Amit Cowshish investigates the chinks in India’s defence procurement guidelines and explains how vendors can protect themselves when striking deals in the sector

With a view to galvanizing the domestic defence industry, the Ministry of Defence (MoD) introduced offsets in defence procurement and issued offset guidelines in 2006, which applied to all defence capital purchases exceeding ₹3 billion (US$50 million). The offset guidelines were revised in 2008, 2011 and again in 2012. The 2012 guidelines were later included in the Defence Procurement Procedure, 2013.

The 2012 guidelines were hailed as a bold initiative to harmonize Indian offset policy with global best practices, but once the initial euphoria faded, a number of difficulties started surfacing, forcing the MoD to initiate yet another review of the guidelines. The new guidelines are expected to be notified soon.

This article examines three major issues affecting vendors and their Indian offset partners (IOPs) and suggests pragmatic ways to deal with those issues. The issues relate to: (a) avenues for discharging the offset obligation; (b) selecting an IOP; and (c) submitting the offset offer.

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Amit Cowshish is a partner at Dua Associates in New Delhi. He was formerly a financial adviser for acquisitions in the Ministry of Defence.