The provisions in the Defence Procurement Procedure (DPP) concerning offsets will be implemented as per the following procedure.

1.2 A uniform offset of 30% of the estimated cost of the acquisition in ‘Buy (Global)’ category acquisitions and 30% of the foreign exchange component in ‘Buy and Make’ category acquisitions will be the minimum required value of the offset. Offset obligations may be discharged only with reference to “eligible” products and eligible services.

1.3 The DAC may, after due deliberation, also prescribe varying offset percentages above 30% or waive off the requirement for offset obligations in very special cases. Such directions may be made applicable for different classes of cases or for individual cases depending upon the factors involved such as type of acquisition, strategic importance of the acquisition or technology, enhanced ability of Indian defence industry to absorb the offset, export potential generated, etc.However, offset will not be applicable in ‘Option Clause’ cases, where the same was not envisaged in the original contract.

1.5 This offset condition will form a part of the RFP and, subsequently, of the contract. Offset conditions as specified in the RFP will be binding.

1.6 These provisions will not apply to procurements made under Fast Track Procedure.

2.1 For the purpose of defence purchases made under the DPP 2011, offset obligations shall be discharged directly by any combination of the following methods:

a) Direct purchase of, or executing export orders for, eligible products and components manufactured by, or services provided by, Indian industries, i.e. Defence Public Sector Undertakings, the Ordnance Factory Board and private Indian industry. A list of products eligible for discharge of offsets is given at Annexure VI to this Appendix.

b) Direct foreign investment in Indian industries for industrial infrastructure for services, co-development, joint ventures and co-production of eligible products and components.

c) For the purpose of discharge of offsets, ‘services’ will mean maintenace, overhaul, upgradation, life extension, engineering, design, testing of eligible products and related software or quality assurance services with reference to eligible products as indicated in Annexure VI and training. Training may include training services and training equipment (e.g. simulators) but exclude civil infrastructure.

d) Direct foreign investment in Indian organisations engaged in R & D as certified by Defence Offset Facilitation Agency (DOFA). While certifying, DOFA shall not consider civil infrastructure and such technologies that are otherwise easily available in the open market.

e) Foreign vendors could consider creation of offset programmes in anticipation of future obligations. Offset credits so acquired can be banked and discharged against future contracts. Banked offset credits would not be transferable except between the main contractor and his sub-contractors within the same acquisition programme. The main contractor would be required to submit a list of such sub-contractors at the time of signing the contract. Guidelines for banking of offsets are placed at Annexure-VII to the Appendix-D.

2.2 The Indian industries or organisations concerned are here after referred to as the Indian offset partner. The Indian offset partner shall, besides any other extant regulations in force, also comply with the guidelines/licensing requirements issued by the Department of Industrial Policy and Promotion.

2.3 The offset obligations are to be fulfilled co-terminous with the period of the main contract.

2.4 All offset offers which satisfy the minimum eligibility conditions will be placed on par and no preference will be given for any extra amount offered.

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