vibrant gujarat summit profile on defence offset
TRANSCRIPT
GUJARAT: EMERGING BASE FOR INDIGENIZATION OF
THE INDIAN DEFENCE INDUSTRYDEFENCE OFFSET SECTOR PROFILE
1
Table of Contents
I di P f d I D i i1. India–Preferred Investment Destination
2. Defence Spending & Offsets : Global Scenario
3. Defence Spending & Offsets : Indian Scenario
4. Defence Offsets : Overview
5 Advantage Gujarat : Emerging Offset Destination5. Advantage Gujarat : Emerging Offset Destination
6. Gujarat : Manufacturing & Engineering Hub
7. Gujarat : MSME Scenario
8. Annexures
Defence Spending Global Scenario
2000
Global Defence expenditure is on an upward trend and stands at over USD 1.7 trillion at current prices for 2012, registering an increase of 45 percent since 2002
World Defence Spending (USD billion)
1289 1352 1420 1468 1525 1605 1711 1739 1741 1735 1753
1000
1500
2000
World military expenditure in 2012 totaled USD 1753 billion, around 2.5% of world GDP
M h 4/5 h f ll ili di
0
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
% share in Global Defence Spending
More than 4/5th of all military expenditure in 2012 was made by 15 countries
2%
1%
1%
18%
% share in Global Defence Spending
USA
China
Russia
UK 600800 682
39%
10%5%3%
3%3%
3%2%
2%
2%UK
Japan
France
Saudi Arabia
0200400600
165 90.7 60.8 59.3 58.9 56.7 48.3 45.8 34
4%3%
ArabiaIndia
Source: Stockholm International Peace Research Institute (SIPRI)
Defence Offsets Global Scenario: 2021
Offset revenue of top 20 countries to be around USD 424.57 billion by 2021
APAC countries will register the highest growth in terms of CAGR in military offset market
Saudi Arabia will have highest military offset revenue between 2012‐2021 : ~ USD 62.63 billion
Offset market share‐ 2012GermanyGreece Offset market share‐ 2021
2.40%4.10%
3.60%
3%2.90%
2 90%
7%
ffItalyNetherlandsNorwayPolandTurkeyUK
2.10% 2.70%2.40%
2.60%
2.80%
3.60%7.50%
2.90%
3.50%
4.30%
1.90%3.50%
4.90%
14.40%UKSouth AfricaAustraliaIndiaIndonesiaSouth Korea
3.50%
3.80%
1.90%
6.40%3 40%
5%
14.80%
6.40%
12.10%
20%
2.60%
9.40%SingaporeTaiwanBrazilChileColombiaSaudi Arabia
11.50%
2 90%8.20%
2 90%
9.70%
3.40%
4
2.10%7.20%2.10% UAE 2.90%2.30%2.90%
Source: Frost & Sullivan
Defence Offsets Global Market Size
I di S di A bi & B il ill b th l t l b l d fIndia, Saudi Arabia & Brazil will be among the largest global defenceoffset markets and provide enormous opportunities for growth
High( 5‐9% )
th
Saudi Arabia
I di
117
s for GrowtIndia
Brazil
South Korea
2
3
4
12
3
4
5
67
8
101318
15
Medium( 0‐4% )
portun
ities
UAE
Australia
5
6
12
13
Chile
Norway
91115
Low
Op
7
8
14Colombia
Poland
Italy
Taiwan1514 12
Market Size
Low( 0‐20 billion)
Medium( 20‐40 billion)
High( > 40 billion)
( < 0% )
10
9
1811
15
17
UK
Turkey
Chile
Netherlands
Indonesia
Singapore
5Source: Frost & Sullivan
Market Size
Organizational Structure Ministry of Defence, India
Ministry of Defence Raksha Mantri
Raksha RajyaMantri
Established to improve time and cost management across all
Defence Acquisition Council(DAC)
Ensures effective implementation of Government policy directions and execution of approved programmes
cost management across all capital acquisition processes
(DAC) execution of approved programmes within approved budget
Defence ServicesDepartment of
Defence
Department of Defense
Production (DDP)Defence Finance
Department of Defence R & D
(DRDO)
Headquarters of I t t d
Defense budget Establishment
• Prime design f
• Deals with matters pertaining to defense
• Examines need for Integrated defense Staff (HQ IDS)
Army Navy Indian Air Force
Establishment matters
Defense Policy Defense co‐
operation with foreign countries
Co‐ordination of all
agency for formulation and execution of programmes of design/development of state of weapons systems
pertaining to defense production, indigenization of imported stores, equipment, spares, planning control and responsible for DPSUs
