India confirms move to abolish offset banking

The Indian Ministry of Defence’s (MoD’s) Department of Defence Production (DDP) has confirmed plans to discontinue offset banking provisions.

In a notice published by the MoD’s Defence Offsets Management Wing (DOMW) on 23 June, the DDP indicated that the existing offset-banking clause discourages investment in India’s defence industrial base.

The Indian MoD has confirmed its decision to abolish offset banking provisions. The MoD has entered more than 50 offset deals with foreign contractors, the majority of which support Indian Air Force purchases such as its procurement of Boeing C-17 transport aircraft (pictured). (Boeing)

The MoD plans to introduce updated defence offset guidelines in the near future to replace the existing policy, which has been in place since April 2016.

This updated offset policy, based on a set of draft proposals issued by the MoD in March, will exclude the banking provision, confirmed in the new DOMW notice, which featured DDP responses to industry queries about the draft policy.

In the notice the DDP said the decision to remove the offset banking provision was “aligned with the [overall] objectives of the offset policy, ie, to attract investment and technology in the desired area of the defence sector”.

It added, “Offset banking comes in the way of attracting new investments and thus defeats the prime objectives of the offset policy.”

This response was to a comment from an unidentified defence industry representative who called for offset banking to be permissible. “We recommend that offset banking should be allowed as it favours the Indian companies and helps them integrate… with the global supply chain,” said the industry representative.