India does away with offsets for government to government defence deals

India has done away with offsets for government to government defence deals, with a senior official saying that the policy has failed to bring critical technology into the country and has resulted in loading extra costs on contracts.

The new Defence Acquisition Procedure (DAP), cleared by the defence ministry on Monday, has done away with the need of foreign companies investing at least 30 percent of the contract value in the Indian manufacturing sector if the deal is being processed under the government to government or single vendor case.

Officials said that this could result in savings as anecdotal evidence suggests that foreign companies increase the contract price by 8-10 percent to cater for the offsets clause. However, competitive multi vendor procurement cases will still have the offsets clause.

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