Offset requirements in India major hurdle in defence trade: Ex-Pentagon official

Offset requirements in India pose a major challenge to the defence trade with the US, a former top Pentagon official told lawmakers.

"India has enormous opportunities but also enormous challenges. We have never been able to get the overarching security agreements with India that we would hope," Ellen Lord, who previously served as the Under Secretary of Defense for Acquisition and Sustainment (A&S), told members of the House Armed Services Committee.

"We have challenges with things like the S-400 being on contract and so forth. Additionally, the challenge of doing business, I can tell you in India is enormous because of offset requirements there to be able to provide a local business," Lord said.

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The United States is in talks with India on several multi-billion key defence sales, including the guardian drones. Over the past decade, the volume of defence trade between the two countries has increased from almost zero to $18 billion.

Major American companies like Boeing, Lockheed Martin and General Atomics are eyeing the Indian market now, which is projected to grow exponentially over the next one decade.

"So, enormous potential, but I would say the opportunity and the challenge is to work with the Indian government to streamline policies and procedures, make them consistent so that it is a pretty predictable venue for US business and government to invest in,” Lord said responding to a question from Senator Mark Kelley, who recently returned from a trip to India.

"From our recent discussions, I believe there is a willingness to strengthen the US-India security and industry partnerships. What thoughts do you have on how we can accomplish that? And do you agree this will also benefit US strategic interests at a time when Russia is looking to shore up their own ties with India,” he asked.

"So, this is an opportunity for us to build some ties through the sale of some of our military equipment, which I'd like to see," Kelley said.

Senator Kirsten Gillibrand, who just returned from a trip to India and Nepal, said both countries would love to acquire US-produced helicopters and other weaponry.

"The challenge is that it just takes too long. It is so cumbersome to create any acquisition fluidity with these countries that it's easier to buy from Russia or not in those cases but China," she said.

"I think we have to understand that our cumbersome nature in acquisitions is highly problematic from the way we project power worldwide, but also so that our warfighters can have the most lethal and most effective technology possible," Gillibrand said.

Lord conceded that this delay is because of the bureaucracy in the Pentagon and the State Department.

"We have a very risk-averse workforce that is extremely concerned about media attention or congressional hearings, pointing out when things didn't go well. This is leading to a group that does not want to do anything other than what's there's precedent for before. So, I think we need to encourage and train to use things," Lord said.

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