India to review defence offset policy

Discussion in 'Defence & Strategic Issues' started by SpArK, Nov 12, 2011.

  1. SpArK

    SpArK SORCERER Senior Member

    Oct 24, 2010
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    India to review defence offset policy

    Government promises clarity in policy starting with the $12 billion Medium Multi-Role Combat Aircraft deal


    India is reviewing its offset policy in defence procurements, introduced in 2006, to bring in more transparency and clear ambiguities even as review of the 11th Plan has pegged the Army’s shopping list at nearly at Rs 41,000 crore. The offset policy is aimed to prevent cash outflows and make it mandatory for foreign firms that bag defence contracts to reinvest a part of the total contract value by entering into local tie-ups in the defence industry.

    Announcing reviewing of the policy, Amit Cowshish, Additional Secretary in the Department of Defence Finance, said that lack of clarity had led to several perspectives and interpretations. At a seminar organised here by Observer Research Foundation, he admitted that initially there were uncertainties about success of the policy. However, he said, “I have no doubt that this policy will stay for years to come.” Cowshish said that the defence procurement policy would become more effective. "In the near future, things will change substantially starting with the MMRCA (Medium Multi-Role Combat Aircraft) deal,” he added.

    While the offset business has created huge opportunities for Indian defence firms, many believe that it has hampered quick acquisition of equipment. According to the policy, any defence deal over Rs 300 crore must have an offset clause. It is estimated that Rs 10,000 crore is expected to be invested in local tie-ups and manufacturing by 2020 due to this clause. In the latest, biggest-ever defence deal—purchase of 126 MMCRA aircraft worth $12 billion—the short-listed companies have to reinvest 50 per cent of their contract amount in India.

    The industry, however, is concerned that foreign firms are only willing to transfer technology to Indian partners. Circumventing the process, some foreign firms manufacture 70 per cent of products outside India sharing or transferring just 30 per cent of technology.

    Vivek Lall of Reliance Industries emphasised that improving capability to innovate products required focus in future. He said that priority should be given to sharing of technology rather than transfer to achieve success in the longer run. Others said that the government should integrate its own departments and have one authority to make a coherent policy. David Jarrett, Business Development Director of General Dynamics International, said that the global defence industry was eyeing the big India defence market.

    Tehelka - India's Independent Weekly News Magazine
    sesha_maruthi27 likes this.
  3. SPIEZ

    SPIEZ Senior Member Senior Member

    Sep 24, 2011
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    Somebody tell me how India will implement the offset policy
  4. Tshering22

    Tshering22 Sikkimese Saber Senior Member

    Aug 20, 2010
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    Gangtok, Sikkim, India
    ^^ I have the same doubts. There is NO other agency than the bandy-legged HAL, DRDO and other tired agencies of government that deal with research of such a money value. I heard that some of them are collaborating with IITs in India where students can research and join the sarkari labs later.

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