With the defence offsets expected to generate business in India of about $10 billion over the next five years, the Ministry of Defence (MoD) is bullish on the involvement of private sector in manufacturing of defence equipment.
According to colonel S S Dahiya, PO (CAP), Ministry of Defence, "Around 11 offset contracts have been signed so far in the country aggregating Rs 9,048 crore. Moreover, 45 offset contracts worth Rs 45,000 crore are under different stages of development. Of these, five are in the advanced contract negotiation stage." By 2012, defence offset contracts are likely to be $6 billion and will be signed in verticals like manufacturing, infrastructure, engineering, software and simulators.
Elaborating on the offsets trade in defence sector during a seminar on 'Emerging Opportunities in the Defence Sector', Dahiya said, "Offsets are counter-trade obligations imposed by an importing country, in this case India, upon the original equipment manufacturer (OEM) that mandate the transfer of critical technologies and production of components. India obligates that offset related investments be strictly limited to defence. The foreign supplier has to invest back or purchase from India 30 per cent of the value of the deal currently."
Of the $10 billion worth defence offsets expected, some would be in the form of tangible products and service exports while some in the form of investments and technology transfers in India.
Some benefit would also be received through multipliers, including banking. Genuine export business is estimated to be $1 to $1.5 billion a year.
