Picking Indian partners made easy for foreign defence firms

In a boost to the ‘Make in India’ programme, the Centre on Wednesday announced easier offset norms for defence deals by amending the 2013 guidelines. It has given greater flexibility to the foreign firms in choosing their Indian partners and re-introduced the option of ‘services’ to meet offset obligations.

In amending the offset policy, the Defence Ministry has empowered foreign players to change their Indian Offset Partners and thereby providing a level playing field to Indian vendors in capital acquisition.

“Vendors had been expressing difficulty to upfront provide specific description of products and their work share, supporting documents to establish eligibility of Indian Offset Partners and yearly discharge schedule. This is primarily due to the time lag between submission of technical offset offers and finalisation and subsequent implementation of offset contracts. As a result there were frequent contract amendment requests from vendors,” the Ministry said in a release.

Introduction of services However, the most significant change in the offset policy has been the introduction of services such as research and development (R&D), maintenance, repair and overhaul (MRO) and technology transfers among others to discharge their offset requirements.

This relaxation was scrapped since May 23, 2013 “due to absence of any regulatory oversight mechanism for services”, the release said.

The new policy has ensured that there are no frequent contract amendment requests from vendors as they lead to delay in procuring military hardware.

So it has laid out a two-pronged strategy for clearing the perceived bottlenecks during pre- and post-contract stages.

“At pre-contract stage option has been given to the vendors to submit detailed offset proposals at a later stage. The vendor can finalise his Indian Offset Partners and offset product details one year prior to the intended offset discharge, or can even undertake the offset activity and submit claims thereafter. This will facilitate vendors to finalise a more realistic offset offer,” the release said.

According to Amber Dubey, partner and head of aerospace and defence at global consultancy KPMG, global OEMs find it tough to provide all details related to Indian partners at the time of bidding given the 6-8 year-long procurement process.

“This will exert greater pressure on existing Indian partners to improve their performance and encourage new players to enter this space as alternate vendors. Making it flexible enhances the ‘Ease of doing business’ aspect,” he said.

On restoring services, he said, this is India’s strength and needs to be supported. A blanket ban on allowing services like R&D, MRO, equipment upgrades and IT software was a “gross over-reaction.”

The Ministry also said Indian vendors participating in ‘Buy Global’ cases were at a disadvantageous position in terms of fulfilling offset obligations. In order to promote ‘Make in India’, a level playing field has been provided and an Indian vendor has been brought at par with the foreign OEM in terms of fulfilling offset obligations

“Hitherto most of the vendors put PSUs as their prime contractor at the time of bidding and the private sector was losing out. This is set to change with the flexibility announced in the new policy,” said Sanjay Soni, President of Bengaluru-based Si2 Microsystems.

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