Com Min to soon seek Cabinet nod on national offset policy

Commerce and Industry Ministry would soon seek Cabinet's approval to roll out a national offset policy that proposes to make it mandatory for foreign firms source part of their government or PSU contracts from domestic manufacturers.

The draft policy proposes that foreign firms selling goods worth over Rs 300 crore to the government or PSUs will have to source part of their supplies from domestic manufacturers. "The draft policy was discussed comprehensively in the Committee of Secretaries meeting.

The Commerce Ministry has addressed issues being raised by some concerned ministries. "Soon, it would send the draft national offset policy (NoP) for Cabinet's approval," a senior government official told Media. NoP mainly aims at boosting growth in the manufacturing sector.

It will also help attract investments; acquisition of new technology, raw material and assets; improve balance of payment; increase R&D capacity and enhance exports.

According to the draft policy prepared by the Commerce Ministry, minimum value of the offsets obligation would be 30 percent of the estimated cost of import, which means that the company will have to procure this percentage from local players as the government aims to boost domestic manufacturing. Sources said the policy would be applicable to procurement by central government as well as state-run firms.

Sectors covered under the NoP include civil aerospace, power, fertiliser, railways and other transportation, ports and shipyards, mining, medical equipment, medicine and telecom.

However, sectors such as defence, atomic energy and space will not be covered under the policy. Defence sector has a separate policy, while atomic energy and space would pursue offsets in their contracts independently.

As part of 'Make in India' campaign, the government is taking several steps to boost growth of manufacturing and create jobs. Manufacturing output, which constitutes over 75 percent to the index of industrial production (IIP) or factory output, grew by 1.7 percent in April-January period as compared to a contraction of 0.3 percent in the year-ago period.