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The compulsory offsets or spin-offs from large defence purchases have generated benefits worth Rs 18,000 crore to domestic industry. Offset contracts worth another Rs 40,000 crore are being negotiated, Dr M.M. Pallam Raju, Minister of State for Defence, said on Friday.
A huge inflow was coming in the form of defence offsets for the industry, he said at the second MSME Defexpo 2012 co-sponsored by the MoD and the National Small Industries Corporation. With large national players entering the scene, original equipment makers and MNCs were overcoming an initial apprehension that India may not have the capacity to fulfill the offset obligations.
“I think the confidence in the ecosystem is increasing. We are trying to ensure the offset policy takes off and more manufacturing happens, we are also tweaking the [Defence Production] policy to ensure greater industry participation,” Dr Raju said on the sidelines of the three-day event. “We have given out 178 licences to the private sector since the defence sector opened up in 2001.”
The MoD wanted to increase indigenous defence products from the present 30 per cent.
The Ministry for Micro, Small and Medium Enterprises also wanted weightage to smaller units in defence supplies. The scope of DPP 2006 was constantly being widened. “We will be coming out with a fresh set of recommendations,” he said.
MSMEs, with 26 million units, 59 million employees, 45 per cent share in manufacturing output and 40 per cent share of exports, played a key role in the country's economy. They were also vital for improving the indigenisation of defence supplies.
“The Ministry is in the process of putting in place certain policy measures to bolster the industry strengths through appropriate partnerships,” Dr Raju said.
This included an innovation or R&D fund scheme for MSMEs which the Planning Commission proposed to implement during the 12th Plan period. Manufacturing was the mainstay of offsets while services and the civil sector and homeland security also had a rising share.
The Secretary, Ministry of MSME, Mr R.K. Mathur, said, “We hope that with the tweaking of the offsets policy there will be larger incentive for foreign suppliers to provide more incentives, opportunities to MSMEs. Spares can also be sourced from them. There are discussions on outsourcing whatever the three Services are doing in terms of in-house work, maintenance, workshops, and base repair depots.” The two ministries should work together for it, he said.
The MSME Minister, Mr Virbhadra Singh, was present.
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