellectual capital in these areas. This caution is exacerbated by India's foreign direct investment cap of 26% in the defence sector. Foreign firms are dubious about injecting substantial intellectual property into a venture in which they are minority shareholders.
Antony's comments followed allegations of bribery related to a 2010 deal to obtain 12 VIP-roled AgustaWestland AW101 helicopters. The allegations, which emerged in Italy on Tuesday, 12 February 2013, led to the arrests of the heads of both Finmeccanica and unit AgustaWestland.
Finmeccanica and AgustaWestland deny any wrongdoing, but the allegations prompted New Delhi to commence cancellation proceedings for the deal, although three aircraft have already been delivered.