equipment ‐Examines financial requirement ‐Makes budgetary provisions ‐ Participates in commercial negotiation
7
defense related activities
p yand equipment of Armed forces
p negotiation
Source: Ministry of Defence, Government of India
Overview India Defence Scenario
India has the 3rd largest armed forces in the world in terms of active personnelIndia is world’s largest arms importer and accounts for 14 per cent of the world’s arms importsIndia ranks 8th globally in military spendingIndia’s spending on Defence sector is expected to exceed USD 100 billion over the next few years
India’s Defence budget for the year 2013‐14 :INR 2,03,672.1 crore (USD 37.4 billion)
Defence expenditure accounts for approximately 13% of India’s total expenditure 49%
17%7%
Army
Share of Indian Defence Services in the Defense Budget
Army receives the largest allocation of the Indian Defence budget
27% Airforce
Defence Expenditure of India (USD billion) ; Defense Expenditure as % of GDP
36 741.6
49 49.2 49.6 48.340
50
60
lion
2.9% 2.8% 2.8% 2.8% 2.5% 2.3%2.6%
2.9% 2.7% 2.6% 2.5%
28.5 29.233.9 36.1 36.2 36.7
10
20
30
USD
bill
8
Source: SIPRI, KPMG Analysis; 1USD = INR 55
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Overview India Defence Scenario
India has the 3rd largest armed forces in the world in terms of active personnelIndia is world’s largest arms importer and accounts for 14 per cent of the world’s arms importsIndia ranks 8th globally in military spendingIndia’s spending on Defence sector is expected to exceed USD 100 billion over the next few years
Share of Indian Defence Services in the Defence BudgetIndia’s Defence budget for the year 2013‐14 :
INR 2,03,672.1 crore (USD 37.4 billion)
Defence expenditure accounts for approximately 13% of India’s total expenditure 17%
7%
Army
Airforce
Share of Indian Defence Services in the Defence Budget
Army receives the largest allocation of the Indian Defence budget
49%
27%
Navy
Department of DefenProduction and R&D
Defense Expenditure of India (USD billion) ; Defense Expenditure as % of GDP
41.6
49 49.2 49.6 48.340
50
60
on
2.9% 2.8%2.8%
2.8% 2.5% 2.3%2.6%
2.9% 2.7% 2.6% 2.5%
Defense Expenditure of India (USD billion) ; Defense Expenditure as % of GDP
28.5 29.233.9 36.1 36.2 36.7
41.6
10
20
30
USD
billio
9Source: SIPRI, KPMG Analysis; 1USD = INR 55
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Indian Defence Industry Trends & Drivers
Current Ratio of India’s Defence procurement : 70 per cent from foreign sources ; 30 per cent from Indigenous sources
Government of India is seeking to expand procurement through indigenous sources, from the current 30 per cent to the target 70 per cent over the next decade
Improved InfrastructureModernization of Defence
Overall size and immediate modernization needs of Indian defense forces are enormous
g , p g p
Improved Infrastructure
Availability of Skilled Workforce
Trends&
Drivers
1
29
10
Increasing Defence Spending
Forces
Technology Transfer & Joint Ventures
3
4
8
67
5
Liberalization of Defence Sector
Increasing Domestic Player Involvement
Increasing Overseas Supplier Involvement
Increasing Manufacturing Capabilities
Offset Driven Obligations
10Source: TWB Report : Achieving Defence Offsets in India
p
Defence Spending Bifurcation Capital Expenditure vs. Revenue Expenditure
Incremental growth in capital expenditure of India’s Defence budget
India allocates about 2.1% of its GDP towards defence spending, of which 40% is allocated to capital acquisitions
Of the total defence outlay for 2013‐14, INR 86,741 crore (USD 15.76 billion) will be for capital expenditure
Before 2004‐05, Indian defence forces had a Capital‐to‐Revenue ratio of 27:73 but since then it has increased by about 12 per cent points to 39:61
17%18%
14%13% 13%
13% 13%
14%
16%
18%
20%
60
