Offsets Demystified- Credit- Aviotech
(Posted by Neelam Mathews)
An excellent and thorough study done by Aviotech (+91-124-4982850 )
1. The Acquisition Wing in the Department of Defence will be responsible for technical and commercial evaluation of offset proposals as well as conclusion of offset contracts. Newly formed Defence Offsets Management Wing (DOMW), under the Department of Defence Production, will be responsible for formulation of Defence Offset Guidelines and all matters relating to post contract management.
2. 30% of estimated cost of the acquisition (equal to or more than USD 55 Mn) in ’Buy (Global)’ category acquisitions and 30% of the foreign exchange component in ‘Buy and Make with ToT’ category acquisitions will be the required value of the offset obligations.
3. The new routes for liquidation of Offset obligations are :
a. Procurement of Goods
b. Execution of Export Orders
c. Foreign Direct Investment (equity investment) for manufacture, maintenance and provision of eligible services
d. Investment in ‘kind’ in terms of - i) TOT to Indian enterprises for manufacture/maintenance of eligible products and services , ii) Provision of equipment , iii) Provision of equipment/TOT to Government institutions and establishments
e. Technology acquisition by DRDO
4. Offset obligations are to be discharged within a time frame that can extend beyond the period of the main procurement contract by a maximum period of two years. The period of the main contract includes the period of warranty of the equipment being procured under the main contract.
5. In the discharge of offset obligations, multiplier of 1.50X will be permitted where Micro, Small and Medium Enterprises are IOPs. In discharge of offset obligations relating to technology acquisition by DRDO, a multiplier of 2.0X will be applicable when the technology is offered for use by Indian Armed Forces only but without any restriction on the numbers that can be produced; Multiplier of 2.5X when the technology is offered for use only in Indian Market but for both military and civil applications and without any restriction on the numbers that can be produced and a multiplier of Multiplier of 3.0 when the technology is offered without any restriction and with full and unfettered rights, including right to export.
6. The vendor shall submit six monthly reports to the Defence Offsets Management Wing (DOMW).
Analysis including departures if any from previous versions
Implication for OEMs/Tier 1s and IOPs
1) Objective of Defence Offsets
For the first time, the ministry makes a reference to a ‘Defence Offset Policy’
This has been a long standing demand of the Industry. The new policy is expected to announce policy initiatives that align Development of Indigenous Research and Development Effort in A&D, Increase focus on capacity creation for A&D research and lastly to Help create an industrial base that encompasses related industries like Homeland Security, Space and Civil Aerospace
2) Quantum and Scope of Defence Offsets
These provisions will apply to all Capital Acquisitions where the estimated cost of the acquisition proposal is
300 crore or more and where the programme is
1) Buy Global
a. For ‘Buy (Global)’ category procurements, if an Indian firm including a Joint Venture between an Indian Company and its foreign partner is bidding for the proposal, the clause relating to offset obligation will only be applicable if the indigenous content in the product is less than 50 percent. Indigenous content (by value) will be determined on the basis of exchange rates prevailing on the last date for submission of the main technical bid.
2) Buy and Make with Transfer of Technology
The provisions will not apply to programmes under
1) Fast Track Procedure
2) Procurement under Options clause where the original contract did not have Offset obligations
Implications for OEMs
· ‘Buy (Global)’, i.e. outright purchase from foreign/Indian vendor,
Offset Obligation under Buy Global : 30% of the cost of Acquisition
· ‘Buy and Make with Transfer of Technology’, i.e. purchase from foreign vendor followed by Licensed Production
Offset Obligation under Buy Global : 30% of the foreign exchange component of the contracted value
· Applicability of Offsets: The Offset Obligation limits (30%) are generic and may be defined or the Obligation removed altogether (Given reasons of Type of acquisition, strategic importance or urgency) at the time of the consideration of the programme by DAC.
