Journal of Defence Studies

Industry Perspectives on Defence Offsets

Defence offsets are expected to generate business in India of about $10 billion over the next five years. Some would be in the form of tangible product and service exports while some in the form of investments made in India, and perhaps technology transfers, and yet some would be reduced through multipliers, banking, etc. We can assume that genuine export business could be $1 to $1.5 billion a year. Large as these may appear, in a trillion dollar economy, the direct impact is less than 0.2 per cent.

Implementation of Offset Policy in Defence Contracts: Indian Army Perspective

The Offset Policy has been articulated in the DPP 2008. The Offset Clause would be applicable for all procurement proposals where indicative cost is above Rs. 300 crores and schemes are categorized as ‘Buy Global’ involving outright purchase from foreign/Indian vendors and ‘Buy and Make with Transfer of Technology’ i.e. purchase from foreign vendor followed by licensed production.

Background Paper

Definition, Forms and Types of Offsets Offsets

Gearing up for the Defence Exports: Challenges, Opportunities and Pitfalls

India has made rapid strides in defence technology in recent past and reached a stage of self-reliance. The objective was to have thrust in indigenous production and exploring possibilities of exports to other developing nations that may look forward to supplies from India.

In spite of the potential the country had in defence production, in the form of resource capability, know-how and technical expertise, but due to lack of clear policy had prevented its full exploitation. One can assume that our defence industrial policy broadly consists of the following-

Essential Elements of India’s Defence Offset Policy – A Critique

Offsets have been variously defined. In essence, offsets in defence, as in civil trade, are compensations that a buyer seeks from the seller for the purchase of goods and/or services. The demand for offsets in defence has exhibited an upward trajectory since the 1950s.1 It gained further momentum in the 1980s and has been growing ever since.

Technology Inflows: Issues, Challenges and Methodology

The defence offset policy mandates the foreign suppliers to plough back a minimum of 30 per cent of the contractual value of projects worth Rs. 300 crores or above to the domestic defence industry. The offset route is intended to strengthen the domestic defence industrial base through a combination of technology transfer, investment in R&D and in production facilities, besides export business generation. From the national view point, the offset aims self-reliance and indigenous capability enhancement in the vital defence sector involving advanced technology.

Offset Absorption Roadmap for the Indian Air Force

Offsets in some form or the other have been practiced in many countries over a long period of time. Even in India, licensed production contracts and technology transfer contracts with the erstwhile USSR were a type of offsets. However, Defence Procurement Procedure-2006 (DPP-2006) had streamlined the process to a great extent. DPP-2008 has refined the policy further.

Offset Investment Inflow Priorities for Ordnance Factories

Offset agreements are formal arrangements of trade where some sort of leverage is exploited by a buyer to obtain compensatory benefits in the case of high value off-shore purchases by forcing the seller to undertake well-designated activities for enhancing competitiveness, up-gradation of technology for domestic industries, additions to exports, up-gradation in the infrastructure in appropriate domestic sectors, etc. Though these are business deals with built-in reciprocity clauses, it is not a matter of establishing desired equivalence of inflow and outflow resources.

Offset Policy framework

I shall basically discuss the road map which we have offsets in the country. We in fact have a very good phrase called quasi direct offsets for our system. It is not as direct as is understood internationally and a foreign OEM can in fact buy ships from India if they were to supply multi-role combat aircrafts. While this is true of all the offset proposals in the Ministry of Defence, I would like to mention that barring two or three cases, all cases are in fact ‘direct’ as is internationally known.

A Survey of Successful Offset Experiences Worldwide

In venturing to write about successful offset policy and experience in different countries, the basic problem faced is that of unavailability of data. There are no universally laid down parameters or measures to weigh the costs and benefits of offset programmes. Even if some countries have individually undertaken an exercise to evaluate such costs and benefits, the information is not always available in the public domain. Cross country comparisons would also not yield consistent results.