The Hindu Business Line : Defence `offset deals' seen at $700 m

The contracts would be for engineering services, including software development, testing and validation, and design of critical structural components and aero engines.

There are a number of Indian companies in all these areas, said Mr Subu D. Subramanian, Senior Vice-President and Director, Satyam Computer Services.

The Indian Defence Procurement Procedures and the Ministry of Civil Aviation stipulate an `offset programme' for all major procurements from foreign firms. This programme mandates foreign sellers such as Boeing, Airbus and Lockheed Martin to spend a certain defined percentage of the contract value in India, sourcing goods and services from Indian companies.

As per current regulations, for all purchases over Rs 300 crore, there will be a requirement of an `offset obligation' to all foreign sellers.

This obligation is indicated in each individual contract and is expected to be a minimum of 30 per cent of the total contract value.

Offset contracts will not be restricted to government-owned companies.

Foreign vendors will have the liberty to select their offset partners, he told Business Line.

According to Mr Subramanian, India plans to purchase over 300 aircraft over 10 years.

Air India, Indian and private Indian civil aviation players have also placed huge orders for aircraft.

In addition, Defence establishments plan to procure over 120 freighter aircraft (F18 types); this is one of the largest Defence contracts globally in recent times, he said. India tops the Defence budget in the Asia-Pacific region, with total imports expected at $15 billion a year for the next few years and expected to grow to $50 billion by 2015.

The global aerospace industry spends around $60 billion on engineering, and India Inc accounts for less than one per cent of this market compared to 12 per cent overall offshoring in engineering services space.

Nasscom has predicted that by 2020, India's aerospace offshore engineering services market has a potential to touch $3 billion.

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