The Ministry of Defence today called on the private sector to take advantage of its Offset Policy which will throw up a Rs 40,000 crore opportunity in the next five years to manufaturers and service providers.

“Our anticipation is that the Offset opportunity will grow to Rs 40,000 crore (about USD 10 bn) in the next five years. This offers a tremendous opportunity (for the private sector),” Minister of State for Defence M. M. Pallam Raju told a press conference here.

The Defence Offset Policy stipulates that foreign contractors catering to the Armed Forces source systems and components from local vendors for at least 30 per cent of the value of orders of more than Rs 300 crore.

For a multi-role combat aircraft, the Offset value is 50 per cent, Mr. Raju said.

Most global aerospace industries have started looking towards India as a hub for development of technology, he said, adding the primary driver for this outsourcing of Aerospace Engineering and Manufacturing was the Offset Policy.

He said the value of the country’s Offshore Aerospace Engineering stood at around USD 700 to 800 million, he said, adding this will grow to USD 3 bn by 2020. The value would rise to 12 bn if manufacturing was included.

Earlier, Speaking at a CII-sponsored ‘Biz Bridge’ seminar on ‘The Emerging Landscape in Industry-Defence Collaboration,’ Mr. Raju said that till date, Rs 18,000 worth of contracts have been signed under the Offset provision in the Indian Defence Procurement Procedure (DPP) 2008.

The share of Engineering services and design was about 18 per cent and had lot of scope to rise further, he said, adding companies in all segments of the Aerospace and Defence industry must strengthen their ability to increase productivity to meet customer demands as well as economic and regulatory requirements.

India will be a major spender on arms and platforms in the coming years with the anticipated expenditure of about USD 30 billion in the 11th plan, he said.

Pointing out that the country was fast emerging as a manufacturing nerve centre for companies from all over the world, he said several foreign partners want to leverage India’s proven skills in product designing, assured quality and value addition.

Admitting that anomalies in the defence procurement policy deterred private investors from entering the area, Mr. Raju said his ministry was aware of the concerns of the industry and would address the issues.

“Our objective is to develop a strong, vibrant modern and advanced defence production industry in the country within the shortest possible time,” he said.

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