Offset Contracts Under Defence Procurement Regulations in India: Evolution, Challenges and Prospects

Abstract

The practice of countries demanding discharge of offset obligations as a prerequisite to foreign firms’ participation in major civilian or defence contracts is not new, and recent years in particular have seen a number of countries, both developed and developing, apply offsets and industrial participation measures at an ever-growing scale and complexity, as governments worldwide use their purchasing power to develop local capacities and channelize investments and technology to favored domestic sectors. This paper traces the history of offset regulations in defence procurement in India, together with a legal analysis of this evolutionary path over the last four years. It then identifies challenges and areas of concern in the existing regulatory framework, and comes up with suggestions on the way forward to address the identified areas of concern keeping in view two primary objectives of procurement reform, namely, enhancing efficiency and uniformity in the administration of offset contracts in India.

Keywords: India, Defence Procurement, Defence Contracts, Offset Contracts

JEL Classification: K12, K23