A defense offset policy is drafted to leverage capital acquisitions in order to develop the Indian defense industry by fostering the development of internationally competitive enterprises, augmenting capacity for R&D, and encouraging the development of synergistic sectors like civil aerospace and internal security.
But, so as to achieve such a partnership, there is a list of defense offset guidelines that need to be followed. While the number of guidelines are umpteen, let’s help you get a brief in this blog below.
Application of provisions
The provisions apply to every capital
acquisition, may it be outright purchase from a vendor, or purchase from a vendor
that is followed by Licensed Production, where the estimated cost of the
acquisition proposal is 300 crores or more. Generally, 30% each of both these
costs of acquisition will be the required value of the offset obligations.
However, the Defence Acquisition Council may prescribe varying offset
obligations in special cases if required. Nevertheless, these provisions will
not apply to procurements under the Fast Track procedure, and those under the
“Option” clause, where an offset obligation was not stipulated in the original
contract.
Discharge of offset obligations
The offset obligations may be discharged by
one or more of the following methods –
ü Direct purchase or export orders for eligible products manufactured
or serviced by Indian enterprises
ü Foreign direct investment in joint ventures with Indian enterprises
for the manufacture and/or maintenance of eligible products and provision of
eligible services
ü Investment in ‘kind’ in terms of transfer of TOT (Transfer OF
Technology) to Indian enterprises for the manufacture and/or maintenance of
eligible products and provision of eligible services
ü Investment in ‘kind’ in Indian enterprises in terms of provision of
equipment through the non-equity route for the manufacture and/or maintenance
of eligible products and provision of eligible services, excluding TOT, civil
infrastructure and second-hand equipment.
ü Provision of equipment and/or TOT to government institutions and
establishments engaged in the manufacture and/or maintenance of eligible
products and provision of eligible services.
ü Technology Acquisition by the DRDO in areas of high technology
Then, there are a multitude of other offset
obligation discharge policies that are divided into different sectors, such as
vendor responsibility, performance bond, offset credits, offset banking, value
addition, Buy Global procurements, offset valuation, and more.
Submission of offset proposals
Vendors are required to submit a written
undertaking to the effect that every offset obligation will be met. Any failure
on the part of the vendor to comply with the guidelines may result in
disqualification of the vendor from any further participation in the contract.
The proposals should be submitted by a specified date, failure of which may
render the bid non-responsive, and liable to be rejected.
Evaluation of offset proposals
The Acquisition Wing in the Department of
Defence is responsible for technical and commercial evaluation of offset
proposals received in response to RFPs, and the conclusion of offset contracts.
The Defence Offsets Management Wing in the Department of Defence Production is
responsible for the formulation of the offset guidelines, auditing and
reviewing or progress reports, and post contract management. And, both these
wings work in close collaboration for the smooth implementation of the
guidelines.
Processing of offset proposals
Technology acquisition – The Technology Acquisition Committee is responsible for assessing
the offset proposals, covering both technical and financial parameters,
including valuation of technology, and the timeframe and strategy for utilizing
the technology.
Technical evaluation – The Technical Offset Evaluation Committee (TOEC), constituting of
representatives of the Service Headquarters, Defence Finance, DRDO, DOMW, and
other experts, is responsible for scrutinizing the technical offset proposals
to ensure conformity with the offset guidelines. The TOEC report is then
forwarded to the Technical Manager, who will then process the report for
acceptance.
Approval authority – After the offset proposals are processed by the Acquisition
Manager, they will be approved by the Raksha Mantri.
Penalties – If
a vendor fails to fulfil the obligations as agreed to, a penalty equivalent to
5% of the unfulfilled offset obligation will be levied, after which the
unfulfilled offset value will be re-phased over the remaining period of the
contract. The vendor may also be liable for debarment from participation in
future defence contracts for a period of up to 5 years, the decision that will
depend upon the Director General of Acquisition.
Re-phasing requests – A vendor has the advantage of requesting re-phasing of the offset
obligations within the period of the offset contract, providing valid reasons.
If justified, the request may be granted.
Annual reporting – An annual report is submitted to the Defence Acquisition Council
in June every year, regarding the details of the contracts signed, and the
status of implementation of all on-going contracts.
Indian enterprises, institutions, and
establishments engaged in the manufacture of eligible products and/or provision
of eligible services are referred to as Indian Offset Partners, who are
required to comply with all the above guidelines/licensing requirements and many
more. Vendors are free to select such a partner. If you’re looking for the same
too, Miracle Electronics can prove to the best Offset Partner For Indian Defense, thanks to their complete adherence to the obligations, proven
industry capabilities, consistent R&D, and every necessary quality
certification in place!
No comments:
Post a Comment