· Applicability on contracts issued under preceding versions of DPP: For procurements undertaken under Options clause where the original contract stipulated Offsets, the original contract DPP and Offset Policy versions will apply. This may be a serious disadvantage for OEMs having Offset Obligations arising from Options clause contracts exercised on programmes where original RFP was under DPP 2006 or DPP 2008
Implications for Indian Industry
§ The Offset Clause for Indian firms participating in Buy Global categorised programmes has to be read in conjunction with the minimum indigenous content as specified and hence in Buy Global programmes in case an Indian vendor is bidding for the project, the minimum indigenous content has to be 50% by value, else the Indian vendor will have to comply with Offset Obligation on the foreign exchange component of the contracted value
3) Avenues for Discharge of Offset Obligations
The DPP 2011 specified 6 major ways to discharge Offsets
1) Procurement of Goods
2) Execution of Export Orders
3) Direct Foreign Investment
4) Procurement of Services
5) Investment in Defence R&D
6) Banking of Offset Credits
These have had ambiguities in the past and there have been a few additions to the same broad structure aimed to reduce such issues:
The new routes for liquidation of Offset obligations are :-
1) Procurement of Goods
2) Execution of Export Orders
3) Foreign Direct Investment (equity investment) for manufacture, maintenance and provision of eligible services
4) Investment in ‘kind’ in terms of
a. TOT to Indian enterprises for manufacture/maintenance of eligible products and services
b. Provision of equipment
c. Provision of equipment/TOT to Government institutions and establishments
5) Technology acquisition by DRDO
6) Banking of Offset Credits
§ Offset Banking is allowed for Direct Purchase and Export of and Investments made after signing of main contract.
§ Pre Approved banked credits will be limited to 50% of the Total Offset Obligation under each procurement contract
§ Banked offset credits are non-transferable except between the main contractor and the tier I sub-contractors within the same procurement contract. These credits will be valid for a period of seven years from the date of acceptance by DOMW (Defence Offset Management Wing)
§ Credits for offset banking will only be provided for contracts entered into or after 1-9-2008 ie for all programmes issued under DPP 2008 or after.
§ For contracts entered into between 1-9-2008 and 31-3-2012, the vendor shall be required to apply for banking offset credits by 31-3-2013.
§ In respect of contracts entered into after 31-3-2012, the vendor will need to apply for banking offset credits within one year of completion of the transaction.
§ In case of surplus offset credits, the vendor can bank these for a period of seven years from the time of recognition and acceptance of these credits by DOMW
Implications for OEMs
§ Rewording or Direct Foreign Investment to Foreign Direct Investment thereby removing ambiguity.
§ Specific change from Indian ‘industries’ to “Joint ventures with Indian Enterprises”
§ Specific change from “Industrial Infrastructure” to Manufacture and/or Maintenance of eligible products and provision of eligible services.
§ This implies offset for equity FDI for companies in the area of Manufacturing, Maintenance (Including MROs) and for provision of Services including ‘Training’, ‘Upgradation and Life Extension’,’ Engineering, Design and Testing’, ‘Software Development’, ‘QA’, ‘MRO’ and R&D services (from government recognised facilities)
§ Establishment of Maintenance organisations aimed at prospective, current or even legacy systems can become a very viable route for Indian firms to become attractive partners to OEMs. Issues linked to FDI in service organisations will need to be clarified.
§ It is also important to note that the services are not limited to only defence products but cover all ‘eligible’ products implying that items like Civil Aerospace MROs etc will also become an offset eligible operations
§ There has been a significant introduction of acceptance of Non Cash Equity for treatment of offsets and its acceptance to generate Offset credits for the OEMs. Non Cash Equity has been split into two versions
a. Non Cash Equity amounting to Transfer of Technology. Conditions governing this include it to be with full documentation, training and consultancy and without any licence fees or encumbrance on manufacture, Sale or Export.
b. Non Cash Equity in the form of provision of equipment for manufacture and maintenance of eligible products and services.
§ Additionally there has been another couple of routes opened up where OEMs can earn offset credit for providing equipment for private enterprises as well as Government Institutions including DRDO . Implication include that Foreign OEMS which cater to maintenance programmes targeted to Legacy systems in India may be able to leverage it as a lucrative model to liquidate offsets
§ Another route that has opened up is for technology acquisition by DRDO in areas of high technology. The DRDO has specified 15 specific Critical Technologies for transfer of which Offset credits may be provided to
o MEMs based sensors, actuators, RF devices, Focal plane arrays.
o Nano technology based sensors and displays.
o Miniature SAR & ISAR technologies.
o Fiber Lasers Technology.
o EM Rail Gun technology.
o Shared and Conformal Apertures.
o High efficiency flexible Solar Cells technology.
o Super Cavitations technology.
o Molecularly Imprinted Polymers.
o Technologies for Hypersonic flights (Propulsion, Aerodynamics and Structures).
o Low Observable Technologies.
o Technologies for generating High Power Lasers.
o High Strength, High-modulus, Carbon Fibers, Mesophase pitch-based fiber, Carbon Fiber Production Facility.
o Pulse power network technologies.
o THZ Technologies.
