The Government is re-working the draft national offset policy, which proposes to impose local sourcing conditions on foreign companies selling to the Centre and public sector units, to keep smaller contracts out of its ambit and restrict the norms to just a few sectors.

“While the threshold limit for transactions on which off-set obligations would apply could be raised from ₹300 crore proposed in the first draft to ₹1,000 crore, the number of sectors that would be initially covered by the policy is being reduced,” a Commerce Ministry official told BusinessLine .

The government is now actually considering calling it an ‘off-set mechanism’ instead of a ‘national off-set policy’ because of the restricted coverage.The sectors on which the off-set policy would initially apply may include civil aerospace, railways, fertilisers, electronics and IT. “A final decision on what sectors would get covered and the threshold limit (whether ₹300 crore or ₹1,000 crore) will be taken by a Committee of Secretaries (COS) examining the policy,” the official said. The offset policy will be applicable only on Government procurement for non-commercial purposes estimated at over $100 billion annually, the official added.

Based on objections raised by a number of ministries including economic affairs and coal to the draft floated by the Commerce Ministry last December, a COS is making changes in the proposed policy and will soon place it before the Cabinet for approval. The amount to be domestically sourced by foreign companies that get covered by the off-set policy is likely to be retained at 30 per cent of the value as proposed in the draft circulated by the Commerce Ministry last December.

The CoS will also take a final call on the off-set utilising sectors. The proposed policy allows cross-sectoral linkages giving the foreign supplier the flexibility to fulfil its domestic sourcing obligation from a different sector than the one it is selling to. Such sectors could include software, infrastructure development, telecom and electronics, mining, steel, space, fertilisers and railways.

India already has an offset policy for the defence sector where foreign suppliers have to buy at least 30 per cent of the total value of the supplies locally.

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