India To Allow Foreign Firms To Change Defense Offset Partners

India’s new Defense Procurement Procedure (DPP) will allow foreign firms to change their Indian offset partner (IOP) anytime subject to approval.

The power will be given to the Secretary, Defense Production to allow foreign firms to change their offset partners.

“IOP could not be changed and we felt that this was the wrong way of doing business as the IOP can even close down or their technology may not be latest at the time of operationalization," a source said Sunday.

Among other changes in the upcoming DPP, ‘services’ will be restored as eligible offsets for military deals.

"Services which were stopped have been included. We have approved four out of the six services," one of the sources said.

These services are maintenance and repair, software, skill development and technology transfer. The sources said these segments will have certain riders and conditions. 

The services restoration was kept aside after the VVIP chopper scandal.

Another key change in the policy could be the option to migrate from offset obligations to 'buy and make'. It is not yet clear if this is part of the new policy. 

Under this, value of FDI by Original Equipment Manufacturer and eligible products being manufactured in India will be counted against offset obligations.

Offsets were introduced in 2005 with an objective of developing a defence industrial base in the country. However, it has failed to deliver to its full potential. Another reason why the offset policy is being revised is because it has led to delays in critical acquisitions.

In some cases, negotiations and finalisation of offset contracts have taken equal, if not longer, time as for the prime contract itself.