Saturday, February 10, 2007

Bangalore: At the Aero India show in Bangalore, hectic parleys are on between about a hundred Indian companies, large and small with large international defence suppliers. The companies are hoping to be vendors for the international players, who in turn are urgently looking for Indian companies to complete their offset obligations.
“No contract with the Indian armed forces will be considered complete unless it the offset obligations are fully completed,” says Kiran Chadha, joint secretary defence (exports), who is also the chairperson of Defence Offset Facilitation Agency (DOFA), the apex body set up by the government to co-ordinate offsets. DOFA is now an integral part of every defence contract signed by India.
The scale of the offset contracts is mind boggling. Chief of Air Staff Air chief marshal SP Tyagi estimates that the Indian forces will procure equipment worth $80 billion to $100 billion over the next five years. The clause is applicable to all acquisitions where the tender value exceeds Rs 300 crore. In a deviation from its policies in other sectors, the government has decided that defence PSUs will get no priority on the offset deals. They will have to compete for the contracts with private companies. Of course, after years of regulation, the market for defence systems is dominated by public sector companies such as Hindustan Aeronautics, Bharat Electronics (BEL), Bharat Dynamics, Bharat Earth Movers, Mazgaon Docks and Goa Shipyard. Mid-to-small cap companies produce sub-systems for public sector defence companies or smaller, integrated systems for armed forces like Astra Microwave, Dynamatic Technologies, Zen Technologies, Premier Explosives and Avantel Softech.
Most foreign companies such as Lockheed Martin, Boeing Integrated defence systems and British Aerospace, see the PSUs as ready and reliable sources which can be given offset contracts. The hunt for private sector companies is beginning now and many companies have had vendor meets to identify these firms in the past six months.
09/02/07 Cuckoo Paul/Economic Times

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