Defence offsets, a catalyst for defence manufacturing

Speaking at a CII interactive session on defence offsets, the Union Defence Minister stressed on need for an effective implementation of existing policies in compressed procurement time frames and also assured of resolving issues pertaining to selection of partner and lack of proper grievance redressal platform in the Indian Defence sector.

By Sai Nikesh D 

The Government of India’s pitch for domestic defence manufacturing under Make in India policy, in the recently-held defence show, seems to have placed proceedings on pace.

According a Confederation of Indian Industry (CII) release, the Union Indian Defence Minister Manohar Parrikar on Thursday participated in a CII-organised interaction session to discuss defence offsets of the Indian defence sector.

Speaking at the meet, the Union Minister said, “The defence offsets are the key to boost the defence manufacturing and the defence offsets act as catalyst to kick-start Defence Manufacturing.”

The session that was attended by over 300 CEOs/MDS and top ranking officials of various Indian and foreign companies, also stood as a platform for key defence deals.

As a part of the session, the CII and Aerospace Industry entered into MoU for providing range of services for new entrants, particularly for the ones under small scale enterprises.

Besides this, Kalyani Group, a traditional defence supplier to Indian Defence sector, also signed a joint venture with one of the major Indian manufacturer of explosives Premier explosives Ltd, for manufacturing of High Energy propellants, Rocket motors and selected grade of ammunition that is currently being imported.

According to the latest reports, the Kalyani Group is also set to enter into a another joint venture with Israel’s Rafael Advanced Defense Systems, marking the first joint venture after the NDA government increased FDI in defence to from 26% to 49%.

The joint venture that goes in line with the ‘Make in India’ policy is intended at manufacturing missile, remote weapon systems and advanced armour solutions.

Addressing the session, Parrikar further said that this interactive session on defence offsets has thrown light on various issues like time line, lack of flexibility of selecting a partner and of no proper grievance redressal platform, which he said would be resolved soon.

The Defence Minister also stressed on need for an effective implementation of existing policies and procedures in the   compressed procurement time frames.

Meanwhile the Chairman of CII National Committee on Defence Baba N Kalyani informed that, in India, the defence offsets are one of the lowest in the world at 30% of the contract value and said that in the present context, for India and any other country in that case, defence offsets are the means to kick-start defence manufacturing.

He further suggested that the offset banking is a good idea and it is very much needed to engage with foreign Original Equipment Manufacturers (OEMs) in advance.

While mentioning the case of Indian companies becoming single source suppliers for the foreign OEMs, Phil Shaw, Co-Chairman, CII Defence International Cooperation Sub-committee, called for a win-win situation in defence offsets between the buyer and seller.

Meanwhile Chandrajit Banerjee, Director General CII, hoped that the private sector companies would graduate from Tier 4 and Tier3 levels to Tier 2 & Tier 1 levels, where the companies will be direct suppliers to the OEMs.

He expressed hope that the Indian private companies, in this regard, would contribute to the global supply chain and act as the System Integrators in keeping defence systems more connected in the future and also assured the Confederation’s support to the Government of India’s Make in Policy.

On a whole, the CII interactive session created a larger scope for the defence industry to gear up for indigenous manufacturing in line with the Make in India policy.

This article was published in The Dollar Business  on February 20, 2015.

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