The defence ministry is planning another round of changes to the offsets policy, which will be unveiled with a further liberalised Defence Procurement Procedure (DPP) in January 2013.
An official, on the condition of anonymity, told FE: ?Further changes to the existing offsets policy are expected to be unveiled in 2013 when the ministry of defence will reveal the modified DPP-2013, which governs the buying of military weapons and equipment.?
The official added: ?Conforming to industry expectations, the new DPP would liberalise defence procurement further, and the fresh round of amendments to the offsets policy is expected to be more broad-based.?
The defence ministry?s offsets policy is a form of counter-trade, under which global vendors winning Indian defence contracts worth R300 crore or more are expected to source 30% of the contract value from the Indian defence industry, or invest an equivalent amount in Indian R&D. Since 2011, based on two rounds of amendments made, offset liabilities can now also be discharged in the fields of civil aerospace and internal security.
Currently, the offsets are: permitting transfer of technology as offsets; allowing credit multipliers of up to 300% for specified technologies that vendors transfer to the Defence Research and Development Organisation; extending by two years the period within which vendors must discharge offset obligations; and extending the validity of banked offset credits to seven years (from two years earlier ).
Despite frequent amendments to the offsets policy, there is a lack of clarity that has resulted in misdirected offset contracts for VVIP helicopters, Mi-17V5 helicopters, MiG-29 fighter upgrades, a fleet tanker, C-130J Super Hercules aircraft and the Low Level Transportable Radar. According to industry watchers, none of those offsets develop the Indian defence industry in any way.
In August this year, the ministry announced keenly anticipated modifications to its defence offsets policy, which came into effect on August 1. Transfer of technology has been made eligible for offsets, multipliers specified, sub-vendors have been allowed to discharge offsets, and the defence ministry has acceded to vendors? requests to relax time-frames for the discharge of offsets. For the first time, the aim of the offsets policy has been spelt out clearly, making it easier for vendors to structure their offsets to satisfy Indian aims.
Offsets were first made mandatory in the DPP-2005 and then revised periodically, most recently in DPP-2011.
