policies on defense-related acquisitions from abroad and production within India are believed to have been directed not only at ensuring India's security interests but also at promoting self-reliance and indigenous capability in this vital sector often involving advanced technologies. Whatever one's opinions about intentions, questions have often been raised, including in these columns, as to whether these goals have actually been achieved. Again, while the point may be debated, clearly there are major problems going by the evidence in the past two decades. India has been buying ever larger quantities of increasingly sophisticated military hardware from foreign suppliers, while its defense forces have not been able to acquire necessary comparable equipment from Indian state-sector manufacturers due to inadequate performance, inordinate time delays and massive cost overruns. Fighter aircraft such as the Light Combat Aircraft (LCA), jet trainers, helicopters, main battle tanks, submarines are all military equipment in which India has had active indigenous or collaborative R&D or manufacturing programs over several decades. But, as inventories have reached the end of their life cycles calling for replacements, India has repeatedly been forced to go in for costly foreign acquisitions while requisite indigenous capability has continued to languish even for the next generation of technology. This has not only increased India's dependence on imports, and vulnerability to technology denial regimes, in such a vital sector, it has also meant huge lost opportunities for enhancing science and technology capabilities, and downstream spread effects, in important sectors of national industry. Very belatedly, India had set in place over the past two years a policy of "offsets" in major defense contracts worth over Rs 300 crore in value. Under this clause, a party securing such a contract was obligated to plough back to Indian parties at least 30 per cent of the contract value by way of buy-back of products and services, with a provision for a higher percentage in special cases. Of course, there still remained the danger that even such offsets may amount to little more than some sub-contracts or assembly-line operations, not resulting in any upgradation or absorption of know-how or capability, but it least it was a beginning. Unfortunately, under pressure from major manufacturers in the US and some other Western countries, there are moves to dilute even this offset clause in important ways to the detriment of the long-term Indian interests. As we go to press, Defense Ministry officials have confirmed that a modified DPP will be notified by April 2008. OFFSET POLICY The policy on offsets, first enunciated in 2005, was further elaborated along with rules and procedures in the Defense Purchase Policy (DPP) of 2006 under which a new Defense Offset Facilitation Agency (DOFA) was also set up to work with vendors on implementation and monitoring. Offsets could include buy-back of products or services, foreign direct investment (FDI) in Indian public or private companies for such products or services or co-development and infrastructure, or even FDI in Indian entities engaged in defense R&D. All these were envisaged to be "direct offsets" that is directly related to the contract, the procurement of items under it, and their cost. In the short period DPP-2006 had been in operation, two major contracts had been concluded with offset clauses. Israeli firm ELTA System had been awarded a contract worth Rs 900 crore for supplying radars. Under the offset provision, ELTA signed contracts with two Indian firms for purchase of components, with Astra Microwave securing a contract worth Rs 100 crore. Similarly, in the $1 billion (Rs 4000 crore) contract awarded to the Russian manufacturers of the Mig-29 for upgrades of the IAF's fleet, the vendor has agreed to offsets of $300 million. Several other pending deals such as for refueling tankers also contain offset clauses. Interestingly, even the controversially cancelled deal to purchase 196 military helicopters from the French-led European conglomerate Eurocopter (most probably cancelled under pressure from its US rivals Bell Helicopters as revealed in these columns a few months ahead of the cancellation) had contained offset provisions with Eurocopter having agreed to 30 per cent offsets as required. Two points must be noted here. First, such offset clauses are not unique to India nor are they some archaic leftovers of an earlier "socialistic" self-reliance policy incommensurate with the contemporary realities of globalization. Many countries have, and continue to successfully enforce, such offset clauses in the interests of their economies and in order to boost their knowledge base and industrial capabilities. Israel, Malaysia, Thailand to name a few are among many other countries in Asia and South America having even more stringent offset conditionalities than India. Take for instance Israel's $2.5 billion order for 50 F-16 fighter aircraft from the US giant Lockheed Martin which had lost out to its American rival Boeing (both now pushing aggressively for the Indian 126-aircraft deal). Israel secured an offset package of $850 million or about 35 per cent of the contract value spread over 10 years. Within 3 years of signing the deal, Lockheed Martin had already invested over $250 million in 12 Israeli firms for sourcing various components, assembly and post-production services. Israel not only enhanced their capabilities in these sectors it also ensured that it acquired new knowledge in advanced areas. Lockheed Martin was made to invest and participate in co-development of flight