§ The wording of when Banking will commence is not very clear and in one sense can imply that banking of credits only begins after the signing of the main contract which in a way distorts the issue even more.
§ Limitations on utilisation of Banked credits require additional planning for OEMs.
§ Banked Offset Credits are valid for 7 years beyond which they lapse and hence they now have a defined life term.
§ The role of managing Banked Offset credits rested with the Offset Monitoring Cell in DPP 2011, this has now been replaced by the Defence Offset Management Wing (DOMW)
4) Indian Offset Partner
The new guidelines stipulate that the OEM/Tier I sub-vendor will be free to select IOPs provided they have not been barred from doing business by the MOD.
Furthermore, the agreement between the OEM/vendor/Tier I sub-vendor and IOP shall be subject to laws of India
Implications for OEMs include that some Indian firms which are banned/on the negative watch list for the Ministry of Defence will not be qualifiable as Offset Partners. However this does not preclude other firms which may be banned by other ministries but not by MoD to be IOPs.
This is an interesting sub-clause as it forces any legal dispute arising from non compliance including issues related to product liability to be governed by Laws of India and not by the Laws of the OEM home country or neutral jurisdictions. The Indian laws are in variance with a large number of other legal jurisdictions and hence OEMs will need to incur additional legal coverage thereby increasing product and programme costs.
5) Discharge of Offset Obligations
§ The Government clearly states that the vendor shall be held liable for fulfilment of offset obligations. Any shortfall by the Tier I sub-vendor shall be made good by the main/prime vendor
§ Furthermore, penalty of non performance clearly rests with the prime and not the tier 1 vendors.
Period of Discharge
§ Offsets obligations can be discharged within a time frame that extends beyond the period of main procurement contract by a maximum of two years.
§ Where the period for discharge of offset obligations exceeds the period of the main procurement contract, the vendor will be required to furnish an additional
Performance Bond to Defence
Offset Management Wing in the form of a Bank Guarantee covering the full value of the un-discharged offset obligations falling beyond the period of the main procurement contract. This Performance Bond shall be reduced annually, until full extinction, based on the pro rata value of the discharged offset obligation accepted by the Defence Offsets Management Wing (DOMW). The additional Performance Bond shall be submitted six months prior to expiry of the main Performance-cum-Warranty Bond.
§ For contracts under the US IGIA- FMS route, the vendor will be required to furnish a performance bond equal to 5% of the Offset obligation to be fulfilled in the main contract period. In case of additional time required beyond the period of main contract, an additional performance bond will be required.
§ There are limitations now on how the Offset plan needs to be structured. Direct Procurement, including Export Orders + FDI (Equity) in JVs + FDI (Non Equity)+ Investment through provision of equipment must not be lower than 70% of Total Offset Obligation.
§ This implies that Banking of offset credit + TOT to Government institutions and establishments including DRDO and Critical Technology secured cannot exceed 30% of the Total Offset Obligation of an OEM.
§ In areas of Offset discharge which are a result of ‘Investment in kind’ in terms of provision of equipment, the Government stipulates a minimum buyback at 40%.
Offset Credits for TOT
§ The Value of Offset credit for TOT through non equity route of investment in kind is limited to 10% of the buyback generated (from value add in India) in the period of main contract.
§ The concept of value addition will apply only for direct purchase/export of eligible products. Value Addition will be determined by subtracting (i) value of imported components (i.e.) import content in the product and (ii) any fees/royalty paid.
I. For Micro, Small and Medium Enterprises (MSMEs)
§ In case of Direct Procurement, including Export Orders + FDI(Equity) in JVs + FDI (Non Equity)+ Investment through provision of equipment as well as Investment through TOT (Non Equity), a multiplier of 1.5x will be permitted where MSMEs are Indian Offset Partners as per following parameters:
II. For Technology Acquisition by DRDO
§ In discharge of offset obligations relating to technology acquisition by DRDO, a multiplier of up to 3x will be provided based on the following guidelines:
a. Multiplier of 2x will be applicable when the technology is offered for use by Indian Armed Forces only but without any restriction on the numbers that can be produced.
b. Multiplier of 2.5x will be applicable when the technology is offered for use only in Indian Market but for both military and civil applications and without any restriction on the numbers that can be produced.
c. Multiplier of 3x will be applicable when the technology is offered without any restriction and with full and unfettered rights, including right to export.
