Ind Offset Estimates

Indian defense offset's policy to bring in $10 billion by 2011

Dated 27/7/2006
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India's newly introduced defence offsets policy is likely to bring in $10 billion during the 11th five-year plan period (2007-11), Defence Secretary Shekhar Dutt said Thursday.

India will look for direct offsets in all capital acquisitions of the defence ministry to strengthen the capabilities of its indigenous industry, he said while speaking at a workshop on Implementation of Offsets in Defence organised by the Confederation of Indian Industry (CII) here.

The government recently announced the new policy for capital acquisitions in which the minimum requirement is of 30 percent offsets in all acquisitions where the purchase cost exceeds Rs.3 billion. Nearly 80 percent of all offsets are in the area of aerospace.

The secretary said much depended on the ability of the Indian defence industry to absorb the offset and the export potential generated.

India has a large industrial base and offsets will further enhance its technical and manufacturing potential. They will also help to increase investments in domestic research and development, he maintained.

Offsets provisions will apply to capital acquisitions categorised as outright purchases from a foreign or Indian vendor or purchases followed by licensed production. However, the Defence Acquisition Council can prescribe offset percentages higher than 30 percent, if required.

Pointing out that it will be as much as 40 percent cheaper to manufacture in India under offsets, Dutt said: 'We would like to pursue offsets that will be beneficial to both Indian industry and foreign collaborators.'

The concept and benefits of offsets can also be applied to leverage large purchases by leading Indian companies individually or through consortiums, he said.

'This would strengthen their collective bargaining abilities,' he added.

Offsets will also help foreign collaborators take advantage of India's software industry. There are large software technology hubs in practically all cities of India whereas earlier most software development was centred around Bangalore, Dutt pointed out.

In addition, India has a large reservoir of technically trained manpower developed over the past few decades.

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