70
80
25.128.4
31.6
35.9
40.7
9%
11% 11%13% 13% 13%
8%
10%
12%
14%
30
40
50
Revenue Expenditure
Capital Expenditure
Growth rate
7.2 7.6 9.02 9.36 9.86 13.2 13.95 16.1 18.2 21.1 23.9 27.110.8 11.412.98
16.64 19.1419.8
22.753%
0%
2%
4%
6%
0
10
20
11Source: ICD Research, KPMG Analysis
2005 2006 2007 2008 2009 2010 2011(P) 2012(P) 2013(P) 2014(P) 2015(P) 2016(P)
Indian Defence Forces Modern Equipments Required
Army Air Force Navy
Future Infantry Soldier as a System (F‐ Multi‐Role Combat Aircrafts Aircraft Carrier INSAS)
Unmanned Aerial Vehicles (UAV) Upgrade of Jaguar MIG‐27/ MIG‐29 Maritime surveillance aircraft
Upgrade of T‐72 Tanks/ ICV Mig‐29K (Fulcrum‐D) fighters Radars for Coastal Surveillance
Specialized Vehicles like Mine and Protected vehicles
Fifth Generation Fighter Aircraft Diesel Submarines
Future MBT and Engine Device Hawk UAVs
155 mm Arty Guns, Field, SP Transport Aircraft Barak II
Helicopters, UAVs Surface‐to‐Air Missiles ATVs (nuclear subs)
Satellite Surveillance System Medium range surface‐to‐air missiles Short/medium range battlefield surveillance radars
Battle Field Surveillance Radar
12
Main Battle Tanks
Indian defence industry Technology Requirements
Surveillance, CommunicatioAdvanced High PowerCombat
SEEKER Technology
Communications and
Navigation Technologies
Advanced Rocket
Technology
High Power Laser
Generation
Combat technology/protection
Technology for Hypersonic P l i
Trajectory correction
system/missile Miniature SAR
&ISAR
Sensors/Detectors/R d
Hypersonic Propulsion
Propulsion y /guidance
Radars p
Miniaturization/
Nanotechnology
Thermal imaging (TI) &
image intensification
Shared & Conformal Apertures
Networking technologies for seamless integration
System simulators
13
Homeland Security Scenario Security Paradigm in India
Homeland Security market in India is spread across Central & State government spending and private security busines
The Home Land Security market which currently stands at ~ USD 8 billion (capital Security installations for manufacturing
BorderSecurity
Airport Security
currently stands at USD 8 billion (capital spend from government, private sector
and some part of export demand) expected to grow to~ USD 16 billion per
year by 2018
Security installations for manufacturing hubs in sectors such as petroleum,
petrochemicals, and power is expected to grow by 125%
Homeland Security:Key Threats
Police Modernization
Mass TransportSecurity
Critical Infrastructure
Security
Counter Terrorism
Safe City SurveillanceMaritime
S iCentral Government is likely to spend Total Transport Security spending inSecurityCentral Government is likely to spend over USD 7.5 billion and State
Governments close to USD 2 billion on police modernization
Total Transport Security spending in India is expected to be over USD 5
billion by 2016
G f I di i d l h bili i f h i i d i IT d i i d i f i
14Source: ASSOCHAM & Aviotech Report on Homeland Security Assessment –India Expansion and Growth
Government of India intends to leverage the capabilities of the private industry in IT and engineering design for meeting the needs of the homeland security
Indian defense industryOpportunities for participation in development
• Sophistication of India’s arsenal lagsit regional rivals
Geopolitical Perspective
• Very high dependence upon imports
Structural Perspective
• India is embarking onone of the worlds largest
d i d
Opportunities
g• Increased threat perception from the
neighboring countries nexus • Increased proximity to the western
economies • Increased relevance in the economic
f
p• Very high dependence upon
platforms of Russian origin• Government owned defense
manufacturing industry has not been efficient P i d f f i
and most sustainedprocurement cycles
• India has introduced Defense Offsets and due toit being one of the topmilitary spenders in thecycle of the world • Private defense manufacturing
