Defense sector to gain from $30 billion inflow

New Delhi: The Indian defense industry will benefit from an inflow of $30 billion as offsets through military procurements from abroad over the next decade, according to a report submitted to parliament Wednesday.

In a deposition before the Parliamentary Standing Committee, the defense ministry said that the projection, amounting to INR 1.5 lakh crore, was made in view of the $100 billion that India is expected to spend on defense procurements in the next 10 years.

The deposition was part of a report on budgetary demands for grants for 2011-12, submitted by the committee, headed by Congress MP Satpal Maharaj, to the Lok Sabha (Indian Lower House of Parliament).

Offsets is a clause in the defense ministry’s procurement policy under which any equipment import worth more than Rs.300 crore will involve plowing back of 30 percent of the contract amount back in Indian defense, homeland security and aviation industry. The policy is in existence since 2005 and has been refined over the years now.

“As far as offsets are concerned, it is true that our procurements in the next five to 10 years would be more that $100 billion and 30 percent of that is $30 billion, which is INR 1.5 lakh crore,” a defense ministry official told the committee.

The official also went on to explain that the offsets clause involved either in a direct purchase by foreign arms companies from Indian industry, or technology transfers, or joint ventures with domestic firms in the defense, homeland security and aviation sectors.

The official, who has not been identified by the committee in its report, gave the example of the recent Indo-US deal for supply of 10 Boeing C-17s to the Indian Air Force (IAF), under which India’s premier military research agency Defence Research Development Organization (DRDO) will get high altitude engine test facility and a wind tunnel facility, both firsts in the country.