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Indian Defence Offsets – Defense Offsets Guidelines (DOG)
Kamaljit Singh Jassal Linkedin profile available
Background
• Offsets were introduced in DPP 2005.
• Offsets Banking was added in DPP 2006.
• DOFA used to manage it till 2010.
• DDP had the power to comment on Technical Feasibility of Offsets.
• Very slow/ poor implementation of Offset then.
• Review committee revised guidelines in 2011 and DOMW made.
• Not impressive record in Monitoring/ Evaluation of Offsets Proposals.
Background
• Much thoughts/ Committees ideated on DOG.
• Presently, 25 Offsets Contracts valued at approx. USD 4.87 Billion have been signed.
• 44 more contracts of value USD 15 Billion to be discharged until 2028.
• Only 51.5% achievement until last year.
• In ongoing cases, technical and commercial evaluation has become a long drawn process due to inability of Foreign OEMs to ensure conformance to guidelines.
Glitches
• Offsets contract negotiations, monitoring and implementation has not been a smooth process thus far.
• As on 31 march 2014, Offset Contracts for a value approximately USD 4.87 Billion had been signed.
• As on 31 January 2015, offsets credit for USD 20 - 25 Million have been approved against the claims worth USD 921 Million submitted by the vendors.
• Claims for approximately USD 676 Million are under Audit.
• Balance claims of USD 220 Million, communication with the vendors are ‘on’ & thereafter, these would move to audit section.
Glitches
• Proposals made by OEMs for Banking of offsets do not get approvals notwithstanding the stipulation.
• Offsets credits for discharged offsets are not being intimated to the vendors, which results in uncertainties.
• Surprise rejections communicated after a long time gap with avoidable consequential penalties.
• Abeyance order on discharge of offsets through Services has caused considerable loss of opportunity.
What is the Problem
• Do we know What the Problem is with current DOG?
• Current DOG focused on:
– exporting existing Product [Para3.1a]
– FDI [Para3.1b]
– obtaining Eqpt [Para3.1c/e]
– obtaining ToT [Para3.1d/e]
– Technology Acq [Para3.1e]
• Cant we export an exisitng product as it is?
• Don’t we buy ‘Eqpt’ under ‘Global’ and ‘ToT’ under ‘Buy & Make’ Categorization?
What is the Problem
• If DRDO cannot develop Tech then why not float tender for such Tech, cause nobody would give its Crown Jewels (Tech) for cost of Offsets!
• Opaqueness, process delays & disagreements taking toll on offsets proposals.
• Do we know the bridge-gap between what we want from offsets and what is give-able by OEMs? Hope it is not one way street!!
Way Out
• Can Offset be something like tangible Defence FDI?
• Can we have multi product manufacturing shops as Offsets, which are easy to measure?
• FDI in Defence Manufacturing would give:-
– Such products which are Hi Tech & required by Defence.
– Job creation.
– Create secondary Supply chain, upstream integration.
– Long term product support. [email protected] 8
Way Out - FOEM
• FOEM can set up manufacturing shops which are:
– Labor intensive
– Require skilled labor
– Has ready absorption market
– Dual use Hi Tech items would be good
– Augurs well with the Global Supply Chain of the Company
• Choose IOP who is ready to absorb the dual use Tech today and account for Offsets Banking.
Cdr (Retd) Kamaljit Singh Jassal
• Author is former Joint Director of MoD and was part of Executive team that made revised Offsets Policy. He has also been Country Manager of a US MNC dealing in Defence Eqpt.
• He was responsible for formulation of LTIPP 2012-27, 12th Defence Plan, 12th Manufacturing Plan and processed around 400 to 450 Capital Acq of 3 services as Memb Secy of SCPACC.
• Data & Info given are from open sources & out of experience respectively. Open source expert Committee report have also bee gleaned/ data quoted.
• Author can be reached on email [email protected]
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