simulators and helmet-mounted display systems, as well as other technologies relating to space applications and electronics. Israel also made full use of its option clause for acquisition of a further 50 F-16s to add pressure on the US vendor. OFFSETS FOR WHAT? Second, as also brought out by the above example, offsets should not be seen merely as commercial propositions by which India could earn additional money thus reducing capital outflows in defense contracts. Merely obtaining orders for some components, or securing servicing and overhaul contracts, or even assembly and license- production is not sufficient to ensure absorption of know-how and building up the capacity to independently develop and manufacture equipment using the next generation technology. Indeed, India's own experience of serial license-production agreements clearly reveals the yawning gap between certain types of licensed manufacture and development of indigenous capability. India manufactured the French Alouette helicopter (Cheetah) and its engine at HAL, Bangalore, in the '70s and '80s but, not having absorbed the technology, was forced to go for imports of the next generation helicopters such as the Eurocopter. HAL's bottom line was certainly boosted, its turnover substantially increased for several years, but this does not appear to have translated into capability to develop and make its own helicopters, forcing the government to go in for another sequence of imports and license arrangements. Similarly, India is now in the market reportedly for 200 howitzer artillery guns building up through licensed manufacture towards an inventory of 1500 guns worth an estimated $2.5 billion (Rs 10,000 crore), and even had to buy howitzers on an emergency basis during the Kargil conflict, despite having had full access to the Bofors technology since the '80s. Therefore, in working out offsets, quite apart from the commercial angle, it is very important to see that offset arrangements are properly planned and channelized to projects and institutions with a clear vision of what is required in the short and medium term in terms of developing independent indigenous capability and know-how. NEW POLICY Despite this past experience, and in spite of some success in pressurizing vendors into more meaningful collaboration through the policy of direct offsets under DPP-2005/6, the defense ministry is in the process of modifying the DPP particularly is respect of offsets. It is no coincidence that this process has been initiated at a time when major Western military hardware vendors are salivating at the $30 billion Indian acquisition budget, and especially the massive $10 billion deal for multi-role combat aircraft, in the tender for which India has specified a 50 per cent offset condition, much to the open displeasure of US aviation majors Lockheed Martin and Boeing. It is also no surprise that defense ministry spokesmen confirmed the advent of a new offsets policy just prior to the opening of the large arms expo in Delhi on February 18. The revised policy proposes three major departures all leading to a framework of "indirect" offsets in contrast to the earlier system of direct offsets. The first allows for "banking" of offsets wherein offsets accumulated under one project can be shown against any subsequent project too. The second, although apparently an extension of the first, allows companies engaged in civilian contracts to "bank" such offsets and show them against offset requirements in military contracts. Clearly, this is purely a commercial consideration and makes no allowance for the fact that the main purpose of offsets is, or ought to be, building capability and know-how in the defense technology sector albeit with spin-offs in the civilian sector. It is also a measure that will clearly favor Boeing which can show offsets and "bank" its sub-contracts to Indian parties making fuselage parts for the passenger jets being bought by Air India and Indian Airlines while tendering for the combat aircraft order. The third modification and perhaps the most dangerous is to allow vendors to charge for technology transfer, show these charges as part of the offsets and deduct these charges from the actual offset payments. This is a specious provision and opens the door to all sorts of underhand manipulations, will render the entire offsets mechanism useless and make its processes completely non-transparent. Who is to define what constitutes transfer of technology and what price to attach to it? In any sub-contracting or license production, there is some technology transfer involved. Under the direct offset clause operational hitherto in India, and practiced elsewhere in the world, licensed production includes technology transfer for manufacture. Under the modified provision, it can be charged separately, and an arbitrarily determined technology fee can be subtracted from any buy-back arrangement! With a 50 per cent offset provision for the fighter deal, about Rs 20,000 crore worth of business was expected to come to Indian firms but, with the new technology transfer clause, this could easily be reduced to half or even less! VESTED INTERESTS Vs NATIONAL INTERESTS It is significant that pressure has been brought on India to change its offsets provisions particularly by US companies especially in the aviation sector. The US Defense Department has always opposed offset clauses, but has not stood in the way of contracts including such clauses when it serves US policy or when US companies push for them, as with the Israeli case cited above. In the case of India, the US India Business Council (USIBC) constituted and empowered under the US-India Strategic