Qioptiq logo Raytheon


By Bulbul Singh

06 Jun 07. The Indian Army says, the delay in procurement of arms and equipment is due to the Newly introduced mandatory offset clause under which any contract above $74m will have to meet the requirement of 30 per cent offset.

The Offset clause is not only leading to delays, but is also leading to cost escalation of arms and equipment being procured from overseas companies.

The Indian Army has made a strong case before the Indian defence ministry recently in which it has said that the Offset policy is becoming a burden on the Indian Army and is not benefiting the user, even though the policy will help the domestic industry in the long run by getting them huge orders, estimated at around $10bn in the next five years as India is one of the biggest buyers of arms and equipment in the world

The Indian Army in its case sent in writing to the Indian defence ministry early this year has argued that the offsets will lead to cost escalation of around 30 per cent and will lead to delays by over 20-24 months. As it is India’s acquisition process takes long time due to bureaucratic delays in the Indian defence ministry.

India’s Offset Policy on defence was promulgated in 2006 and the offset clause will be applicable for all procurement proposals where indicative cost is above $74m and schemes are categories as Buy Global, involving outright purchase from foreign vendors and Buy and Make with Transfer of Technology i.e purchase from foreign vendor followed by licensed production.

The Indian Army has said that offsets should be delinked from the $74m restriction. It said several times there are several import schemes which may be less then $74m even though the total import order could be very heavy.

Ever since the Offset Policy was launched in July 2006, only one offset contract has been awarded to Elta of Israel for supply of medium power radar to Indian Air Force.

The Indian Army is lined up acquisition of a variety of weaponry and equipment in the next three to five years, but is worried that the offset will delay the procurement to a level where it will start affecting even the combat worthiness of the army said a senior official of the Indian Army in private. As an example the purchase of 155mm guns for the Indian Army have delayed by the Indian defence ministry bureaucrats for the last five years and is affecting the fire power of the Indian Army. Similarly the upgrade and replacement of the Russian air defence systems have made a hole in the Indian Army’s air defence systems, said the Indian Army official.

The Indian Army intends to purchase Thermal imaging sights, Fire Control systems, navigation systems, static and mobile electronic warfare systems, 155mm/52 calibre artillery guns, UAVs, air defence radars, air defence systems, modern helicopters mounted with surveillance systems, advanced communication systems and new generation anti-tank guided missiles.

Back to article list