Govt proposes to widen scope to fulfil offset obligations by foreign defence firms

The Defence Ministry has proposed amendment in the existing offset policy to provide additional avenues for foreign defence companies to invest a percentage of the value of a military deal in India.

The ministry has made public the draft amendment in the offset guidelines and sought opinion of the stake-holders on it.

According to the defence procurement procedure, foreign arms manufacturers and vendors are mandated to invest a percentage of the value of any deal above USD 50 million in India.

The draft amendment says aerospace and internal security related enterprises will be allowed to fulfil their offset obligations through investment in defence-related infrastructure projects such as setting up of testing labs and skill centres, officials said.

They said only the capital costs of these projects would be reckoned for discharge of offset obligations.

The foreign firms would also be allowed to meet their offset obligations through sharing of "specified critical technology".

Officials said these projects will be implemented through an agency to be identified by the government.

The implementing agency may be a public sector entity including defence public sector undertakings, Defence Research and Development Organisation or through a Special Purpose Vehicle to be set up with or without industry participation.

The draft amendment also proposed to set up a collegium to recommend projects under various categories.

"The investment may be made by the vendor having discharge obligation, by any of its sister companies or affiliates," officials said.

The government has set a May 15 deadline for stake-holders to send their inputs to the the proposed amendment.