India’s Offset Opportunities

The Offset Commitment
In India, all contracts above $65 million require 30 per cent of offset. Indian firms and joint ventures are exempted from offset obligations provided the indigenous content is over 50 per cent. India also accepts subcontracting in outsourced services, such as engineering and R&D. Clearly, Indian offsets’ requirements are not unreasonably stringent.

Countries incentivize certain types of purchases, investments or transfers of technology by offering “multipliers” of a base value. Objects of such incentives include distribution of work to micro, small and medium size business enterprises, transfer of targeted technologies, full as opposed to limited intellectual property rights transfer.

India’s new offset guidelines promote investment in micro, small and medium enterprises (MSMEs) by applying a multiplier factor of 3.0 to the offset calculations. It also facilitates technology acquisition from a select list of research and development organizations.

A problem of emerging importance, especially in light of a still-festering scandal in India is how the foreign purchaser can satisfy itself that the amounts submitted to discharge offset commitments represent bona fide purchases or investments.

A related concern is that credit should be given only for “value added” in country and not, for example, for work that may be subcontracted by an indigenous offset partner to the selling prime or other foreign companies.

There are increasing efforts on the part of a number of companies to require documentation of claims of offset discharge and increasing attention to verification of those claims. This can prove difficult for limited trained acquisition and oversight personnel to review and approve submissions.

The NAVIN Consortium IRC can help facilitate this process.

Offset Authority
The Defence Offsets Management Wing (DOMW) under the Department of Defence Production is responsible for formulation of Defence Offsets Guidelines and all matters relating to post contract management.

DOMW is responsible for the following functions:

a. Formulation of Defence Offset guidelines;
b. Monitoring the discharge of offset obligations, including audit and review of progress reports received from vendors;>/li>
c. Participation in Technical and Commercial evaluation of offset proposals as members of TOEC and CNC;
d. Implementation of Offset Banking guidelines;
e. Administration of penalties under offset contracts in consultation with Acquisition Wing
f. Assisting vendors in interfacing with Indian industry; and
g. Other responsibilities assigned under the offset guidelines or entrusted by the Government
The country is desperate to see tangible results of the offset policy. The need is to make sure that it works and its potential is optimized

Offset Opportunities
A Financial Times study projects 15,000 defence contracts in the decade ending 2022, with offset obligations of $100 billion.

Areas of Interest

With billions of dollars worth of offsets set to flow into the country on the back of high-value system purchases, India's Defence R&D Organisation (DRDO) has compiled a list of 26 critical defence technologies and test facilities it would like to harvest through the incoming offset tide. These include:
• MEMs based sensors, actuators, RF devices, focal plane arrays,
• nano technology based sensors & displays,
• miniature SAR & ISAR technologies,
• molecularly imprinted polymers and composite sabot manufacturing technology,
• high strength, high modulus, carbon fibers, mesophase pitch-based fiber, etc.