Foreign companies selling goods worth over Rs 300 crore to government or PSUs would have to source part of their supplies from domestic manufacturers, according to the new draft National Offset Policy (NOP).
According to the draft policy prepared by the Commerce Ministry, minimum value of the offsets obligation would be 30 per cent of the estimated cost of the import, meaning the company will have to procure this percentage from local players to boost domestic manufacturing.
"This was proposed by the Ministry in the draft policy which would be considered the Committee of Secretaries headed by the Cabinet Secretary by the end of this month and then it would be approved by the Union Cabinet," sources said.
The policy is aimed at boosting manufacturing sectors growth. Besides it would help in attracting investments; transfer and acquisition of new technology; acquisition of raw material and assets; improving balance of payment; increasing capacity for R&D; long term supply pacts; and enhancing exports.
Sources said that the policy would be applicable to the central government and state-run firms procurement.
Sectors which will be covered under the NOP include civil aerospace, power, fertiliser, railways and other transportation, ports and shipyards, mining, medical equipment, medicine and telecom.
However sectors including defence, atomic energy and space would not be covered under the policy. Defence sector has a separate policy while atomic energy and space would pursue offsets in their contracts independently.
For smooth operation of the NOP, a 10-member National Offsets Authority (NOA) is also proposed. It would be headed by the Cabinet Secretary and comprises of secretaries of commerce, expenditure, foreign, economic affairs and Director General of Foreign Trade.
Offsets will require any foreign seller of products and services in India to buy part of the material at a pre-determined percentage of the sale value from the Indian manufacturers and suppliers.
In its response and suggestions on the policy, the Department of Economic Affairs has said that offsets could lead to inefficient procurement practices and high costs.
