The defence ministry is set to announce a set of radical changes in its offsets policy that will bring in investmentsworth billions of dollars into the defence and aerospace industry from foreign vendors that win Indian military contracts. While the current outstanding value of offsets – pegged at $16 billion to be executed till 2028- shall be executed under older rules, all future programmes will be governed by a new policy set to be announced in January.
Sources have told ET that the defence ministry has firmed up its futuristic offset policy to promote ‘Make in India’, technology transfer and skill development – the key focus areas of the government.
In the past, foreign companies winning major Indian military contracts were mandated to spend at least 30 per cent of the contract value. This would give the foreign players flexibility to choose any area to invest in, leaving little control on the kind of technology or capability transfer. With the new rules, set to be part of the Defence Procurement Policy2016, the defence ministry and the armed forces buying the equipment will specify what they want as offsets for a particular deal. Three options will be available for the government under the new policy.
One would be a directed offsets plan in which the foreign vendor will be mandated to spend its 30 per cent investment share in a particular Make in India plan – to set up a defined manufacturing facility in India, be it a aircraft production line or a ballistic testing facility.
The second option would be transfer of technology – with a committee of the armed forces and defence ministry deciding what technology is needed. In this case, DRDO would be the custodian of the technology but the production agency – the private sector will be preferred – would be fully involved from the beginning.
The third option is for skill development – creation of R&D facilities, innovation centers, training institutions and labs – to raise a new generation of skilled workers for the defence and aerospace sector.
Invest in skills for innovation
The stress on skill development makes perfect sense. Better skills would boost innovation and give rise to a spirit of enterprise. In tandem, we need a better institutional setup for tech revamp in the defence sector and beyond. We need close interaction between DRDO, industry and academe, and not just for technology and skill absorption.
Source from India Defence News.
