MoD tweaks purchase rules, drops offset clause for deals

New Delhi, September 28

Less than a week after the Comptroller and Auditor General of India (CAG) slammed the existing offset policy for foreign military equipment makers, the Ministry of Defence has altered the policy for certain categories of purchases.

The “offset policy”, introduced in 2005, required foreign suppliers to reinvest a certain percentage – usually 30 per cent — of the deal into the Indian market.

The new Defence Acquisition Policy (DAP-2020) announced on Monday removed the need for reinvesting for three types of purchases. The policy comes into force from October 1 and will apply to future deals.

Purchases exempt from offset policy

• All government-to-government deals. Most deals with the US have been on this pattern
• Inter-governmental agreements (IGAs). Purchase of 36 Rafale was an IGA deal
• Purchases made when there is a single vendor

Director General, Acquisitions, Apurva Chandra told mediapersons: “All government-to-government deals, all inter-governmental agreements (IGAs) and purchases made when there was a single vendor will be exempted from the offset policy.”

The CAG in its report on September 23 had said “it did not find a single case where the foreign vendor had transferred high technology to the Indian industry. Thus, the objectives of the offset policy remain largely unachieved”.

The new DAP will also allow the armed forces to take military equipment from global or Indian suppliers on lease. “This opens new avenues and will meet operational requirements and save huge capital investment,” Chandra said. Also, the parameters of buying new equipment called “staff qualitative requirement” will be made more realistic after seeing what all is available globally and domestically. The DAP has been aligned with the Atmanirbhar Bharat vision, the Ministry of Defence said. — TNS