ET has gathered that high-level meetings are being called by the Cabinet Secretary to build consensus among stakeholder ministries on the issue.
Defense offset guidelines apply in case of defense contracts over ₹ 2,000 crore and mandate certain contractual obligations for the vendor / manufacturer aimed at boosting domestic defense industry and related infrastructure.
The current defense offset guidelines mandate that vendors, mostly foreign entities, must spend at least 30% of contract value in ‘avenues’ such as procurement of components domestically, transfer of technology, R&D and so on. Skilling and creating related infrastructure have so far not been identified as a defense offset ‘avenue’ in the defense ministry’s offset guidelines. The issue is on the table at the highest level in the government now.
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While the Ministry of Skill Development & Entrepreneurship (MSDE) has been seeking inclusion of skilling as a defense offset avenue since 2015 and a strong pitch was made by then minister Rajiv Pratap Rudy, the proposal could not move through with the defense ministry.
MSDE wants to include infrastructure for skill development including training of trainers, provision of teaching aids, preparation of curriculum material etc as a defense offset as it feels that is the only way to build a specialized workforce for a robust domestic defense manufacturing industry.
The MSDE feels that adequate level of skilling and training can only happen through institutional mechanisms which are formalised in contracts.
“This is not like any other training. Most defense manufacturing set-ups require intensive and specialized training, sometimes for two years. Hence, the proposal. We hope some way can be found in the existing guidelines to facilitate training in an institutional manner, with tie ups with ITIs etc, “an officer privy to the discussions told ET on condition of anonymity.
The defense ministry has held that it is open to inclusion of skilling as a defense offset avenue in some format but only in new contracts. Applying it to existing contracts would not be tenable as it would be violative of the agreement, a senior official privy to inter ministerial discussions told ET.
The defense ministry feels that inclusion of skilling as an offset avenue was more relevant when India was relying heavily on foreign manufacturers for its defense-related requirements unlike the domestic industry focus now.
“So, while it was a relevant question even 1-2 years back, that is not so much the case now with India moving towards domestic manufacturing. Creating domestic skilled manpower for strategic manufacturing is hardly a hurdle now with more domestic manufacturers in the fray “, the official pointed out.