Government Modifies Offset Guidelines To Offer Indian Vendors Parity With Foreign OEMs

New Delhi

The Ministry of Defence has initiated various policy measures to address the concerns of the industry for ease of doing business. Provisions have now been made with an intent to provide greater flexibility to the vendors in offset contracts and reinstatement of services as an avenue for discharge of offset obligations and level playing field to Indian vendors in Capital acquisitions.

China: A History

Vendors had been expressing difficulty to upfront provide specific description of products and their work share, supporting documents to establish eligibility of Indian Offset Partners (IOPs) and yearly discharge schedule. This is primarily due to the time lag between submission of technical offset offers and finalisation and subsequent implementation of offset contracts. As a result there were frequent contract amendment requests from vendors. Accordingly, a two pronged approach for mitigating perceived bottlenecks during pre and post contract stage has been evolved through recent amendments to offset guidelines. At pre contract stage option has been given to the vendors to submit detailed offset proposals at a later stage. The vendor can finalise his IOPs and offset product details one year prior to the intended offset discharge, or can even undertake the offset activity and submit claims thereafter.

This will facilitate vendors to finalise a more realistic offset offer. Orders in this regard were published by MoD on August 05, 2015. At the post contract stage, enabling provisions have been made in the offset guidelines for change in IOP/component and re-phasing of offset schedule, thereby giving complete flexibility to the vendor. The Standard Operating Procedure (SOP) will now make it possible to address requests from vendors to change their IOP or their offset component as per requirement during the period of the contract. Necessary orders in this regard have been issued by the Ministry vide MoD ID No. 1(6)/D (Acq)/13-Vol.-II dated 11.12.2015.

The Defence Procurement Procedure (DPP) has a provision for foreign Original Equipment Manufacturers (OEMs) to discharge their offset obligations through ‘Services’. This provision had been kept under abeyance with effect from 23 May 2013 due to absence of any regulatory oversight mechanism for Services. However, there was a persistent demand from the industry (both domestic and foreign) for allowing Services as a valid avenue for discharge of offset obligations. Based on several interactions and inputs, received from industries most of the ‘Services’ which were in abeyance, have been reinstated with checks and balances following a Ministry of Defence order in this regard on December 07, 2015. Orders have been published vide MoD ID No. DOMW/OP/GEN/03/2015/01 dated 07.12.2015.

Indian vendors participating in ‘Buy Global’ cases were at a disadvantageous position in terms of fulfilling offset obligations. In order to promote ‘Make in India’, a level playing field has been provided and an Indian vendor has been brought at par with the foreign OEM in terms of fulfilling offset obligations through orders issued by the Defence Ministry on December 11, 2015. Orders have been published vide MoD ID No. 1(6)/D (Acq)/13-Vol.II dated 11.12.2015.