industry is just starting to take off
military spenders in theworld, the offset obligation is a significantopportunity that will needto be addressed by theexpansion of private defense manufacturing
15
Indian Defence Marketplace Key Players
Public Sector International Players Private Players
IT / ITeScompanies
Undertaking in IndiaPrivate Players companies
in Defence Sector
•Hindustan Aeronautics Limited •Mazagon Dock Limited•Bharat Electronics Limited•Bharat Dynamics Limited•Ordnance Factory Board•Bharat Earth Movers Limited•BrahMos Aerospace Private
•TATA Advanced Systems Ltd.•Larsen & Toubro•Ashok Leyland•Godrej and Boyce Mfg. Co. Ltd•Mahindra Defence Systems•Pipavav Defence & OffshoringCompany
•LCorporationockheedMartin•General Electric•Boeing•Rockwell Collins•Dassault Systems•Northrop Grumman
•Tata Consultancy Service•Infosys•Wipro Technologies•HCL•Mahindra Satyam•Geometric•NeilSoftBrahMos Aerospace Private
Limited•Mishra Dhatu NigamLimited (MIDHANI)•ECIL•Hindustan Shipyard Limited•Ordnance Factory Board (OFB)•Garden Reach Shipbuilders
p y•Bharat Forge•MKU Private Limited•Alpha Design Technologies•Anjani Thermoplast•Dynamatic Technologies•Kirloskar Pneumatic Company
•Honeywell•EADS•Raytheon•Ness Technology•Thales•Finmeccanica•SAAB
•Plexion•QuEST•eServ Perot•Rolta•KPIT Cummins
• India is emerging as a key outsourcing hub for global defense companies that are setting up exports and outsourcing basesas long term strategies to serve global markets
p•& Engineers (GRSE)•Goa Shipyard Limited
•BAE Systems•Eurocopter and Typhoon•General Dynamics•Paramount Group
16
as long‐term strategies to serve global markets• India's proven expertise in outsourcing for a range of industries and areas requiring high competency levels are the key
factor encouraging these companies
Defence Procurement Procedure & Defence Acquisition Plans Overview
Expeditious decision making Simplification of Contractual and financial provisions
Establish level playing fi ld i tand financial provisions field – private
Aim – expeditious
Ship Building –competitive basis
Expansion of scope of offsets discharge
Aim – expeditious procurement, optimal utilization of budgetary resources, probity, public
accountability, transparence in operations, free p
competition and impartiality
15 Years Long Term Integrated Perspective Plan (LTIPP) formulated based on defense planning guidelines in consultation with SHQ Approved by DACguidelines in consultation with SHQ. Approved by DAC
Five Year Services Capital Acquisition Plan (SCAP) indicating list of equipment to be acquired, keeping in view operational exigencies and overall requirement of funds. Approved by DAC
18
Annual Acquisition Plan (AAP) would be a two year roll on plan for capital acquisitions and would consist of the schemes from approved five year Services Capital Acquisition Plan. Approved by DDP
Note: DAC : Defence Acquisition Council ; DDP : Department of Defence Production | Surceo: Ministry of Defence;, Govt. of India
Acquisition Categories
Capital acquisitions are categorized as under:
MakeIndigenous development to meet complete requirement
BuyOutright purchase of
equipments
Buy & MakeImport partial requirement and
produce balance in India
Buy (Global)Both foreign &
Buy (Indian)Only Indians can
Buy & MakeGlobal tenders are
i d i l i
Buy & Make (Indian)
Only Indian bidders Indian vendors can
bidbid with min. 30%
local content
issued, partial quantity bought and balance produced in India
Only Indian biddersinvited and equipment
to have min 50% indigenous content
Make (DRDO)Development of strategic, complex
Make (High‐Tech) High‐tech complex
systems with min 30%
Make (Low‐Tech) Low‐tech mature t ith i 50%
19
g , pand security sensitive systems by DRDO
yindigenous content in
prototype
systems with min 50% local content
