IT Ministry wants electronics to be part of Defence offset policy

The Department of Electronics and Information Technology (DeitY) wants the Ministry of Defence to expand the scope of its offset policy for boosting electronics manufacturing in India.

Keeping in line with Prime Minister Narendra Modi’s ‘Make in India’ and ‘Digital India’ campaigns, the DeitY wants 10-15 per cent of the Defence offset requirements to be met through investment in the country’s electronics sector.

Offset obligations require Defence contractors to source the equivalent of 30 per cent of the foreign exchange value of the contract from Indian suppliers. Currently, the offset obligation is rarely met through any investment in the electronics sector.

“Electronics constitute a major component of Defence procurement…the DeitY had formulated a proposal wherein it has been broadly envisaged that in case of procurement of electronic items, 10-15 per cent of the procurement price should be earmarked for electronics products/components that go into manufacture of that item,” DeitY said in an internal note, seen by

A senior government official said that currently, most of the contractors are happy to meet offset obligations through low-end sourcing.

“What we are trying to say is that if you are buying electronics, part of the offset obligations should be met through electronics,” the official said. “In case domestic electronic products for the purpose are not available, the supplier must undertake to invest in manufacturing in India to meet the offset obligations as above,” the DeitY said.

The move, when implemented, will enable smaller electronics component manufacturers to participate in contracts for supplies to the armed forces.

‘Make in India’ is an international marketing campaign slogan launched by the Prime Minister on September 25 to attract businesses from across the world to invest and manufacture in India. Under the Digital India Programme, the aim is to achieve net zero import of electronic items by 2020.’

In line with this vision, a draft policy has been formulated to provide a set of special incentives for projects that involve investments of over $1 billion.