Valuation of Offsets
§ The date of discharge of offset obligations for direct purchase or execution of export orders shall be reckoned as per the date of invoice or the date of final payment whichever is later. In case of all other methods for offset discharge, the date of completion of the transaction, based on documentary evidence, shall be reckoned as the date of discharge of offset obligation.
§ The value of the offset components for which offset credits are sought would have to be supported by documentary evidence. Only transactions (Except offset banking) undertaken after signing of the offset contract will be reckoned for discharging offset obligations
Existing position made explicit
Implication includes that the Period of discharge of Offset obligation is equal to Period of Delivery of system under Main Contract + Period of warranty + 2 years. This allows for explicit understanding of this issue which was not well explained earlier.
Implication for OEMs is an increased cost associated with submission of a Bank Guarantee of the full value of undischarged Offset obligation planned for discharge outside the main contract (including warranty) period i.e. for the period of 2 years that the current model allows. This bond will be prorate reduced for credits secured.
The OEM will need to submit this additional bond 6 months prior to expiry of the main Performance-cum-warranty bond.
The OEMs have a clearer understanding of the performance bonds carried during the period of planned execution of contract.
This puts an implicit price on the ‘Critical Technologies’ sought by DRDO as well as limits the usage of DRDO partnership programmes as Offset routes.
However the mode of tracking this buyback is not clearly specified. The Buyback obligation rests with the ‘Vendor’ and so it is not clear if Tier 1s can ensure a buy-back or does the obligation of buy-back rest with the Prime.
This means that OEMs which are trying to explore this non equity route of TOT will need to ensure a much larger proportion of the value add being done in India to ensure a viable Offset plan.
There seems to be some error as a common 1.5x multiple is prescribed for micro, mini and small enterprises
The multiplier for technology to be acquired by DRDO is lucrative however it gets limited by the overall stipulation that limits the use of the DRDO route to <30 obligation.="obligation." of="of" offset="offset" span="span" the="the" total="total">30>
Focus is on the ability of the DRDO to develop technologies and to be able to commercially leverage it.
There are however issues that arise from the fact that as by definition DRDO is the technology incubation entity whereas the DPSUs are the production vehicles, this route may not be as exciting as it leaves the DPSUs out.
This brings in some elements of clarity on the procedural aspects of securing credits.
6) Management of Offsets
§ The Acquisition Wing in the Department of Defence will be responsible for technical and commercial evaluation of offset proposals as well as conclusion of offset contracts.
Defence Offsets Management Wing
§ The Defence Offsets Management Wing (DOMW) under the Department of Defence Production will be responsible for formulation of Defence Offset Guidelines and all matters relating to post contract management. The functions of DOMW include:
a. Formulation of Defence Offset guidelines
b. Monitoring the discharge of offset obligations, including audit and review of progress reports received from vendors;
c. Participation in Technical and Commercial evaluation of offset proposals as members of TOEC and CNC;
d. Implementation of Offset Banking guidelines;
e. Administration of penalties under offset contracts in consultation with Acquisition Wing;
f. Assisting vendors in interfacing with Indian industry; and
g. Other responsibilities assigned under the offset guidelines or entrusted by the Government.
This is a major departure from earlier policy wherein the Acquisition wing has directly taken ownership of the part of the process that is linked to the bid process.
The creation of this new body that acts in both a policy advisory role as well as a monitoring role is central to this overall amendment.
The powers of the DOMW are significant and impactful. However few critical issues remain.
1) Under the new regime, there are potentially two entities that interpret regulation and that can be a cause of disconnect
2) The body which is in charge of implementation of an offset programme only comes into being once the programme has largely been frozen and accepted by the acquisition wing and that causes some issues to crop up.
3) Manning of an agency that is competent enough with adequate depth and quantum of capability is still not addressed.
4) The DOMW continues to face risks arising from frequent shuffle of staff as it is likely to be staffed with service personnel.
5) Who does the DOMW report to is not very well articulated and its position in the overall MoD structure is not very well delineated.
