Article Posted on : - Jan 06, 2010

India would sign offset contracts worth Rs 40,000 crore by 2012, says CII.

NEW DELHI (PTI): With India set to go in for large-scale defence purchases, the Confederation of Indian Industry (CII) expects offsets contracts worth Rs 40,000 crore to be signed by 2012 would help in expanding and enhancing the defence industrial base in the country.

Offsets would leverage purchasing power and build up the homespun defence industrial base, said a CII statement quoting a survey conducted by it.

“It is estimated that offsets contracts worth Rs 40,000 crore would be signed till the year 2012,” it said.

The offsets clause in the Defence Procurement Procedures mandates that 30 per cent of worth of any deal over Rs 300 crore should be invested back in the Indian defence sector by foreign vendors.

The Indian defence offsets policy was formulated in 2005 as part of the Defence Procurement Policy and was revised twice thereafter.

The study said that between 2006 and 2008, offset contracts worth Rs 8,000 crore have been signed of which 94 per cent were for aero systems and six per cent were for land systems.

In the last couple of years, India has signed various deals including two deals worth over Rs 12,000 crore with American companies for procuring eight P-8I long range maritime reconnaissance aircraft and six C-130J Super Hercules transport aircraft.

The CII survey observed that the implementation of offsets is expected to result in expanding and enhancing the manufacturing infrastructure and technical knowledge for weapon systems required by the defence services.

Noting that industrial participation in the offsets programme was spread across Defence Public Sector Undertakings and private sector, the survey said “the benefits of offsets accrue to both DPSUs as well as to private Indian industry engaged in the manufacture of defence systems and equipments.”

According to the survey, the manufacturing sector accounted for the lion’s share of the offsets with 35 per cent, followed by infrastructure with 23 per cent share.

Engineering and software sectors have a share of 15 per cent each and the simulator segment accounts for 12 per cent.

With Indian defence forces undergoing massive modernisation programme, several big-ticket items are slated to be ordered including the over Rs 42,000 crore 126 multi-role combat aircraft deal, several types of artillery guns and tanks, naval ships and submarines.

India has spent Rs 1,77,000 crore on defence purchases in the period between 2005 and 2009 and has spent over Rs 2.3 lakh crore on acquisitions after the Kargil war in 1999.