India to get $10-billion offset works from defence deals


Bangalore : The multi-billion dollar defence deals under negotiations are expected to give Indian firms offset works worth around $10 billion (Rs.45,000 crore) over the years, Minister of State for Defence Production M.M. Pallam Raju said here Wednesday.

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“Defence offset projects worth Rs.45,000-crore ($10-billion) are being negotiated, which will benefit India in terms of business and development of defence technology,” said Raju, releasing the KPMG-AMCHAM report on “The Indian Defence Sector: The improving landscape for US business and Indo-US commercial enterprise”.

According to the global consulting firm KPMG, the increasing convergence between Indian and US defence establishments is manifested in signing of major procurement contracts.

These include deals such as 12 P-8I (Poseidon maritime reconnaissance aircraft) worth over $3 billion, ultra-light howitzers worth $647 million, F414-GE-INS6 engines for the Light Combat Aircraft (LCA) worth $650 million, Harpoon anti-ship missiles worth $170 million and six Martin C-130 J super Hercules aircraft for the Indian special forces worth $1 billion.

“The offset provision is a great opportunity to develop long-term partnership in various areas, which can be utilised by the US industry to identify Indian partners and establish a long-term supply chain,” Raju said in his keynote address to the Indian Aerospace and Suppliers’ Conference, organised by KPMG and the American Chamber of Commerce (AMCHAM).

Under the renewed defence procurement policy (DPP), it is mandatory for overseas firms securing Indian defence contracts to outsource 30 percent of the deal to state-run Indian enterprises and private firms as offset works.

“The procurement contracts indicate that the US defence industry players are increasingly looking towards East to establish manufacturing bases,” said Martin W. Philips, KPMG global head of aerospace and defence.

Endorsing Philips’ view, Richard Rekhy, KPMG advisory head, said a business of $10-billion was a big number for the Indian defence industry.

“The benefit to the Indian industry will be in the form of upgrading domestic infrastructure, capacity addition and research development and activities,” Philips noted.

Raju also told the industry representatives that the government was conscious of the benefits of the offset policy and would tweak it to incorporate best global practices.