Offset
policy was first introduced as part of the Defence Procurement Procedure (DPP),
2005.
The
offset policy has undergone revisions since 2005. The DPP, 2013 indicates that
the objective of the Defence Offset Policy is to leverage capital acquisitions
to develop Indian defence industry by:
i)
Fostering development of internationally
competitive enterprises,
ii)
Augmenting capacity for Research, Design
and Development related to defence products and services and
iii)
Encouraging development of synergistic
sectors like civil aerospace and internal security.
Offset provisions apply to the Capital Acquisitions
categorized as ‘Buy (Global)’, i.e. outright purchase from foreign/Indian
vendor, or ‘Buy and Make with Transfer of Technology’, i.e. purchase from foreign
vendor followed by Licensed Production where the estimated cost of the
acquisition proposal is Rs. 300 crore or more. These will also apply to Indian
firms or their Joint Ventures under “Buy (Global)” procurements. 30 percent of
the estimated cost of the acquisition in ’Buy (Global)’ category acquisitions
and 30 percent of the foreign exchange component in ‘Buy and Make with ToT’
category acquisitions are the required value of the offset obligations. The
Defence Acquisition Council (DAC) may, after consideration by SCAPCHC,
prescribe varying offset obligations above 30 percent or waive the requirement
of offset obligations in special cases.
Offset
obligations may be discharged with reference to eligible products and eligible
services as specified in DPP, 2013. However, the provisions related to services
have been kept in abeyance vide the Ministry’s OM No. 9(42)/2013/OFFSETS dated
23rd May 2013.
The
provisions relating to offsets do not apply to following:
(i)
Procurements under the Fast Track procedure, and
(ii)
Procurements under the ‘Option’ clause where offset obligation was not
stipulated in the original contract.
The
foreign vendors are discharging their offset obligations in accordance with the
signed offset contracts by and large. Till date total 24 offset contracts have
been concluded amounting to approx. 4.87 Billion USD. These offset contracts
are currently under implementation stage with the execution period of certain
contracts extending till 2022. The Indian Offset Partners (IOP) through which
the vendors are executing offset obligations are both from public and private
sector. In those cases where foreign vendors are not adhering to implementation
schedule of signed offset contracts, penalties @ 5% of the unfulfilled
obligations are being levied as per the provisions of the offset guidelines.
The offset policy guidelines, since inception, have
undergone several revisions to keep pace with the emerging needs of the Indian
industry. The last comprehensive revision of the offset policy undertaken in
August 2012 with an aim to further streamline the offset policy provide for
creation of a dedicated agency in the form of Defence Offset Management Wing
(DOMW) to address all post contract related matters. Subsequent to formation of
DOMW in August 2012, a collegiate committee was set up with the approval of
Hon’ble Raksha Mantri to regularly review offset contract implementation and
address all related issues.
This information was given by Minister
of State for Defence Rao Inderjit Singh in a written reply to Shri Kirty Azad in
Lok Sabha today.
HH/RAJ