Indian Defence Offsets

1. Indian Defence Offsets –
Defense Offsets Guidelines (DOG)
Kamaljit Singh Jassal
Linkedin profile available
jassalnavy@hotmail.com 1

2. 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.
jassalnavy@hotmail.com 2

3. 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.
jassalnavy@hotmail.com 3

4. 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.jassalnavy@hotmail.com 4

5. 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. jassalnavy@hotmail.com 5

6. 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?
jassalnavy@hotmail.com 6

7. 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!!
jassalnavy@hotmail.com 7

8. 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.jassalnavy@hotmail.com 8

9. 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.
jassalnavy@hotmail.com 9

10. 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 jassalnavy@hotmail.com
jassalnavy@hotmail.com 10