India is the third largest importer of arms and equipment in the world. India every year spends nearly 40 % of the defence budget towards acquisitions of arms and technology either through direct or indirect imports. To achieve greater self reliance in defence production, Ministry of Defence, Government of India has announced the Offset Policy as part of the Defence Procurement Procedure (DPP) 2005.

India is the third largest importer of arms and equipment in the world. India every year spends nearly 40 % of the defence budget towards acquisitions of arms and technology either through direct or indirect imports. To achieve greater self reliance in defence production, Ministry of Defence, Government of India has announced the Offset Policy as part of the Defence Procurement Procedure (DPP) 2005.

The offset policy given in DPP 2005 mentions inclusion of an offset clause amounting to a minimum of 30 percent of the indicative costing in the RFP where the indicative cost of the contract is Rs 300 Crores or more. Offset Policy aims to get state-of-the-art technologies for both, Public and Private Sectors to give major thrust to Self Reliance and boost Defence exports.

Priorities of the Offset Policy through Direct Offsets are:

• Acquisition and development of state of-the-art technologies.
• Acquisition and development of manufacturing competence to create world class defence production industry.
• Export of defence industrial products, engineering design and testing services.

CRA team spoke to various Indian and Foreign delegates at DefExpo 2008 from 15th -19th Feb 2008, Pragati Maidan, New Delhi. To know how does defence industry perceive Indian Governments Offset Policy

Most of the Indian delegates supported Offset policy by Indian government as it will leverage the country's buying power to upgrade technology, improve infrastructure and make it part of the global defence supply chain. Though few international companies wanted the offset policy to be flexible they accepted Offset as an business strategy for growing in India.

While speaking to our team Mr.Peter Smith, Director International Naval Program from Raytheon was of view that as Raytheon already has 16 billion dollar invested on Offset in 40 different countries, it is open to the Indian Governments offset policy and said
“Rules are what rules are and we follow the rules”. He also focused that as part of offset policy Raytheon aims to provide same technology to India.

First tine participant a Brazilian public company CEO Vice Admiral Marcelio Pereira was of the opinion that Offset will lead to better quality in delivery and build stronger partnership, he stressed that the such arrangements between the Public Sector Undertaking leads to strategic alliance and better military network.

Presenting the Indian View Brig SKS Ranna,VSM GM (Marketing ) said that Offset Policy will also help equip the Indian armed forces with sophisticated technology and strengthen the technology base of the country's defence industry and leverage the buying power of the country.

The Ministry of Defence has established a Defence Offset Facilitation Agency (DOFA) under the DDP as a single window agency to:

• Facilitate implementation of the offsets policy.
• Assist in vetting of offset proposals technically.
• Assist in monitoring the offset provisions.
  
• Suggest improvements in the policy and procedures.
  
• Interact with Headquarters Integrated Defence Staff and Service Headquarters.
  
• Advise, in consultation with the Headquarters Integrated Defence Staff, Services and Defence
• Research and Development Organisation, areas in which offsets will be preferred.
  
• Promote exports of defence products and services.
  
• Provide advisory clarifications on the policy and procedures.

Taking a view on this Mr.Kevin Rock Senior Vice President of the Global Aerospace & Defense business unit of Tyco Electronics, said that Joint Ventures become very important to have successful business module under the Offset Policy, and his company looks at Offset Policy as a tool for technology transfer and knowledge sharing.

Mr.Xavier Marshal from DCNS a French company which is partner in the scorpion deal said the deal was signed before the Offset Policy was introduced but they are open to offset and his company is open to offset and they would fulfill their commitment in the Scorpion deal.

While companies have accepted the direct offset policy, they still have been lobbying for the relaxation in offset policy, what still needs to be seen is does strong policies can curb the nexus of middle men in the defence deals and make Indian Defence Industry self reliant and independent of denial regime of international players…