The most far-reaching change is the introduction of “offset banking” last year, allowing vendors to accumulate offset credits towards a future liability. But South Block has been less than responsive in the justifiable demand for “offset trading”, which would allow accumulated credits to be sold by vendors who may not have a use for them at that time. As foreign vendors struggle to find offset partners for their mounting offset liabilities, there is rising clamour — particularly from US companies — for allowing “indirect offsets”, or the discharge of offset obligations through investment in non-defence fields like infrastructure, health, housing, etc. The MoD, focused on building up the domestic defence industry, considers “indirect offsets” as a potential turf infringement. But unless a well-conceived policy and regulatory framework is created for handling billions of dollars of offsets liabilities each year, New Delhi may have to allow some of that money to spill over into non-defence fields.
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Our Comments: FDI is an option in Defence & Aerospace now. What is important is, how does offset as a package work for domestic consumption and exports? Or it is only for the domestic clientele. Dual-Usage Industry, or areas typically important to our strategic options could be considered, where MOD spends.
Brigadier (Retired) Sukhwindar Singh