Government Unveils New Offset Policy in Defence


To provide greater flexibility to the vendors in offset contracts and to ensure level playing field to Indian vendors in capital acquisitions, the Government has today rolled out the new offset policy in defence deals. The policy has restored services as eligible offset for military deals. It also allows foreign firms to change their Indian partner at any time, subjected to approval.

The services may include maintenance and repair, software and technology transfer. These were earlier kept aside after the VVIP helicopter scandal, with effect from 23rd May 2013 due to absence of any regulatory oversight mechanism for services.

A statement released by the Defence Ministry says there was a persistent demand from the industry (both domestic and foreign) for allowing services as a valid avenue for discharge of offset obligations. “Based on several interactions and inputs, received from industries most of the services which were in abeyance, have been reinstated with checks and balances following a Ministry of Defence order,” the statement adds.

Though offsets were introduced in 2005, it has failed to fulfill the objective of developing a defence industrial base in the country. According to Defence Ministry, vendors had been expressing difficulty to upfront provide specific description of products and their work share, supporting documents to establish eligibility of Indian Offset Partners (IOPs) and yearly discharge schedule.

“This is primarily due to the time lag between submission of technical offset offers and finalisation and subsequent implementation of offset contracts. As a result there were frequent contract amendment requests from vendors,” the statement says.