Defence Offset Overview
• Offsets are compensatory, reciprocal trade agreements for industrial goods and services applied as acondition of military‐related export, sales and services
• Globally, offsets have been implemented successfully to promote the domestic Defence industry andsupport the setting up of critical technologies within the procuring nation
Defence Offset
support the setting up of critical technologies within the procuring nation
Indirect Offset Direct Offset
Direct offsets require the supplier to purchase goods or make investments which are related to the sector of the primary transaction, there by encouraging the growth of the domestic industry in that specific sector
Indirect offsets obligate the supplier to purchase goods or make investments from the purchasing country which may be in certain stated sectors or be entirely at the discretion of the vendorThe purpose is to stimulate economic growth in the
20
t at spec c secto e pu pose s to st u ate eco o c g o t t evendor country more generally
India Defence Offset Categorization
Buyi.e. Outright purchase from Indian or foreign
vendor
Buy and make with ToTPurchase from foreign vendor followed by
licensed production
Offset
Offset obligation of 30% of contract value to be discharged by
Direct purchase from Indian enterprises
Advanced technology
acquisition by DRDO
Equipment/ ToT to
government institutions
Equipment to Indian
enterprises
ToT to Indian enterprises
FDI in Indian enterprises
DRDOinstitutions
Multipliers permitted• Minimum70% of total obligation• Multipliers permitted for SMEs
21
Multipliers permittedMultipliers permitted for SMEs• Banking allowed
Source: Ministry of Defence, Govt. of India
Defence Offset India Scenario: Policy Intervention
■ Defence procurement is governed by the DPP.
■ The DPP governs all Capital Acquisitions undertaken by the MoD, Defence Services and Indian Coast Guard
■ Its aim is to incorporate procedures to expedite decision‐making, simplify contractual and financial
Defence Procurement Procedure (DPP) and offset p p p g p y
provisions, and establish a level playing field for the public and private playersand offset guidelines
■ The offset policy is a part of the DPP and has undergone revisions with the DPP
■ The policy stipulates an offset requirement of a minimum 30% for procurement of Defence equipment inOffset policyexcess of USD 49.2 million
■ Under the Industries (Development and Regulation) Act 1951, an industrial license (IL) is required formanufacturing Defence equipment
■ The applicant must be an Indian company or partnership and has to apply to the Department of IndustrialIndustrial licensing policy ■ The applicant must be an Indian company or partnership and has to apply to the Department of Industrial
Policy and Promotion (DIPP)licensing policy
■ FDI up to 26% is allowed in an Indian company manufacturing Defence equipment, subject to the companyobtaining an IL from the DIPP
■ The approval is given by the government through an application filed before the Foreign Investment and
Foreign Direct Investment (FDI) ■ The approval is given by the government through an application filed before the Foreign Investment and
Promotion Board (FIPB) in the Ministry of Financepolicy
■ The import and export of Defence equipment is governed by the Director General of Foreign Trade (DGFT)in the Department of Commerce
■ Barring some specific items Defence equipment can be exported either after obtaining a license from theForeign trade policy
22Source: Ministry of Defence, Foreign Investment Promotion Board
■ Barring some specific items, Defence equipment can be exported either after obtaining a license from theDGFT for items in the SCOMET list or after obtaining a NOC from the Ministry of Defence
policy
Offset Policy India Scenario: Policy Intervention
