New defence Offset policy in the offing

NEW DELHI: The government is likely to bring key changes in the 'Offset policy' in the defence sector under which a company will have the option of migrating from the offset obligations to 'Buy and Make'.

The much-awaited changes to the Defence Procurement Procedures (DPP-2013) are expected in the coming months with the release of DPP-2015.

One of the key changes in the DPP will be an option to migrate from the Offset obligations to 'Buy and Make', defence sources said.

Under the new provisions, value of the FDI by the Original Equipment Manufacturer (OEM) and the eligible products being manufactured in India will be counted against Offset obligations.

"This will not only provide a boost to the 'Make in India' programme in the defence sector but will also bring in greater FDI," the sources said.

Another reason why the Offset policy is being revised is because it has led to delays in critical acquisitions, they said. In some cases, negotiations and the finalisation of offset contracts have taken an equal if not longer time than that for the prime contract itself, they added.

Offsets were introduced in 2005 with an objective of developing a defence industrial base in the country. However, it has failed to deliver to its full potential.

Addressing an interactive session on 'Leveraging Defence Offsets for Make in India' on the sidelines of the Aero India show, Defence Minister Manohar Parrikar had said conceded that the current defence acquisition process is complex and said it should be more friendly.

"Whether it is offset policy or Make in India or whether it is DPP -- probably 80 to 90 per cent of the problems are understood. It is high time that the valuable inputs are put into operation," he had said.