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Home arrow Defence arrow Utilization of offset amount : Defence Minister Shri AK Antony
Utilization of offset amount : Defence Minister Shri AK Antony Print E-mail
Written by Jeeva   
Thursday, 13 March 2008
Government promulgated Defence Procurement Procedure (DPP) 2006 with effect from 1st September, 2006 to ensure expeditious procurement of the approved requirements of the Armed Forces in terms of capabilities sought and time frame prescribed.  Procedure for implementing Offset Provisions is part of DPP-2006.  Offset clause is applicable for all procurement proposals where indicate cost is Rs. 300 crore or more and the schemes are categorized as ‘Buy (Global)’ involving outright purchase from foreign/India vendors an ‘Buy and Make with Transfer of Technology’ i.e. Purchase from foreign vendor followed by Licensed Production.

A uniform offset of 30% of the indicative cost of the acquisition in ‘Buy (Global)’ category acquisitions and 30% of the foreign exchange component in ‘Buy and Make’ category acquisitions will be minimum required value of the offset.  The Defence Acquisition Council may, after due deliberations, also prescribe varying offset percentages above 30% for difference classes  of cases or for individual cases depending upon the factors involved such as strategic importance of the acquisition or technology, enhanced ability of Indian defence industry to absorb the offset, export potential generated etc.  Offset obligations are to be discharged directly by any combination of the following methods :

 Direct purchase of, or executing export orders for defence products and components manufactured by, or services provided by, Indian defence industries, i.e. Defence Public Sector Undertakings, the Ordnance Factory Board, and any private defence industry manufacturing these products or components under an industrial license granted for such manufacture. From the purpose of defence offset, “services” will mean maintenance, overhaul, upgradation, life extension, engineering, design, testing, defence related software or quality assurance services.

 Direct foreign investment in Indian defence industries for industrial infrastructure for services, co-development, joint ventures and coproduction of defence products.

 Direct foreign investment in Indian Organisations engaged in research in Defence Research & Development as certified by Defence Offset Facilitation Agency (DOFA).

Government has constituted Defence Offset Facilitation Agency (DOFA) with a charter to:
(a) Facilitate implementation of the offsets policy.
(b) Assist in vetting of offset proposals technically.
(c) Assist in monitoring the offset provisions.
(d) Suggest improvements in the policy and procedures.
(e) Interact with Headquarters Integrated Defence Staff and Service Headquarters.
(f) Advise, in consultation with the Headquarters Integrated Defence Staff, Services and Defence Research and Development Organisation, areas in which offsets will be preferred.
(g) Promote exports of defence products and services.
(h) Provide advisory clarifications on the policy and procedures.        

This information was given by the Defence Minister Shri AK Antony in a written reply to Shri Kalraj Mishra and Shri Santosh Bagrodia in Rajya Sabha today.

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