The key objectives of the Defence offset policy are to leverage capital acquisitions to develop the Indian Defence industry by:
Fostering development of internationally competitive enterprises
Augmenting capacity for research, design and development related to Defence products and services
Encouraging development of synergistic sectors like civil aerospace, and internal security
Key Features:
Infusing greater efficiency in the procurement process St th i th D f f t i b i th tStrengthening the Defence manufacturing base in the countryClarifications on the acquisition
Objectives of DPP 2013Enhancing indigenizationEncourage Value addition within the countryReducing processing timeProgress towards self‐ reliance in a sustained manner inclusive of Technological growth
23Source: Ministry of Defence, Govt. of India
Progress towards self reliance in a sustained manner inclusive of Technological growth Implementation to bring about increased opportunity for Indian industry
Salient Features of Defence Procurement Procedure‐ 2013 Stronger impetus to indigenization
Prioritisation of ‘buy (Indian)’ and ‘buy and make (Indian)’ for capital acquisitions under defence procurement procedure
The Defence Procurement Procedure 2013 aims to balance the competing requirements of expediting capital procurement, developing a robust indigenous Defence sector and conforming to the highest standards of transparency, probity and public accountability
Ad l i f ‘ k ’ d
defence procurement procedure
Maintenance ToT (MToT) will no longer be through nomination but through bidding
Defence
Advance consultations for ‘make’ procedure
Simplification of ‘buy and make (Indian)’ procedure
DPP 2013 clearly focuses oncreating a conduciveenvironment for achievingindigenization by stipulatingpreferred categori ation forProcurement
Procedure 2013
Clear definition of indigenous content
preferred categorization forbuy (Indian), buy and make(Indian), make categoriesand allowing the privateindustry to participate inmaintenance transfer of
Ensuring faster progress in ‘make’ and ‘buy and make (Indian) cases
Enhanced delegation of financial powers for capital acquisitions
maintenance transfer oftechnology (ToT) therebyproviding a level playingfield to it with foreign OEMsand DPSUs
24
Source: Ministry of Defence, Govt. of India
Powers to DAC to approve all deviations from DPP
Defence Offset India Scenario: Methods of discharge of Offset Obligations
Indian offsets policy provides a powerful investment driver, but could benefit from greater focus and direction
Direct Purchase• A major change introduced in DPP 2008 was to allow Direct Purchase Direct purchase of products/services provided by the Indian Defence industries, i.e. DPSUs, OFBs and the private Defence industry
A major change introduced in DPP 2008 was to allow foreign vendors to bank offset credits
• The concept of multipliers in offsets is used by many countries around the world to encourage the inward investment of sought‐after technologies into targeted
Market Share
D f P bli
Offsets Credit• Credit based on creation of offset programmes created in anticipation within two financial years before the issue of RFPs
sectors
43%
24%
Defense Public Sector Units
Large Industries
Direct FDI• Direct FDI in Indian Defence industries for industrial infrastructure for services co –
33%
SMEs
industrial infrastructure for services, co development, JV and co‐production of Defenceproducts and components
• Direct FDI in Indian organizations engaged in R&D as certified by the Defence Offset Facilitation A (DOFA)
25
Agency (DOFA)
Source: KPMG, UKIBC
Indian Offset Contracts Value & Share
• The offset policy was introduced in 2005 and the first offset contract was signed in 2007 US companieshave signed offset contracts worth over USD 2 billion, while French companies have signed contractsworth USD 1 billion
