Bangalore, Apr 16 With Indian Aerospace and Defence budget expected to touch USD 100 billion mark in the next 10 years, an offset clause warranting foreign defence vendors to source 30 to 50 per cent of contract value within India, is expected to fetch several billion dollars worth of business for local industry.
The Indian offset policy states that any defence contract worth over Rs 3,000 million that India enters into with a foreign vendor will have an industrial offset liability to the extent of 30 to 50 per cent, which presents a huge opportunity for India, said Bejoy George, Vice President, Global Sales, QuEST.
QuEST is a provider of outsourced engineering services and manufacturing.
“The foreign vendor would therefore have to source his equipment or services from India, which is 30 to 50 percent of the contract value, which means that foreign vendors would now have to look for Indian firms to partner with them to cater to this offset obligation,” he said.
“This spells business of around one billion USD annually in three to four years, up from USD 150 million currently”, Bejoy said.
The Indian aerospace and defence buying budget is expected to be USD 100 billion in next 10 years – this indicates an offset value of USD 30 to 50 billion (depending on the offset percentange applicable to each order) coming into India, Bejoy said.
India’s offset clause in terms of the tender for 126 MMRCA (medium multi-role combat aircraft) states that 50 per cent of this contract value should be invested by the supplier in the country.
This again would mean a business opportunity worth USD five to six billion over a period of 7 to 10 years, starting 2012-2013, he said.
Also the long-range maritime reconnaissance (LRMR) patrol aircraft order would be worth around USD two billion, and the offset clauses would generate about USD 700 to 800 million of business to Indian firms, Bejoy said, outlining the huge potential here. Another military aircraft order, that is expected to be placed, is for high altitude utility helicopters worth around USD 500 to 700 million.
Regarding civilian offset clause, Airbus obligations, due to sale of aircraft to Indian Airlines a couple of years ago, was expected to be to the tune of around USD 800 million.
Also, the Boeing obligation due to the sale to the erstwhile Air India (Now Indian) was expected to be around USD 2.2 billion over a period of five to seven years.
“Hence there is a definite visibility of above USD 10 billion due to military aircraft orders and civilian aircraft orders for India, over the next 7 to 1O years”, he said.
The aerospace products and services which include aerospace application software, embedded systems and hardware is around USD 150 million annually as of now.
India has the opportunity to reach at least the USD one billion annually in a span of three to five years, he said.
“This growth is in line with overall engineering services business being outsourced to Indian firms; during 2004-2005, between USD 1.2 billion and USD 1.8 billion worth of engineering services were offshored to India and this figure is expected to reach between USD 45 billion and USD 65 billion by 2020”, he said quoting Nasscom-Booze Allen Hamilton report on engineering services outsourcing. PTI