Even as Indian industry argues for dedicated ‘Offsets Authority’ and an institutional mechanism to ensure a transparent and appropriate valuation for technology transfer to raise the capability of the domestic defence manufacturing industry, the Ministry of Defense has decided to strengthen the monitoring mechanism for the implementation of offsets.
Inaugurating the FICCI Defense Seminar on ‘Defense Offsets: Policy to Implementation- How Offsets can enable Indian Industry’ at Defexpo India 2010, Mr. Raj Kumar Singh, Secretary (Defense Production), Ministry of Defense said the government had signed defense offsets deal worth Rs 1200 crore and Rs 49000 crore worth of deals were under various stages of consideration.
While this represents a huge opportunity of Indian industry, Mr. Singh urged Indian firms to build up and showcase their capabilities to enable the OEMs to find the right partner. He called upon them to invest in a far greater measure on technology, scientific and engineering personnel and come up with innovative technologies.
“We see Offsets as an enabler to build indigenous capabilities to be able to make the products ourselves. Offsets are an integrated part of our policy towards indigenization of integrated systems and platforms,” Mr, Singh said, adding that there was an imperative need to closely monitor the implementation of offsets which at present remains “fuzzy”.
The Defense Production Secretary made clear that the government was reluctant to change the Indian partners in offset deals as it would lead to a weakening of the bargaining position of the Indian partner. “We will also ensure that the penalties for non-compliance are not stringent and that these are enough to dissuade reneging of contracts,” he said.
On the occasion, Mr. Singh released a FICCI-Religare Knowledge Paper on Defense Offsets.
Mr. V. RS Natarajan, CMD, BEML & Chairman, FICCI Defense Committee, underlined the need to enhance the validity of banked offsets from two to five years. While India has adopted a gradual approach towards offsets policy, keeping the offset obligation at 30% and keeping multipliers and other instruments out of its scope, he expressed optimism that multipliers and other tools would be included in the policy in the future.
He called for equipping the Defense Offsets Facilitation Agency (DOFA) with the necessary funding, experienced and permanent staff and making it a single point of contact to deal with the increasing defence expenditure, vis-à-vis offsets. The present offset rules provide no incentive for system integrators and this poses a hindrance in the process of offset liquidation, he added.
The inaugural session of the seminar was also addressed by Mr. S Ravi Narayanan, CEO, Axis Aerospace & Technologies & Chairman, FICCI Task Force on Offsets and Mr. Rahul Chaudhry, CEO-Tata Power SED & Co-Chairman, FICCI Defense Committee.
The day-long seminar deliberated on issues such as ‘Creating an Environment for Strategic Defense Manufacturing through Offsets’; ‘Finding the Indian Offset Partner’; ‘Challenges to be an Indian Offset Partner’ and ‘Managing a dynamic offset policy: Issues of Banking of credits, DOFA, ToT & Multipliers’.