7) Submission of Offset Proposals
§ The new guidelines state that failure on the part of the vendor to comply with the offset guidelines at any stage may result in disqualification of the vendor from any further participation in the tender/contract. It may also result in imposition of penalties indicated in Para 8.13 and render the vendor liable for debarment from participating in future procurement contracts for a period up to five years as indicated in Para 8.14. Failure to submit the undertaking in Annexure-I to Appendix-D shall render the bid nonresponsive and liable to be rejected.
§ Under the revised guidelines, the OEMs will be required to submit Technical and Commercial Offset offers as before but with the exception that the offer would need to explicitly talk about any Transfer of Technology to DRDO in a separate proposal while linking it and presenting it as a part of the main contract as well.
This for the first time limits in some manner the risk carried by an OEM. It also presents the issue of debarment of OEMs with time boundaries.
The proposal format requires for the first time an explicit provision of whether an offset project presented is linked to the main contract in any manner or not.
Additionally, the Offset proposal will require for quantities to be specified.
8) Processing of Offset Proposals
§ The Technical Offset Evaluation Committee (TOEC) will be constituted by the Technical Manager with approval of the Director General (Acquisition). The TOEC will include representatives of the Service Headquarters, Defence Finance, DRDO and DOMW. The Committee may also include experts, as may be deemed necessary, with approval of the Director General (Acquisition).
§ Offset Proposals relating to Para 3.1(f) will be assessed by a Technology Acquisition Committee (TAC) to be constituted by the Defence Research and Development Organization with the approval of Scientific Advisor to Raksha Mantri. The assessment will cover both technical as well as financial parameters, including valuation of technology, and also indicate the timeframe and strategy for utilizing the technology. The TAC will send its recommendations, duly approved by SA to RM, to the Technical Manager within a period of 4-8 weeks of its constitution, for incorporation in the TOEC Report. Guidelines for processing Technology Acquisition proposals are at Annexure-IX to Appendix-D.
§ The Commercial Offset Offer will contain the detailed offer specifying the value of the offset components, with a breakdown of the details, phasing, Indian Offset Partners and banked offset credits proposed to be utilized. The commercial offset offer will be opened along with the main commercial offer after the TOEC report has been accepted by the Director General (Acquisition). The commercial offset offer will have no bearing on determination of the L-1 vendor.
§ CNC Composition to include members of the newly created DOMW
§ All Offset proposals will be processed by the Acquisition Manager and approved by Raksha Mantri, regardless of their value.
Six monthly Reports
§ The vendor shall submit six monthly reports in the format in Annexure-V to the Defence Offsets Management Wing (DOMW). DOMW may conduct an audit by a nominated officer or agency to verify the actual status of implementation.
Assignment of offset credits
§ Offset credits shall be assigned by DOMW after scrutiny of six monthly reports.
Changes in Offset Plan
Re-phasing of offset obligations
§ Limited rephrasing options allowed with the written consent of the Joint Secretary (DOMW) and with the approval of Secretary, Defence Production. However rephrasing has been limited only to the period of discharge of Offset obligation.
Change in IOP or Offset Component
§ Change in IOP allowed under exceptional circumstances with the Prime taking the responsibility for the same. The overall value of offset obligations shall, however, remain unchanged. Any change in the IOP shall be approved by the Secretary (Defence Production).
§ If a vendor fails to fulfil the offset obligation in a particular year in accordance with the annual phasing as agreed in the offset contract, a penalty equivalent to five percent of the unfulfilled offset obligation will be levied on the vendor. The unfulfilled offset value will thereafter be re-phased over the remaining period of the offset contract. The penalty may either be paid by the vendor or recovered from the bank guarantee of the main procurement contract or deducted from the amount payable under the main procurement contract or recovered from the Performance Bond of the offset contract. The overall cap on penalty will be 20 percent of the total offset obligation during the period of the main procurement contract. There will be no cap on penalty for failure to implement offset obligations during the period beyond the main procurement contract. The penalties will be administered by DOMW in consultation with Acquisition Wing, as required.
The new format allows for introduction of specific subject matter experts as members of the TOEC.
The process is now to be controlled by the DG (Acquisition).
Creation of a new committee to assess Technology Acquisition proposals. Interestingly DPSUs are not considered a part of this committee
The process of technology acquisition is now linked to the overall developmental objectives of the DRDO through the SA to the RM
For the first time the technical and commercial offset proposal will require phasing , quantities and whether an offset project is linked to the items being procured under the main contract or not.