• Till date offset contracts worth USD 3 2 billion mainly in manufacturing infrastructure engineering• Till date offset contracts worth USD 3.2 billion mainly in manufacturing, infrastructure, engineeringdesign, development & testing, and simulators have been signed with Indian offset industry
I l
OFFSET CONTRACTS (COUNTRY, VALUE IN USD MILLION, PERCENTAGE SHARE)
Year wise Offset Contract Value (in USD million)
Russia71317%
Italy3348%
Israel1303%
1010
1684
1000
1200
1400
1600
1800
e (in
USD
million)
USA205448%
17%
54
768
207386
200
400
600
800
1000
Offset Co
ntract Value
France104624%
0
2006 2007 2008 2009 2010 2011 2012 2013
Year
26Source: Ministry of Defence, Govt. of India
Defence Offset India Scenario ‐ 2020
• With perceived threats and an recovering economy, defence spending to increase substantially• Present Offset Opportunity is estimated at USD 5 bn• Offset opportunity expected to rise to USD 12 billion over next 3 years and USD 4‐5bn per year thereafter• Greater private sector participation in defence to be in favour of Indian companies• Greater private sector participation in defence, to be in favour of Indian companies• 55% of offset contracts are taken by the private sector• Indian Aerospace and Defence industry is emerging as outsourcing hub for many services like CAD,CAM and CAE,manufacturing and design engineering, testing and integration, and technical publications
100
120
8492
102
Estimated defence spend over next decade (2012‐2020)
40
60
80
4147
5562
6976
84
27 9 31.7 35.7 39.5 45.151
SD Billion
0
20
40
2012 2013 2014 2015 2016 2017 2018 2019 2020
16.6 20.2 24.2 27.9U
27
2012 2013 2014 2015 2016 2017 2018 2019 2020Defense Expenditure (USD billion) Capital Expenditure (USD billion)
Source: KPMG Analysis, UKIBC
Advantage Gujarat : Leveraging Opportunities to create capabilities
in Defence and Homeland Security manufacturing
Gujarat has emerged as a state with excellent infrastructure facilities and can offer both forward and backward supply chain linkages to the Defence
offset and homeland security
28
offset and homeland security equipment manufacturing sector
Defence Offset Gujarat Scenario: Growth Drivers
With skilled intensive manufacturing capabilities and a robust infrastructure, Gujarat has the right ingredients to become a key link in the Indian Defence supply chain
Gujarat’s Small and Mediumengineering companies will play acritical role in the entire supplychain for the Aerospace andDefence sector
Gujarat, with a coastline of 1600 kmis well connected to all the majorport‐based trade routes and acts asa Gateway to the rich northern andcentral hinterland of India
Strong Manufacturing & Engineering basewith presence of MSME’s across the
value chain
h
Robust Physical Infrastructure
Proactive Governance
Growth Drivers
World Class Ship building & repairing facilities
Availability
of highly skilled manpower facilitiesp
Gujarat has good educationalstructure with premier institutesin management, engineering &technology, design, infrastructurel i d
Alang and Sosiya are Asia's biggestShip Breaking Yards. PipavavShipyard owned by Pipavav Defence& Offshore Engineering Companyd i ld l hi ildi
29Source: INDEXTB
planning andR &D
Ltd is a World Class Ship Buildingfacility
Gujarat India’s Manufacturing Hub
Gujarat has a plethora of companies manufacturing precision engineering goods which can be further aligned with the Defence offset sector’s requirement
Gujarat aims to target 35% of the possible Defence Offsets to be sourced from India
28 21
Contribution of Manufacturing Sector in GSDP
The number of factories in Gujarat have increased from 15576 in 2009‐10 to
28.02%
27.57%
28.21%
Secto GS
CAGR of investments in
21282 in 2010‐11(P), showing a growth of
36.63 percent
27.16%
%
Manufacturing sector contributes 26.7 % to in Gujarat’s GSDP i.e.
