Saturday, 25 August 2012

Defence Offset Policy

The defence offset policy original intent was to impel foreign arms vendors towards sourcing defence goods and services from India.  It compels global vendors who win defence contracts worth Rs 300 crore or more to invest at least 30 per cent of the contract value into India’s defence industry. 1

The Ministry of Defence had infact also set up a Defence Offset Facilitation Agency to as a single window agency to facilitate implementation of the offset policy of the Ministry of Defence.  DOFA will assist potential vendors in interfacing with the Indian defence industry for identifying potential offset products/projects as well as provide requisite data and information for this purpose.2

However, the global arms industry, backed in many cases by their respective governments, has lobbied since 2006 for relaxing offset conditions. Indian officials also are in agreement. "The primary job of the acquisitions wing is timely procurement, not developing India’s defence industry. It views offsets as an inconvenient hurdle to procurement, a box that must be ticked. The result is that vendors get away with sub-standard proposals that do nothing to build indigenous capability,” points out Maj Gen (Retd) Mrinal Suman, an expert on offsets who has worked in the acquisitions wing.1

Thus, from 2011 onwards vendors can discharge offset liabilities in civil aerospace and internal security as well.1


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