Comments
A 20 per cent penalty will be imposed on vendors who do not fulfil the offset obligations within the prescribed timeframe of the Defence Procurement Procedure.
This has been decided as part of the ‘Revised offset guidelines’ firmed up during the meeting of the Defence Acquisition Council in late July. The new guidelines come into effect from August 1, according to an official statement on Thursday.
“The overall cap on penalty will be 20 per cent of the total offset obligations during the period of the main procurement contract. There will be no cap on penalty for failure to implement offset obligations during the period beyond the main procurement contract, which can be extended to a maximum of two years,” the statement added.
An offset contract refers to a stipulated amount that a company engaging in a Government defence deal reinvests as a fixed amount in the country. The guidelines lay down a 30 per cent offset cap in all deals over Rs 300 crore.
The revised guidelines have also increased to seven years the period for which a company can bank its offsets. Earlier, a company could bank its offsets for two years. Offset banking implies generation and accumulation of offset credits prior to the award of the main contract.
A bank of offset credits is created in anticipation of getting contracts to defray subsequent offset obligations.
The revised guidelines also recognise transfer of technology (TOT) as being eligible for meeting offset obligations.
“Investment in kind in terms of TOT must cover all documentation, training, and consultancy required for full TOT (civil infrastructure and equipment are excluded),” the statement added.
It was decided that TOT should be provided without licence fee and there should be no restriction on domestic production, sale or export.
The meeting also decided that the agreement between the OEM and the Indian Offset Partner shall be subject to the laws of India.
The new policy will facilitate capacity building for research, design and development, training and education in defence research laboratories, Army base workshops, Air Force base repair depots and Naval aircraft yards among others.
The defence offset obligations could run to over $300 million, with India expected to conclude defence deals of over $100 billion over the next couple of years.
> ashwini.phadnis@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.