India’s defence offsets policy: civil aerospace, internal security added, banking allowed

International companies winning defence contracts in India will no longer be required to invest in direct defence equipment to fulfil offset obligations. An amendment to the policy made public today includes civil aerospace and internal security equipment too besides allowing offsets banking. However, the government has allowed itself the right to bypass the bidding process if “strategic considerations” so dictate. “Imperatives of strategic partnerships or major diplomatic, political, economic, technological or military benefits deriving from a particular procurement may be the principal factor determining the choice of a specific platform or equipment on a single vendor basis. These considerations may also dictate the selection of particular equipment offered by a vendor not necessarily the lowest bidder". The new Defence Procurement Procedure for 2011 has broadened the scope of the offset policy “to include civil aerospace, internal security and training within the ambit of eligible products for the discharge of offset obligations". Indian Defence minister AK Antony in a signed statement said, “These changes will provide a wider range of offset opportunities to defence vendors and encourage building up of indigenous manufacturing capability in crucial areas". A list of products eligible for offsets banking has been released. Defence equipment-Small arms, mortars, cannons, guns, howitzers, anti-tank weapons and their ammunition. Bombs, torpedoes, rockets, missiles, other explosive devices and charges, related equipment and accessories specially designed for military use, equipment specially designed for handling, control, operation, jamming and detection. Energetic materials, explosives, propellants and pyrotechnics. Tracked and wheeled armoured vehicles, vehicles with ballistic protection designed for military applications, armoured or protective equipment. Vessels of war, special naval system, equipment and accessories. Aircraft, unmanned airborne vehicles, aero engines and air craft equipment, related equipment specially designed or modified for military use, parachutes and related equipment. Electronics and communication equipment specially designed for military use such as electronic counter measure and counter-counter measure equipment for surveillance and monitoring, data processing and signalling, guidance and navigation equipment, imaging equipment and night vision devices, sensors. Specialised equipment for military training or for simulating military scenarios, specially designed simulators for use of armaments and trainers. Forgings, castings and other unfinished products that are specially designed for products for military applications and troop comfort equipment. Environmental test facilities and equipment for the certification, qualification, testing or production of the above products. Software designed or modified for the development, production or use of above items. This includes software specially designed for modelling, simulation or evaluation of military weapon systems, modelling or simulating military operation scenarios and Command, Communications, Control, Computer and Intelligence (C4I) applications. High velocity kinetic energy weapon systems and related equipment. Direct energy weapon systems, related or countermeasure equipment, super conductive equipment and specially designed for components and accessories. Internal security equipment- Arms and their ammunition including all types of close quarter weapons. Protective Equipment for Security personnel including body armour and helmets. Vehicles for internal security purposes including armoured vehicles, bulletproof vehicles and mine protected vehicles. Riot control equipment and protective as well as riot control vehicles. Specialised equipment for surveillance including hand held devices and unmanned aerial vehicles. Equipment and devices for night fighting capability including night vision devices. Navigational and communications equipment including for secure communications. Specialised counter terrorism equipment and gear, assault platforms, detection devices, breaching gear. Training aids including simulators and simulation equipment. Civil aeronautics-All types of fixed wing as well as rotary aircraft including their airframes, aero engines, aircraft components and avionics. Aircraft design and engineering services, technical publications, raw material and semi-finished goods, flying training institutions and technical training institutions (excluding civil infrastructure). Banking of offsets credits-Foreign supplies can accumulate offset credits for two years preceding the award of a contract. The proposals for banking of offsets will have to be submitted to the defence ministry. Such proposals will have to be in conformity with the valid discharge of offset obligations as specified in the DPP-2011. The banked offset credits are non-transferable except between the main contractor and his sub-contractors within the same acquisition programme. A vendor will be able to discharge the banked offset credits for the RFPs (requests for proposals) that are issued within the two financial years of the date of approval of the banked offset credits. The cut off date would be 1st April and 1st October of the financial year.