An OEM Perspective On Legal Issues Under Offset Manufacturing Arrangements

Introduction

Defence offsets are a significant opportunity for India to provide a growth impetus to its manufacturing sector. The partial liberalization of FDI caps and simplification of the industrial licensing process are some of the steps which have been taken to inspire investor confidence. These steps are also intended to encourage OEMs to engage in more meaningful partnerships with the Indian industry and not merely use it for low end manufacturing tasks.

These recent initiatives are representative first steps and should be viewed positively. However, from a OEMs perspective, entering into a manufacturing arrangement which may require a transfer of technology poses significant legal and commercial risks. Through this article, we have analysed a few options available to OEMs to discharge their offset obligations and the legal risks which they may incur under each of them.