Offset clause chucked out, but conditions apply in acquisition of defence hardware

Under the new DAP, a clause requiring foreign firms to invest 30% of the contract value in the Indian manufacturing sector has been dropped for G2G or single-vendor deals.

Published: 29th September 2020 03:54 AM  |   Last Updated: 29th September 2020 08:27 AM   |  A+A-

Defence Minister Rajnath Singh lay foundation stone to underpasses construction at IMA Dehradun through video conferencing in New Delhi Monday Sept. 28 2020. (Photo | PTI)

Express News Service

NEW DELHI: On a day the Defence Acquisition Council (DAC) approved purchases worth Rs 2,290 crore, the bigger talking point was a major tweak in the offset policy tied to the acquisition of arms and equipment to make procurement easier. 

According to the new Defence Acquisition Procedure (DAP) 2020 unveiled on Monday by Defence Minister Rajnath Singh, offsets will not be applicable to three specific categories—Inter-Government Agreement (IGA), Government to Government (G2G) and single-vendor deals. 

The offset clause was a UPA government policy introduced in 2005. But “no offset has led to a transfer of technology. Most have to do with product purchase as has been brought out in a recent Comptroller and Auditor General report,” Director General (Acquisition) Apurva Chandra said while interacting with journalists.

Under the new DAP, a clause requiring foreign firms to invest 30% of the contract value in the Indian manufacturing sector has been dropped for G2G or single-vendor deals. However, competitive multi-vendor procurement cases will still have offsets.

Among other changes, the armed forces will now be allowed to take a variety of equipment on lease to cut down acquisition time and cost. The equipment include transport aircraft, trainers or simulators.

Meanwhile, the DAC approved the purchase of a clutch of equipment from both the domestic and foreign vendors.

Under the Buy Indian (IDDM) category, the approval was granted to Static HF Tans-receiver sets and Smart Anti Airfield Weapon (SAAW).

The HF radio sets will enable seamless communication for the field units of the Army and the Air Force. The Smart Anti Airfield Weapon being procured for around Rs  970 crore will add to the fire power of the Navy and the IAF.

In addition, to equip the frontline troops, the DAC approved the procurement of SIG SAUER assault rifles, with the deal valued around Rs  780 crore. Frontline troops are already armed with Sig Sauer Rifles.

Policy’s mandate

Under the offset policy, foreign defence entities, for all contracts worth over Rs  300 crore, are mandated to spend at least 30% of the total contract value in India through procurement of components, transfer of technologies or setting up of research and development facilities.


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