Also this explicit mention helps to alleviate fears that an Offset proposal may drive the L1 decision in any way
Expanded powers to audit the status of implementation. However execution in face of crunch of resources appears as a serious issue.
Allows for some flexibility to the OEMs but not allowing rephrasing by OEMs outside the period of discharge ie when they would be attracting penalties is a limitation.
Allows for some flexibility to the OEMs.
Penalties for violation on phasing introduced. Earlier the penalties were only for non-fulfilment in the period of discharge. Now the penalties seem to have been increased with there being penalties for violation on the year-on-year plans of discharge to be submitted by the OEM.
However this penalty has been capped at 20% of the obligation during the period of main contract.
If However an OEM fails to discharge offset obligations in the ensuing period after the period of main contract, the penalties remain uncapped.
This increases the risks to the OEMs and they would have to make larger provisions for costs arising from Risk mitigation on not only on total fulfilment but also on phase wise fulfilment.
Changes in Definition of Eligible Goods and Services for Offsets
New Offset Guidelines 2012
1. Defence Products
• Small arms, mortars, cannons, guns, howitzers, anti tank weapons and their ammunition including fuze.
• Bombs, torpedoes, rockets, missiles, other explosive devices and charges, related equipment and accessories specially designed for military use, equipment specially designed for handling, control, operation, jamming and detection.
• Energetic materials, explosives, propellants and pyrotechnics.
• Tracked and wheeled armoured vehicles, vehicles with ballistic protection designed for military applications, armoured or protective equipment.
• Vessels of war, special naval system, equipment and accessories.
• Aircraft, unmanned airborne vehicles, aero engines and air craft equipment, related equipment specially designed or modified for military use, parachutes and related equipment.
• Electronics and communication equipment specially designed for military use such as electronic counter measure and counter counter measure equipment surveillance and monitoring, data processing and signalling, guidance and navigation equipment, imaging equipment and night vision devices, sensors.
• Specialized equipment for military training or for simulating military scenarios, specially designed simulators for use of armaments and trainers.
• Forgings, castings and other unfinished products which are specially designed for products for military applications and troop comfort equipment.
• Miscellaneous equipment and materials designed for military applications, specially designed environmental test facilities and equipment for the certification, qualification, testing or production of the above products.
• Software specially designed or modified for the development, production or use of above items. This includes software specially designed for modeling, simulation or evaluation of military weapon systems, modeling or simulating military operation scenarios and Command, Communications, Control, Computer and Intelligence (C4I) applications.
• High velocity kinetic energy weapon systems and related equipment.
• Direct energy weapon systems, related or countermeasure equipment, super conductive equipment and specially designed for components and accessories.
2. Products for Internal Security
• Arms and their ammunition including all types of close quarter weapons.
• Protective Equipment for Security personnel including body armour and helmets.
• Vehicles for internal security purposes including armoured vehicles, bullet proof vehicles and mine protected vehicles.
• Riot control equipment and protective as well as riot control vehicles.
• Specialized equipment for surveillance including hand held devices and unmanned aerial vehicles.
• Equipment and devices for night fighting capability including night vision devices.
• Navigational and communications equipment including for secure communications.
• Specialized counter terrorism equipment and gear, assault platforms, detection devices, breaching gear, etc.
• Training aids including simulators and simulation equipment.
3. Civil Aerospace Products
• All types of fixed wing as well as rotary aircraft including their air frames, aero engines, aircraft components and avionics.
• Aircraft design and engineering services.
• Technical publications
• Raw material and semi-finished goods.
• Flying training institutions and technical training institutions (excluding civil infrastructure).
1. Defence Products
(a) Small arms, mortars, cannons, guns, howitzers, anti tank weapons and their ammunition including fuzes.
(b) Bombs, torpedoes, rockets, missiles, other explosive devices and charges, related equipment and accessories specially designed for military use, equipment specially designed for handling, control, operation, jamming and detection.
(c) Energetic materials, explosives, propellants and pyrotechnics.
(d) Tracked and wheeled armoured vehicles, vehicles with ballistic protection designed for military applications, armoured or protective equipment.
(e) Vessels of war, special naval systems, equipment and accessories to include following:
1. Design, manufacture or upgrade of weapons, sensors, armaments, propulsion systems, machinery control systems, navigation equipment/instruments other marine equipment and hull forms of warships, submarines, auxiliaries.
