New guidelines make technology transfer eligible offset in defence acquisitions

The government today announce revised guidelines under the defence offset policy, which clearly spells out the objective of defence offsets and makes transfers of technology or acquisition of technology by Indian companies eligible for offsets. 

The Defence Acquisition Council (DAC) under the defence ministry had, at its meeting held on 23 July 2012, approved the revised guidelines for defence offsets. 

The key objective of the defence offset policy is to leverage capital acquisitions to develop Indian defence industry by fostering development of internationally competitive enterprises, augment capacity for research, design and development related to defence products and services and encourage development of synergistic sectors like civil aerospace and internal security, an official release said today.

The revised policy tries to clearly define the concepts of co-production and co-development. Distinction has also been made between equity and non-equity route. Investment in 'kind' by OEMs through the non-equity route, ie, co-production, co-development, etc will be recognised for offset credits, subject to certain conditions.

Transfer of technology
The revised policy recognises transfer of technology as eligible for discharge of offset obligations. Investment in 'kind' in terms of transfer of technology must cover all documentation, training and consultancy required for full transfer of technology (civil infrastructure and equipment are excluded). The technology transfer should be provided without licence fee and there should be no restriction on domestic production, sale or export. The offset credit for transfer of technology will be 10 per cent of the value of buyback by the OEM during the period of the offset contract, to the extent of value addition in India.

The revised policy allows provision of equipment and / or transfer of technology to government institutions and establishments engaged in the manufacture and / or maintenance of eligible products and provision of eligible services. This 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, etc.