Indian Defence and Offset Policy Dilution

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On the basis of the recent CAG  report, India has decided to dilute the offset policy in defence procurement. In simple terms, we can say that offset policy helps in indigenisation in defence sector which is mandatory at present for developing countries like India.

What is Offset Policy?

Offset policy in defence procurement mandates foreign vendors to source 30% of the contract value(Rs. 300 Cr or more) locally. This policy was introduced in 2005.

How Offset Policy promotes indigenisation?

Offset policy ensures the transfer of technology to India which opens the door for defence indigenisation. This could also include the provisions of training local personnel in practical skills and promotion of R&D. 

Why GOI has diluted the Offset Policy?

As per the recent report by CAG, India has seen a large amount of investment during the past under offset policy but there has not been a significant investment in the domestic sector as per the norms. For instance, the transfer of technology clause has not been implemented.

According to GOI, the dilution of offset policy will eventually bring down the cost of imported defence equipment. After the recent development of dilution, offset policy is not applicable to a single seller and bilateral deals.

How it will affect India?

Offset policy dilution can have a negative impact on India's capabilities and it is not in accordance with the vision of Atmanirbhar Bharat in the defence industry.
The initial cost of the defence product may be higher than the usual but it will be compensated by indigenisation and technology transfer in future.

Conclusion

Offset policy is a very important clause of the defence sector, if it's implemented strictly, it will boost up the Indian defence sector in terms of R&D. So, the Indian government should reconsider its decision of dilution for achieving Atmanirbhar Bharat or Self-reliant India.