The success of India’s defence offset policy should not be measured in agreements signed, or goods manufactured. An offset policy is successful only in so far as it generates long-term industrial partnerships, which function even after the vendor has discharged his offset liabilities. For this, the partnership must benefit both vendor and buyer. The challenge for India is to develop the domestic defence industry, both public and private sector, to create an ecosystem of potential partners for foreign vendors. This is not difficult; India’s auto component manufacturers have already demonstrated domestic capabilities in high-tech manufacture and cutting-edge R&D. These are precisely the qualities that global arms corporations seek in offset partners in India.
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.
Pse Click to read the full Report: Offsets' Take Off?
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
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.
Pse Click to read the full Report: Offsets' Take Off?
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
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