Offsets value for Indian Defence Industry are astronomical, which means that each foreign vendor will need multiple Indian Partners to meet offset obligations. The MOD estimates that offsets will generate approx Rs 40,000 crores (US $10 billion) worth of business for Indian Defence Industry over the next five years. Just one forthcoming purchase, the acquisition of 126 Multi-Role Combat Aircraft (MRCA) for about Rs 42,000 crores, will generate offsets worth Rs 12,600 crores.
Other purchases in the pipeline include artillery guns for over Rs 10,000 crores, 317 light utility helicopters for Rs 4000 crores, 12 VIP transportation helicopters for Rs 1000 crores, mid-life upgrades for 52 Mirage-2000 fighters for Rs 8000 crores, and 12 heavy lift helicopters for Rs 2500 crores. The Indian Navy is shopping for up to 30 Long Range Maritime Patrol (LRMP) aircraft, and 16 Anti-Submarine Warfare (ASW) helicopters to replace its antiquated Sea King fleet.
To meet offsets liabilities that will arise from these purchases, prospective vendors signed a large number of MoUs with Indian companies during the Aero India 2007, and later. Defexpo 2008, now provides opportunities for negotiations to translate those MoUs into action plans. DPSUs are likely to be major beneficiaries of offsets business, but foreign producers are however keen to partner with private sector companies, which may be more flexible and responsive.
Important amendments to the offsets policy are awaited. Vendors are being assured that the MOD is likely permit “offsets banking”. This would allow vendors to go ahead with setting up partnerships with Indian companies, with the assurance that offsets generated would be credited towards future defence contracts.
To meet offsets liabilities that will arise from these purchases, prospective vendors signed a large number of MoUs with Indian companies during the Aero India 2007, and later. Defexpo 2008, now provides opportunities for negotiations to translate those MoUs into action plans. DPSUs are likely to be major beneficiaries of offsets business, but foreign producers are however keen to partner with private sector companies, which may be more flexible and responsive.
Important amendments to the offsets policy are awaited. Vendors are being assured that the MOD is likely permit “offsets banking”. This would allow vendors to go ahead with setting up partnerships with Indian companies, with the assurance that offsets generated would be credited towards future defence contracts.
The MOD may also allow foreign vendors to credit TTs to Indian manufacturers as offsets.
The MOD is still to establish a fully-equipped department which can handle the enormous workload that will arise from offsets. Presently a small cell, Defence Offsets Facilitation Agency (DOFA), under a Joint Secretary, my find it difficult to handle offset-related workload.
DOFA (MOD) could be expanded into a multiple-discipline Defence Offsets Management Agency (DOMA) or whatever name, which will be equipped with the policy managers, legal personnel, accountants, and the technology and production specialists that will be required for handling the entire gamut of offsets. This may happen progressively.
The MOD is still to establish a fully-equipped department which can handle the enormous workload that will arise from offsets. Presently a small cell, Defence Offsets Facilitation Agency (DOFA), under a Joint Secretary, my find it difficult to handle offset-related workload.
DOFA (MOD) could be expanded into a multiple-discipline Defence Offsets Management Agency (DOMA) or whatever name, which will be equipped with the policy managers, legal personnel, accountants, and the technology and production specialists that will be required for handling the entire gamut of offsets. This may happen progressively.
The evolution of offsets policy and the constitution of DOMA are being watched keenly by foreign vendors, as well as by private Indian Defence Industry. The Private Sector has lobbied actively for a role in such an Agency; which the MOD has not accepted. But with so much money at stake, global defence industry has its eyes focused on the MOD, waiting for the policy announcements that could open the floodgates for offsets.
Brigadier (Retired) Sukhwindar Singh
http://www.indiandefenceindustry.com/
Credit: Business Standard, 16 Feb 2008, Preview Defexpo 2008.
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