Partnership has been pushing hard for precisely such modifications in offsets policy as are now being made in the soon-to-be-revised DPP. At the Bangalore air show in 2007 when US aviation companies made a big show of their various offerings, Nikhil Khanna, Director of Policy Advocacy at USIBC in Washington said: "We have encouraged the broadening of the definition of offsets to include indirect offsets, so other areas of India's economy may gain from the massive investments that are sure to flow from aerospace and defense contracts." and added that this would credit for technology transfer, limitation of liability, and the ability to "bank" the value of current projects as offsets for future defense contracts. At that time Khanna stated that new Delhi was "considering the suggestions". Defense minister A K Antony stated that "if there is scope for improvement, we will adjust and make minor changes to the policy." It now seems that he has! Only thing is, the changes are not minor! Indian industry has reason to feel deeply aggrieved. The Confederation of Indian Industry (CII), through a Committee chairmanship of Rahul Bajaj had advocated an aggressive offsets policy as far back as 1999. CII had strongly recommended that "direct offsets be implemented as a matter of National Policy for Defense Procurement [so as to] get state-of-the-art technologies for both Public and Private Sectors [and] give major thrust to Self Reliance." The proposed modified offsets policies, being instituted at the instigation of US companies backed by political pressure, will negate these aims. It is therefore imperative that pressure be brought upon the UPA government to abandon these changes, stay the course with direct offsets and ensure that the offsets are properly directed and monitored so as to reduce India's dependence on imports and consequent vulnerability to technology denial regimes while simultaneously leading to significant enhancement in science and technology capabilities, as well as a spread effect in important industrial and research sectors of the national economy. From People's Democracy :

Groups in southern Nepal have pledged to end violent protests and a general strike after reaching an agreement with the government to set up autonomous regions in the Himalayan nation.
Minority groups have organised strikes, transport shutdowns and demonstrations to demand recognition of their rights. The protests left at least 80 people dead.
The agreement provides for the creation of regions with decision-making powers. Details, however, will be worked out after the election of a special Constituent Assembly on April 10, at which minority groups will be guaranteed at least 30% of seats.
The assembly is to rewrite the constitution and decide the nation's future political system.

In an exclusive interview with The Herald, Comrade Prachanda, leader of Nepal's Maoist Communist Party of Nepal-Maoist (CPN), said the erstwhile rebels were committed to multi-party elections for the assembly.
Prachanda, who led the Maoists in a bloody 10-year campaign to establish a people's republic by force, rejected suggestions the CPN was not committed to peace. He claimed the elections were an essential prelude to the transformation of the kingdom.
"When we participated in the peace process, we said if an election was held, any result we would respect," he said. "Time and again we have stated that."
The 54-year-old former teacher spoke with an ease at odds with his surroundings in the heavily guarded nerve centre of the Maoists' campaign in Nepal's capital, Kathmandu.
Prachanda, who has led the CPN since 1996, took a swipe at sceptics and said: "We will win this election in a peaceful way and in a free and fair manner. We think that only then we will see that they were wrong and we were right."
Prachanda, whose real name is Pushpa Kamal Dahal, also defended the Maoists from allegations that members of the Young Communist League (YCL), which is allied to the party, were engaged in a campaign of intimidation and extortion against opponents. Rivals, including the Nepali Congress Party, say the YCL's activities could make it impossible to hold free elections.
While Prachanda insisted the Maoists were unanimous in their support for the elections, some observers believe problems with the YCL reflect deep tensions between the so-called twin streams of the movement.
Those who support the peaceful electoral approach, including Prachanda, face stiff opposition from diehards who continue to advocate rebellion, although more than 10,000 people died in the war from 1996 to 2006.
Prachanda's comments came against the backdrop of the unrest in the Madhes, the plains area in the south. Demonstrations and strikes were backed by parties that claim plains people are discriminated against by an establishment of hill people, dominated by members of the Brahmin caste.
The unrest has stoked fears that it may be impossible to hold elections.
Dr Keshav Shakya, head of the Nepal Rastriya Party, formed to promote the interests of the 40-plus ethnic groups in Nepal, said all leading parties running in the elections, including the Maoists, had failed to recognise the needs of minority groups.
Prachanda insisted, however, the Maoist campaign had brought big practical benefits to excluded groups and the poor.
He said the problems were driven by feudal elements loyal to King Gyanendra, who took power into his own hands in February 2005 before relenting in the face of political protests in April 2006.
Leading members of the Seven Party Alliance, including the Nepali Congress and the Communist Party-United Marxist Leninist, as well as the Maoists, want to scrap the monarchy.
