Companies winning tenders for supplying goods or services to public sector undertakings/government bodies may have to compulsorily source at least 30 per cent of the total contract value domestically.
In an offset transaction, the seller agrees to purchase goods or services of a certain percentage of the total contract value from the buyer (Indian PSUs /Ministries/Government agencies). In such transactions, the buyer's payment is made partially with goods and services instead of money.
According to the draft National Offset Policy, this 30 per cent obligation will be applicable to contracts worth over Rs 500 crore. This Rs 500-crore limit may be reviewed periodically by a new body called the ‘National Offset Authority' (NOA) with approval of the Cabinet, the draft policy says.
Currently, such offset contracts exist for Defence procurements of over Rs 300 crore and the offset obligation is a minimum of 30 per cent of the deal value. But the new policy will cover procurement contracts of all the government departments and PSUs.
Stringent penalty
Significantly, the policy stipulates stringent penalty norms. Defaulting sellers may not only have to cough up a penalty of 10 per cent of the unfulfilled value of the offset obligation, but also be disallowed from participating in future contracts.
The proposed NOA will be headed by the Cabinet Secretary. It will also have Secretaries of various Ministries as its members.
The policy proposes that all the Government agencies intending to make such high value procurements of critical mineral resources and technologies will have to inform the NOA one year in advance.
The norms also specify that the offsets accruing on account of purchases of one Government agency can be utilised by the same or other agencies. The policy insists that offsets should be encouraged chiefly for India's food and energy security besides getting access to high end technologies.
New offset policy is needed because India is emerging as largest importer of arms, nuclear plants, oil and gas and is facing shortage of mineral resources such as coal, potash, oil & gas, fertilisers and high-end technology, Government officials said.