BWI: Indian Defense Offset Policy Norms Eased: A Measure to Attract Foreign Players and Incentivize Domestic Private Firms and MSMEs, notes Frost & Sullivan’s Market Insight

Press release from Business Wire India
Source: Frost & Sullivan
Tuesday, May 08, 2012 01:20 PM IST (07:50 AM GMT)
Editors: General: Consumer interest; Business: Accounting & management consultancy services, Business services, Defence & security
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Indian Defense Offset Policy Norms Eased: A Measure to Attract Foreign Players and Incentivize Domestic Private Firms and MSMEs, notes Frost & Sullivan's Market Insight


Mumbai, Maharashtra, India, Tuesday, May 08, 2012 -- (Business Wire India) -- In view of the increasing Indian defense expenditure and offsets that are expected to be generated over the next decade; the Indian defense ministry has revised its defense offset norms to increase the interest of foreign companies in India through Joint Ventures (JVs) and formation of an interest base for developing indigenous programs.

Over the last five years, the Indian defense ministry has been spending aggressively towards upgrading and modernizing its assets with more technologically advanced alternatives. However, 70 percent of India's procurement needs are still met by foreign imports rather than by domestic production. The easing offset norms may help in reversing this ratio and promote the growth of Indian domestic players. Indian companies are gearing up to utilize this opportunity and to give a boost to the indigenous effort. The revised offset norms are expected to create a win-win situation for all the major stakeholders in the offsets program, that is, the Government, original equipment manufacturers and local industry.

The Indian private sector has relatively less proliferation in the Indian Defense market compared to the public sector firms. These recent changes in the defense offsets will encourage development of the Indian private, small and medium enterprises in the procurement of defense equipment and will help these firms accelerate their specific business units. Majority of the offset opportunity in India lies in Engineering Service Outsourcing (ESO), Maintenance, Repair and Overhaul (MRO), Enterprise Resource Planning (ERP), Information Technology, Control Systems, Research and Development.

The revised offset policy has three stated objectives aimed at leveraging capital acquisitions for the development of the Indian defense industry:

-- Fostering development of internationally competitive enterprises
-- Encouraging development of synergistic sectors like civil aerospace and internal security
-- Augmenting capacity for Research, Design and Development related to defense products and services

Some of the salient features of the revised Defense Offset Policy are:

-- OEMs / vendors are to be provided with an incentive to transfer specified technologies to the Defense Research and Development Organization (DRDO)
-- Extending the validity of banked offset credits from two to seven years
-- Recognizing Transfer of Technology (ToT) as eligible for discharge of offset obligations
-- Multiple sub-vendors incur offset liabilities; the sub-vendors can individually discharge their own liabilities, but the main vendor shall be responsible for ensuring that offsets are discharged in full
-- Discharge of Offset obligations by a foreign vendor has been extended by two years. Revised offset guidelines provide an incentive to SMEs by allowing foreign vendors to select micro, small and medium enterprises (MSMEs) as their offset partners by introducing a multiplier of 1.5 for all offsets discharged through MSMEs. This implies that by sourcing $1 million work from Indian MSMEs, a foreign vendor will be able to discharge offset liabilities worth $1.5 million.

If you are interested in receiving the complete Market Insight on the Indian Defense Offset Policy or past Frost & Sullivan Market Insights on the recent announcements made during the Union Budget 2012-13, send an e-mail to Ravinder Kaur / Priya George, Corporate Communications, at ravinder.kaur@frost.com / priyag@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country. Upon receipt of the above information, the Market Insight will be sent to you via e-mail.

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CONTACT DETAILS
Ravinder Kaur, Corporate Communications - South Asia, Frost & Sullivan, +91 9940141714/ +91 (44) 66814080, ravinder.kaur@frost.com
Priya George, Corporate Communications - South Asia, Frost & Sullivan, +91 98403 55432/ +91 (44) 66814456, priyag@frost.com
Tanu Chopra - Middle East and North Africa, Frost & Sullivan, +91 (22) 66072037, tanu.chopra@frost.com
Deepshri Iyer - Middle East and North Africa, Frost & Sullivan, +91 (22) 66072003, deepshrii@frost.com
Nimisha Iyer, Corporate Communications - South Asia, Middle East and North Africa, Frost & Sullivan, +91 9820050519/ +91 (22) 66072004, niyer@frost.com

KEYWORDS
CONSUMER, CONSULTANCY SERVICES, BUSINESS SERVICES, DEFENCE

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