Updated: India withdraws order abolishing defence offset banking under 2020 procurement procedure

File Photo: India’s defence minister Rajnath Singh.

(Editor’s Note: First update on June 23 with Department of Defence Production comments on Offset Guidelines in the last paragraph. Second update with details of July 17 amended order keeping the policy on Banking Offsets in abeyance in paragraph one.)

New Delhi: India kept in abeyance its June 23 order to abolish the offset banking provisions as the new Defence Procurement Procedure-2020 (DPP-2020) is yet to be notified. Read the fresh amendment order in the last paragraph.

Accordingly, the cut off date of Apr. 1 for offset banking claims notified on June 17 too stands cancelled, the latest order on the subject from the Ministry of Defence said.

Earlier Report on the Now Withdrawn Order on Offset Banking:

On June 23, the order had wrongly claimed that the MoD had notified the new DPP-2020 from Apr. 1 and had abolished the investment-hindering offset banking provisions that were part of the previous arms acquisition norms from 2008 to 2016.

In the now withdrawn order dated June 17, the MoD had said after the notification of DPP-2020 and its coming into force with effect from Apr. 1, representations were received seeking clarity on offset banking.

“lt is, hereby, clarified, as follows regarding offset banking:

(a) Banking offset claims for which transactions have been completed on or before Mar. 31, 2020 will be processed provided they are applied within one (01) year of completion of transactions and complying to other laid down conditions in DPP 2016.

No offset banking claims can be made for transactions done on or after Apr. 1, 2020.

(b) Offset banking claims which are at different stages of examination will be processed as per the provisions of the governing DPP wherein offset banking was permitted.

(c) Offset banking credits earned by the vendors can be utilised as per applicable provisions contained in DPPs 2008, 2011, 2013 and 2016 (as the case be).”

The Department of Defence Production also clarified all queries raised by the Indian industry and foreign vendors with regard to offset obligations and banking of offsets in a separate note.

“The (offset) guidelines have been aligned with objectives of offset policy, that is to attract investment and technology in the desired area of defence sector. Offset banking comes in the way of attracting new investments and thus defeats the prime objectives of the offset policy.”

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