Indian defense offsets guidelines have faced issues with implementation and monitoring. Currently, contracts valued at approximately $4.87 billion have been signed, with 51.5% achievement so far. However, offset contract negotiations, monitoring, and implementation have not been smooth. As of January 2015, only $20-25 million in offsets credits had been approved against $921 million in vendor claims. The current guidelines focus on exporting existing products, FDI, equipment, and technology acquisition, but these do not fully address what offsets foreign OEMs can realistically provide. Establishing manufacturing facilities through FDI in dual-use defense technologies could help meet offsets obligations while providing local jobs and industrial development.

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