"Some people related to the monarchy and to the other side of the border in India do not want to have a republic. They want to have a Hindu kingdom," said Prachanda.
King Gyanendra has kept a low profile since being stripped of power after the April 2006 protests. However, there has been mounting speculation he may attempt a coup with the backing of the army.
Observers note he may be able to exploit discontent with the performance of Nepal's political parties, heightened by the unrest in the south.
Border blockades and fuel shortages have stoked disenchantment in a people who feel that, almost two years after the king was ousted, their lives have have not improved

MANILA, Philippines -- The leader of the communist insurgency in the Philippines on Saturday called for 100,000 Filipinos to gather in a street protest in Manila to unseat President Gloria Macapagal-Arroyo.
Jose Maria Sison, founder of the Communist Party of the Philippines (CPP), said in a statement that anti-Arroyo forces should "assemble at least 100,000 people," in a central part of the capital.
This is "bound to ignite the withdrawal of support from the regime by the bureaucracy and the military," he said, following a large anti-Arroyo rally in the financial district of Makati on Friday, which drew an estimated 15,000 people.
"The groundswell of such... rallies will render impotent the pro-Arroyo military and police officers," said Sison, whose CPP has been waging a Maoist guerrilla insurgency throughout the countryside for more than three decades.
Sison, who is living in self-exile in the Netherlands, cited popular street uprisings in 1986 and 2001, which led to the ouster of scandal-tainted presidents Ferdinand Marcos and Joseph Estrada respectively.
Numerous anti-Arroyo rallies have been staged in recent weeks after a former government official accused the president's husband and a key political ally of seeking alleged kickbacks from a multi-million dollar broadband deal with Chinese company ZTE Corp.
Arroyo has cancelled the deal but denied any wrongdoing and said she will not resign.
Although Friday's rally was the largest in recent years, it still fell short of the organizers' hopes of getting about 50,000 protesters.

THESE words will be published tomorrow, on February 29. A great many tasks lie immediately ahead of us. The 10th International Conference of Economists on Globalization and the Problems of Development, a conference I have always attended and in which I have always expressed different points of view, will begin on Monday the 3rd. Judging by the international developments we’ve witnessed, this conference will doubtless be of great importance, owing to the presence of prestigious economists, some Nobel Prize laureates and two eminent heads of State.I wish to address a specific issue in this, today’s reflection.
In the course of these days of voluntary rest, I have read numerous cables issued by the traditional press agencies or over the Internet. Among these, I found a dispatch, issued from Cuba and published on the BBC World web site, whose blatant personal attack is indeed repugnant. Published on February 25, one day following the election of the president of the Council of State, under the sub-headline of El Peso de las reflexiones ("The Importance of the Reflections"), it states:
Fidel Castro appears to want to reassure the new government and promises "to be cautious" in expressing opinions in his editorials, which are divulged by all of the country’s media, including the radio and television. In his reflections, it adds, he essays a new gesture of modesty, not only asking to be addressed as "comrade Fidel" but also that his articles not appear on the front page of the official newspaper and that the other media divulge a mere summary of these pieces. According to the article, this is strictly formal for, even if his reflections appear on the sports page, their significance will not, as a result, be lessened: nationally and internationally, any comment made by "comrade Fidel" will have immense repercussions. In a sense, the note alleges, it is a sword of Damocles hovering over the heads of the country’s leaders, for all of them know it would be extremely difficult to pursue any policy that is publicly condemned by Castro. The relationship between the Castro brothers, we learn, is a mystery seasoned by the most varied rumours. It is said they locked themselves up in a room and argued for several hours, and that their yelling could be heard outside of Fidel’s office. None of this, the article tells us, can be confirmed, for there is no proof, only alleged witnesses. In Cuba, however, as in no other country, wherever there’s smoke, there’s fire, and the "grapevine", the oral transmission of information, is almost always in the right.
Other important US newspapers, The New York Times, The Washington Post and The Wall Street Journal, expressed their frustration but did not resort to such vulgar insults.
Many picture our country as a steam cauldron that is about to burst. They are thrown off balance by how it has heroically held its ground for half a century.
The wise and serene words Raúl spoke after the 609 members of the National Assembly in attendance unanimously elected him president of the Council of State, his sincere arguments, disentangled the tangle of illusions that had been woven around Cuba. Those who know me and Raúl well know that, out of a basic sense of dignity and respect, we could never hold such a meeting. More than a few people still harbor hopes of seeing the sudden collapse of a heroic revolution, which stood and continues to stand victorious in spite of half a century of imperialist aggression.