2. Facilities and equipment required for testing, certification, qualification and calibration of hull forms, platform, propulsion and machinery control systems, weapons sensors and related equipment including enhancement of stealth features and EMI/EMC studies for warships, submarines and auxiliaries.
3. Software specially designed, developed and modified for design of all types of warships, submarines and auxiliaries or their hull forms.
4. Setting up of maintenance and repair facility for equipment/weapons and sensors and other marine systems including related technical civil works.
f. Aircraft, unmanned airborne vehicles, aero engines and air craft equipment, related equipment specially designed or modified for military use, parachutes and related equipment.
g. Electronics and communication equipment specially designed for military use such as electronic counter measure and counter counter measure equipment surveillance and monitoring, data processing and signalling, guidance and navigation equipment, imaging equipment and night vision devices, sensors.
h. Specialized equipment for military training or for simulating military scenarios, specially designed simulators for use of armaments and trainers and training aids viz. Simulators, associated equipment, software and computer based training modules.
i. Forgings, castings and other unfinished products which are specially designed for products for military applications and troop comfort equipment.
j. Miscellaneous equipment and materials designed for military applications, specially designed environmental test facilities and equipment for the certification, qualification, testing or production of the above products.
k. Software specially designed or modified for the development, production or use of above items. This includes software specially designed for modelling, simulation or evaluation of military weapon systems, modelling or simulating military operation scenarios and Command, Communications, Control, Computer and Intelligence (C4I) applications.
l. High velocity kinetic energy weapon systems and related equipment.
m. Direct energy weapon systems, related or countermeasure equipment, super conductive equipment and specially designed for components and accessories.
2. Products for Inland/Coastal Security
a) Arms and their ammunition including all types of close quarter weapons.
b) Specialised Protective Equipment for Security personnel including body armour and helmets.
c) Vehicles for internal security purposes including armoured vehicles, bullet proof vehicles and mine protected vehicles.
d) Riot control equipment and protective as well as riot control vehicles.
e) Specialized equipment for surveillance including hand held devices and unmanned aerial vehicles.
f) Equipment and devices for night fighting capability including night vision devices.
g) Navigational and communications equipment including secure communications.
h) Specialized counter terrorism equipment and gear, assault platforms, detection devices, breaching gear etc.
i) Specialised equipment for Harbour Security and Coastal Defence including seabed/maritime surveillance sensor chains, sonars, radars, optical devices, AIS.
j) Vessel Traffic Management Systems (VTMS/VATMS) and appropriate vessels/crafts/boats.
k) Miscellaneous maritime equipment for undertaking investigations, Boarding, Search and Seizure of ships/vessels.
l) Software specially designed, developed and modified for all types of Coastal and Maritime security domain awareness, operations and data exchange.
m) Training Aids viz simulators, associated equipment, software and computer based training modules.
3. Civil Aerospace Products
a) Design, Development, Manufacture and Upgrade of all types of fixed wing and rotary wing aircraft or their airframes, aero engines, avionics, instruments and related components.
b) Composites, forgings and castings for the products.
c) Training Aids viz. Simulators, associated equipment, software and computer based training modules.
d) Guidance and Navigation equipment.
e) Test facilities and equipment required for testing, certification, qualification and calibration of the above products.
f) Software specially designed, developed or modified for the above products.
4. Services (related to eligible products)
a) Maintenance, repair and overhaul.
b) Up gradation/life extension
c) Engineering, design and testing.
d) Software development.
e) Quality assurance.
g) Research and Development services (from government recognised R&D facilities).
The Products have been listed out to include details of products and equipments under Vessels of War, special naval systems, equipments and accessories
Inclusions have been made under training aids viz. Simulators, associated equipment, software and computer based training modules.
The Classification has changed from Internal Security to include coastal security, and now stands as Internal/Coastal Security
The word Specialised has been inserted against protective equipment while keeping the inclusions unchanged.
New Inclusion as part of Coastal Security
New Inclusion as part of Coastal Security
New Inclusion as part of Coastal Security
New Inclusion as part of Coastal Security
Includes detailing out of Simulation Equipment.
The operations of Design, Development, Manufacture and Upgrade have been defined
Training has been reframed to define Training Aids and remove the mention of Flying training institutions and technical training institutions.
Change of Nomenclature