India’s offset requirements are a key major hurdle in the defence trade: Ex-Pentagon official
- "India offers tremendous prospects as well as tremendous challenges." We've never been able to reach the broad security accords that we'd hoped for with India.
- the United States is in talks with India about numerous multibillion-dollar defence deals, including the Guardian drones.
India’s requirements for offsets According to a former top Pentagon official, India presents significant prospects for the US in bilateral defence commerce, but its offset rules make doing business with the country extremely difficult.
On Wednesday, Ellen Lord, the former Under Secretary of Defense for Acquisition and Sustainment (A&S), informed members of the House Armed Services Committee that the United States is in talks with India about numerous multibillion-dollar defence deals, including the Guardian drones.
“India offers tremendous prospects as well as tremendous challenges.” We’ve never been able to reach the broad security accords that we’d hoped for with India.
“There are problems, such as the S-400 (Russian anti-air missile system purchased by India) being on contract, and so on.” Furthermore, I can tell you that conducting business in India is quite difficult because to offset requirements to be able to provide a local business,” Lord stated.
Foreign defence firms are required to spend at least 30% of the total contract value in India through component procurement, technology transfer, or the establishment of research and development operations under India’s offset policy for any contracts of Rs 2,000 crore or more.
Offsets, on the other hand, are not applicable to procurements under the ‘fast track method’ or in circumstances where a ‘option clause’ was not included in the original contract.
The volume of defence trade between the two countries has expanded from nearly zero to USD 18 billion in the last decade.
Boeing, Lockheed Martin, and General Atomics are among the major American companies eyeing the Indian market, which is expected to develop dramatically over the next decade.
“So, enormous potential,” Lord said, “but I would say the opportunity and the challenge is to work with the Indian government to streamline policies and procedures, make them consistent so that it is a fairly predictable venue for US business and government to invest in.” Senator Mark Kelley recently returned from a trip to India.