INDIA is fast becoming one of the most sought after defence markets in the world. During 2010-11, US$32.03 billion has been earmarked for national defense. Of this, US$13.04 billion is to be spent on acquisitions for new weapons systems equipment and services.
The Indian defense procurement spending is expected to increase to US$42 billion by 2015, including US$19.20 billion for capital acquisitions.
With each defence procurement, the Indian industry stands to benefit through the offset requirements that plough some of those expenditures back into India in the form of manufacturing orders.
The Defence Offset Programme could serve as a vehicle for OEMs to partner with their Government customers to support and achieve these objectives. The OEM can attain productivity gains such as cost reduction, cycle time reduction and access to market-leading technologies while the offset partners can expand their portfolio of export orders, infuse needed technology, and meet growth objectives. Thereby, creating a win-win situation for all the three major stakeholders in the offset programme, the Government, the OEM and their India partners.
The evolution of a clear offset guidelines and structure of the organisation is highly needed for evaluation and implementation of successful offset programmes. The goal of successful offset guidelines is to stimulate ideas on the part of the OEMs that will support the national industrial policy as well as generate a favourable offset credit return.
Hence there is a strong need for the establishment of a single point of accountability for the entire offset process. One nodal agency within the Ministry of Defence could be responsible for the evaluation of offset proposals as part of the acquisition process, approving projects during implementation and approving the offset credits gained for that project. This will result in offset programmes that are structured to support the national industrial policy objectives and have a low execution risk.
Also there is a need to keep the valuation of offset projects as simple as possible and establish reasonable documentation requirements for crediting purposes. Project valuation could be mutually agreed upon by the provider and recipient, before being presented to the offset authority for final approval.