Direct offsets related to defence industry allowed: DG, MoD 2/3/2006 12:31:18 PM IST
The Government on Friday said that only direct offsets related to the defence industry would be allowed and would encompass activities like co-development, co-production, joint ventures and Transfer of Technology for maintenance and upgrades as also export of defence related products developed indigenously, said, S. Banerjee, Director General (Acquisition), Ministry of Defence in his keynote address at the Defence Industry Summit at the Defexpo 2006, organized by Confederation of Indian Industry (CII) and Defence Exhibition Organisation. It had India’s Offset Policy as its topic of discussion.
Allaying the apprehension of the Indian industry and international players, Banerjee said that the Offset Policy which is part of the Defence Procurement Policy (DPP) clearly mentions that vendors would be at liberty to select their Indian partners from a list that would include both public and selected private sector companies.
He said that the selection of the appropriate private industry would be based on fulfilling certain criterion, the modalities of which are being currently worked out by the Department of Defence Production. “It would be appropriate to state here that the Indian private sector companies would have a major role in fulfilling the offset obligations of Defence contracts,” he said.
The government was also contemplating making 30% offsets on all purchases mandatory after “some experience is gained in implementing offsets,” he said. Under the present system, 30% are mandatory on contracts valued in excess of Rs. 300 crore, which pointed out was the lowest as regard the percentage of offsets sought by countries around the world.
“India plans to follow the example of Israel to ensure that the offsets enable the Indian defence industry to compete in the world market with advanced and state of the art products.”
Banerjee said the government would modify and simplify criteria for selection of appropriate private industry in the days to come. The director general of acquisitions said as regards their concern on a monitoring mechanism, the government was contemplating setting up a separate organization for facilitating and coordinating issues related to offsets." We plan to make offset contracts co-terminus with main contracts to facilitate effective monitoring,” he said.
He said that the scope and areas, which the offsets would relate to were being worked out. However, it is relevant that the scope would be enlarged and the policies further refined based on the experience gained in implementation of offset contracts. Banerjee said that the primary goal of the offset programme would be to encourage foreign and Indian firms to establish long term relationships while working together. “It would be our endevour that activities under offsets be truly beneficial to both parties,” he said.
However, he pointed out that while Indian Industry is increasing becoming technically sophisticated, they have limited access to global markets and it is our intention to address this limitation by opening avenues for Indian Industry to forge partnerships with world Industry leaders.
Banerjee said that India would seek investments by foreign firms in the domestic economy through either equity investments in existing domestic firms or the establishment of joint ventures for co-development/productions. He also said that the large technical pool, strong IT base, cheap labour, fast growing infrastructure and cheap raw materials gives an opportunity to the Indian Industry to produce cheaper products and components. With these inherent advantages, our industry is ideally placed for international sourcing which could be utilized against offsets, he said.