America pushes for overhaul in India’s offset policy for defence

Discussion in 'Strategic Forces' started by sasi, Dec 5, 2014.

  1. sasi

    sasi Senior Member Senior Member

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    The US is making a strong pitch for India to overhaul its offset policy for defence purchases ahead of President Barack Obama’s visit to India next month.
    In essence, offsets in defence, as in civil trade, are compensations that a buyer seeks from the seller for the purchase of goods and/or services. The offset policy in defence purchases means the seller needs to source 30% of the cost of any deal overRs.300 crore with a higher percentage involved for bigger deals.
    Though some of the suggestions put forward are difficult to concede to, the Americans are sparing no effort in pushing for the changes. They have tried to push for it at a senior level, including the recent visit of US trade representative Mike Froman.
    Claiming that Indian firms have not yet found its place in the supply chain, the US has said that their firms should not be penalised for delay, unless a “willful default” is found on their part. New Delhi has countered that proving this would be an onerous task.
    The other demand from Washington is that US companies should be allowed to perform offsets on behalf of the company given the contract.
    US officials have also sought to know what exactly India hopes to gain from these offsets, especially institutions like the Defense Research and Development Organisation.
    According to sources, the US is pushing for India to open its changes in the defence procurement procedure for “public comment” before announcing them. But India lacks such a system.
    Sources said Froman told senior officials that the US views public comment as a “useful” mechanism in getting to know what “issues” the changes in policy would bring and its overall impact. But introducing this system could benefit lobby groups.
    The US has also stressed on bringing greater “flexibility” in the offset policy like reviewing contracts on a “required basis”. In short, the US has argued that “offset contracts shouldn’t be as rigid as defence contracts”.
    http://idrw.org/?p=48571

    earlier they offered bicycle manu as offset in one deal. Now they even don't want any offset.
     
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  3. jackprince

    jackprince Turning into a frog Senior Member

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    Push away. Don't think it will do them any good.
     
  4. Zebra

    Zebra Senior Member Senior Member

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    First of all why US defense companies are coming in India...!

    Only for India? or for themselves only? or for both?
     
  5. DingDong

    DingDong Senior Member Senior Member

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    India must hold her ground, they will get back in line like good boys.
     
  6. Zebra

    Zebra Senior Member Senior Member

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    They don't want offset.

    That's fine.

    Offset is not a free lunch anyway.

    What Indian defense is getting back in absence of offset!
     
  7. warrior monk

    warrior monk Regular Member

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    Offsets are an important part of defense procurement for most countries , offsets are mainly two types direct offsets and indirect offsets . Direct offsets are important for a country for building up capabilities of the procuring country especially for India . India being the largest importer of arms and being in the MOST HOSTILE neighborhood should be a special case for US if at all US wants defense collaboration with India.
    Americans sell to arabs , europeans and other third world countries but should not treat us Indians equal to those countries coz they don't have enemies like we do. Even Israel's enemies are not equal to our enemies so if anything we are a special case.Well we require high quality weapons in large numbers Americans shouldn't treat our defense needs as a profit maximization exercise though some profit is justifiable.
    Those small amount of american toys we bought are of not much help against a full Chinese attack or both Chinese pakistani combined attack so we need to be able to make those weapons in India with spare parts and all to even put up a proper fight against Chinese so offsets are necessary otherwise it will be as good as not buying.
     
  8. pmaitra

    pmaitra Moderator Moderator

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    Can someone explain to me what this means?

    As usual, another poorly edited and shoddily constructed article from IDRW.
     
  9. Zebra

    Zebra Senior Member Senior Member

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    On top of it, what about 'make in India'....!
     
  10. warrior monk

    warrior monk Regular Member

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    I think the 30% of the cost above 300 crore means the seller will have to invest 30% of the value in indirect offsets like procurement from local industries . If the value of the deal is higher the offset fulfillment required will probably be higher like in MMRCA deal we will get 50 % of the price of the deal in offsets both direct and indirect , read somewhere it is around 8-9 billion dollars so the deal is probably not much over 20 billion dollars not including life cycle cost .
    If proper offset procedures are followed the MMRCA deal has the potential to make us an aerospace hub competing with Chinese in future. Though i have no idea how much multiplier we are giving the french in offsets since it is 50% it is probably less than 2.
     

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