Now, they are howling like wolves whose tails have been caught in traps. How particularly vexed they seem by the election, as First Vice President, of Machadito, the Organizational Secretary of the Communist Party of Cuba, to whom the Constitution entrusts the most important tasks as regards leading the people towards socialism.
In the world of nebulous speculation and protocol, what counts is state leadership and the party organization is considered a meddlesome intruder, an internal principle. In the specific case of Cuba, it should suffice to know that Raúl has all the legal and constitutional faculties and prerogatives he needs to govern our country. As he himself explained, I was consulted during the process of putting together a list of candidates for the position of first vice president that he held, and of which no one was stripped. I did not demand to be consulted. It was Raúl and the country’s top leaders who decided to consult me. Similarly, it was my decision to ask the Candidacy Commission to include Leopoldo Cintra Frías and Alvaro López Miera, who joined the Rebel Army combatants when they were only 15, on the list of candidates for the Council of State. The two are much younger than McCain and have more experience as military leaders, as demonstrated by their victorious internationalist feats.
Polito led the battle of Cuito Cuanavale, to the southeast, and the counteroffensive, southwest, with over 40,000 Cuban volunteer combatants and more than 30,000 Angolan soldiers under his command, troops that drove the last Apartheid army invaders out of Angola.
The U.S. government created the conditions that would permit racist South Africa, in certain circumstances, to use a nuclear weapon against those troops.
López Miera once bombed his own troops when, near Luanda, he ordered the multiple launch artillery to fire at his own positions, under attack and nearly occupied by the South African forces that invaded Angola for the first time in 1975.
These were the moves the chess board itself decided. They were not the fruit of Raúl’s alleged militaristic tendencies, nor was it a question of different generations or factions rabidly fighting over a mundane slice of power. With respect to myself, I say again that I cling to no position, as I expressed in my message to the people of February 18, 2008.
One person who was left speechless was the intellectual author of Kosovo’s "independence". In my reflection of February 21st, I described him as "an illustrious Spanish personality, once an impeccable socialist and minister of culture, who for some time now an advocate of war and the use of weapons" (In addition to this, at various points in time, he was a government spokesman, minister of education and science and minister of foreign affairs).
What did he say? "Yesterday’s news could have been more open and better. I am not certain whether a transition has begun from the political point of view… Anything that could point to a political transition towards democracy is welcome."
He spoke as though we lived in Franco’s Spain, a close ally of the United States, and not in Cuba, where they have invested more than 100 billion dollars, much more valuable than today’s dollars, to blockade and destroy the country.
What a man! There’s no way to shut him up! What is his name? The Roundtable program already mentioned the sin and the sinner two or three days ago: Javier Solana.
What party is he affiliated with? Spain’s Socialist Worker’s Party. He would not travel to our country because Cuba, in connection with the invasion of Serbia, urged the world to try him as a war criminal in an international court. As Spain’s Foreign Minister, he welcomed me at Madrid airport when the 2nd Latin American Summit was held in the Spanish capital. He seemed like an angel back then!
Even Aznar, who advised Clinton to bomb the Serbian television station, an action which caused the deaths of dozens of people, understands that, right now, on the eve of elections, one cannot play with the issue of nationalities, as everyone realizes that, with such precedents, the Basque Country and Catalonia could invoke such a principle within the European Community, and we are talking about two of Spain’s most industrialized nations. The Scots and the Irish could proceed in similar fashion.
With the fate of human species in such hands, it is as if we were dancing happily at the edge of a precipice, where the vanity of no few leaders of the globalized capitalist world reigns, putting all countries at risk. The humanitarian, educational and artistic values achieved with its own resources by the Cuban Revolution they seek to destroy means nothing to them, if it does not submit to the dictatorship of the free market. The latter and its blind laws are miring the human species in an unsustainable economic crisis and bringing about changes to the natural conditions of life that could prove irreversible.
It is to fight against that that I write Reflections. Had I unlimited time, I would be willing to write to recall ideas that are today dispersed in speeches, interviews, conversations, declarations, meetings, reflections and things of that nature. I have invested tons of paper and tons of sound – symbolically speaking – but I have no reason to be ashamed of that.
Fidel Castro Ru

February 28,

2008 7:15 p.m.
- Reflections oF Fidel