Offsets Demystified- Credit- Aviotech
(Posted by Neelam Mathews)
An excellent and thorough study done by Aviotech (+91-124-4982850 )
Summary
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).
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New Policy
Provisions/Clause
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Analysis including
departures if any from previous versions
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Implication for
OEMs/Tier 1s and IOPs
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1)
Objective of Defence Offsets
|
For the
first time, the ministry makes a reference to a ‘Defence Offset Policy’
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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
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2)
Quantum and Scope of Defence Offsets
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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
categorized under
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
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Implications for OEMs
Programme Coverage
·
‘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
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3)
Avenues for Discharge of Offset Obligations
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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
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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)
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4)
Indian Offset Partner
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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
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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.
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5)
Discharge of Offset Obligations
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Vendor Responsibility
§
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.
Performance
Bond
§
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.
Mandatory
Offsets
§
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.
Value
Addition
§
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.
Multipliers
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
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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">
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.
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6)
Management of Offsets
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Acquisition
Wing
§
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.
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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.
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7)
Submission of Offset Proposals
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§
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.
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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.
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8)
Processing of Offset Proposals
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Technical
Evaluation
§
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).
Technology
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.
Commercial
Acquisition
§
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
Approval
Authority
§
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).
Penalties
§
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.
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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.
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Changes in
Definition of Eligible Goods and Services for Offsets
|
DPP 2011
|
New Offset Guidelines
2012
|
Changes
|
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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).
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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.
f)
Training.
g)
Research and Development services (from government
recognised R&D facilities).
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No Change
No Change
No Change
No Change
The Products have been listed out
to include details of products and equipments under Vessels of War, special
naval systems, equipments and accessories
No Change
No Change
Inclusions have been made under training aids viz.
Simulators, associated equipment, software and computer based training
modules.
No Change
No Change
No Change
No Change
No Change
The Classification has changed
from Internal Security to include coastal security, and now stands as
Internal/Coastal Security
No Change
The word Specialised has been
inserted against protective equipment while keeping the inclusions unchanged.
No Change
No Change
No Change
No Change
No Change
No Change
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
Removed
Removed
Removed
New Inclusion
Training has been reframed to
define Training Aids and remove the mention of Flying
training institutions and technical training institutions.
New Inclusion
New Inclusion
New Inclusion
Change of Nomenclature
New Inclusion
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