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The Defence Ministry has decided to impose unlimited penalty will be imposed on vendors failing to fulfill offsets obligation within the prescribed time frame as part of the Defence Procurement Procedure.
The decision on 'Revised Offset Guidelines' was taken last month during the meeting of Defence Acquisition Council (DAC) and it shall be applicable from August, Defence Ministry said in a release today.
"The overall cap on penalty will be 20 per cent of the total offset obligations during the period of the main procurement contract," it said.
"There will be no cap on penalty for failure to implement offset obligations during the period beyond the main procurement contract, which can extend to a maximum period of two years."
Under the policy, vendors bagging deals worth over Rs 300 crore have to re-invest at least 30 per cent of the worth of the contract back into Indian defence, civil aerospace and homeland security sector.
With plans to spend over $ 100 billion in next five years, India is expected to sign offset contracts worth over at least $ 30 billion.
Several other decisions were also taken during the meeting on transfer of technology (ToT), technology acquisition, period of implementing the offset, role of defence public sector undertakings (DPSUs) and co-production and co-development of technology.
Besides recognising ToT eligible for discharge of offset obligations, the meeting also made it clear that it should be provided without licence fee and there should be no restriction on domestic production, sale or export.
"The offset credit for ToT shall be 10 per cent of the value of buyback by the Original Equipment Manufacturer (OEM) during the period of the offset contract, to the extent of value addition in India," the release said.
The new policy will facilitate capacity building for research, design and development, training and education in DRDO laboratories, Army base workshops, Air Force base repair depots and Naval aircraft yards.
"Technology acquisition by DRDO for a list of specified technologies will be treated as an eligible offset with a multiplier up to 3," the release said.
The meeting also decided that the agreement between the OEM and the Indian Offset Partner (IOP) shall be subject to the laws of India.
For more flexibility in the policy, the meeting also decided that a competent authority may permit change in offset partners or offset components provided the value of offset obligations remains unchanged.
This will provide greater flexibility in implementation, the release said. |