Indian Defense Offset policy provisions will apply to all 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 indicative cost in the Request For Proposal (RFP) is Rs 300 crore (USD 75 million) or more.
Initially, a uniform offset of 30% of the indicative cost of the acquisition in ‘Buy(Global)’ category acquisitions and 30% of the foreign exchange component in ‘Buy and Make’ category acquisitions will be the minimum required value of the offset. Based on a review of the experience of implementing these provisions, the minimum offset percentage for the following two years will be prescribed with the approval of the Defence Acquisition Council.
The DAC may, after due deliberation, also prescribe varying offset percentages above 30% for different classes of cases or for individual cases depending upon the factors involved such as strategic importance of the acquisition or technology, enhanced ability of Indian defence industry to absorb the offset, export potential generated, etc.
These provisions will also apply with appropriate modifications to ‘Buy’ and ‘Buy and Make with TOT’ components for warship construction where the value of individual contracts is Rs 300 crore or more. In such cases, references to the acquisition wing will mean the DDP or shipyard which is building the ship and procuring the system or sub-systems.
Defence Offset Obligations
For the purpose of defence purchases made under the DPP 2006, offset obligations shall be discharged directly by any combination of the following methods:
Direct purchase of, or executing export orders for, defence products and components manufactured by, or services provided by, Indian defence industries, i.e., Defence Public Sector Undertakings, the Ordnance Factory Board, and any private defence industry manufacturing these products or components under an industrial licence granted for such manufacture. For the purpose of defence offset, “services” will mean maintenance, overhaul, upgradation, life extension, engineering, design, testing, defence related software or quality assurance services.
Direct foreign investment in Indian defence industries for industrial infrastructure for services, co-development, joint ventures and co-production of defence products.
Direct foreign investment in Indian organisations engaged in research in defence R & D as certified by Defence Offset Facilitation Agency (DOFA).
The Indian defence industries or organisations concerned are here after referred to as the Indian offset partner.
The offset obligations are to be fulfilled coterminous within the period of the main contract.
All offset offers which satisfy the minimum eligibility conditions will be placed on par and no preference will be given for any extra amount offered.
The advisability of giving additional weights to offers having multiplier effects in terms of exports generated or building indigenous capability in strategic technology products, or other issues may be considered after reviewing the experience of implementing the above policy.
Defence Offset Facilitation Agency
The Ministry of Defence will establish a ‘Defence Offset Facilitation Agency’ (DOFA) under the DDP as a single window agency to:
Facilitate implementation of the offsets policy.
Assist in vetting offset proposals technically.
Assist in monitoring the offset provisions.
Suggest improvements in the policy and procedures.
Interact with Headquarters Integrated Defence staff and Service Headquarters.
Advise, in consultation with the Headquarters Integrated Defence staff, Services and Defence Research and Development Organisation, areas in which offsets will be preferred.
Promote exports of defence products and services.
Provide advisory clarifications on the policy and procedures (in consultation with the Acquisition wing wherever necessary).
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