~ INR 163,195 crore (USD 26.8 billion)
manufacturing sector in last 6 years ~ 19%
2008-09 2009-10 2010-11 2011-12
(at current prices) in 2011‐12
To leverage on the progressive industrial sector of the state, Gujarat’s industrial sector comprises of over 0.45 million
30
Sources : CMIE, ASI 2010‐11 , Socio‐ Economic Review : Gujarat 2012‐13
g p g ,the government has initiated a “Cluster Development Scheme” to promote and strengthen the MSME sector
Gujarat s industrial sector comprises of over 0.45 millionMicro, Small and Medium Enterprises providing
employment to ~ 2.5 million people (as on 31/12/2012)
Engineering Industry Gujarat Scenario:Presence across value chain
Heavy engineering
Heavy electrical
Heavy engineering and machine
tools
Automotive
• Boilers• Turbines and generator sets• Transformers• Switchgear and control gear
• Textile machinery• Ceramic machinery• Sugar machinery• Rubber machinery
• Passenger and utility vehicles• Auto components and auto ancillaries
gear • Material handling equipment• Oil field equipment• Metallurgical machinery• Dairy machinery• Earth moving and constructionEarth moving and construction machinery
• Agricultural machinery
31
Engineering Industry Gujarat Scenario:Presence across value chain
Light engineering
Low technology products
High technology products
Plastic Machineries
• Roller bearings• Welding equipment and
consumables• Casting and forging
• Medical and surgical instruments• Process control instruments• Domestic appliances
• Injection moulding• Extrusion• Blow moulding
• Casting and forging• Pipes and tubes• Fasteners
• Electronics• Reprocessing• Extrusion coating
32
Engineering Industry Gujarat Scenario:Industrial Infrastructure & Government Interventions
To capitalize on the emerging opportunities and for providing a thrust to the defence sector in Gujarat, the state government is planning to set up an exclusive SEZ for defence supply industries
5 precision engineering clusters proposed in J H l l S d L dhik d lJamnagar, Halol, Sanand, Lodhika, Mandal –these clusters will be developed by GIDC
Units coming in these clusters will be provided single window clearances and streamlined & hassle‐free procedures for obtaining various
approvals
Kutch
h d b dKheda
Anjar
The benefits of existing industrial park scheme will be extended to the tune of USD 3.2 million
approvals
Dahod
Amreli
Ahmedabad
Vadodara
Surat
Dholera
Changodar
Hazira
Okha
Navlakhi
Pipavav
Development of 49 Skill Upgradation Centers has been completed & 22 have been
Government to identify and provide large tracts of land for specialized trials of equipment
Pipavav
Simar
Siemens PLM Software India Pvt Ltd will set up 5 Centres of Excellence in Gujarat for diverse industry segments like automotive, industrial machinery,
operationalized50 new Skill Upgradation Centers within GIDC estates planned
Particular Units Symbol
Special economic zones 5
Special investment regions 9
33
Source: GIDC
g , y,industrial automation, aerospace and defence, and
shipbuildingDMIC influence area
MSME’s will play a vital role in creating Gujarat as a Defence Industrial Bas
Gujarat’s fundamental strength exists in form of a large number of MSME’s, who are transforming themselves into major players and will play a critical role in the
34
entire supply chain execution for the Aerospace and Defence sector
Defence Offset Gujarat Scenario: Role of MSME’s in creating Defence Industrial Base
• Gujarat has 83 identified MSME clusters
MSMEs play an important role in the local and global supply chain of any major defence integrator as key outsourced suppliers. Most large companies use MSMEs to deliver significant parts of their projects
• Gujarat has 83 identified MSME clusters• Gujarat stands 1st in terms of the asset base of the MSME sector, according to the Fourth Census of MSMEs• State ranks 1st in integrated overall performance of MSMEs at National Level, as per ISED Small Enterprise
Observatory• Micro and Small Enterprises ‐Cluster Development Program (MSE‐CDP) is being implemented for holistic and
integrated development of micro and small enterprises in clustersintegrated development of micro and small enterprises in clusters
Total SSI + MSME in Gujarat till 2013: ~5 00 000
Proactive Governance
Total SSI + MSME in Gujarat till 2013: 5,00,000
Total investment under MSME, between FY 2010‐11 and FY 2013‐14, stood at INR 48255.86 crore (USD
7695 million) creating 11,05,172 jobs) g , , j
Out of the total number of working enterprises, 56.13% are located in the clusters with an employment Contribution of 48.92% of
35Source: iNDEXTb, Industries Commissionerate, Government of Gujarat
the total MSME employment
Defence Offset Gujarat Scenario: Role of MSME in creating Defence Industrial Base
With MoD setting itself a goal of sourcing 70% of all equipment from Indian companies–public and private sector ‐ by 2020 which could provide a boost to MSMEs
MSME’s will play a vital role in following areas of Defence Sector:
• Research & DevelopmentM i t R i & O ti
Gujarat’s MSME’s can leverage their strengths in niche technology areas of
f• Maintenance, Repair & Operations• Software Development• Casting, forging and metal works• Naval systems, subsystems and accessories
• Land systems, subsystems and
Defence Sector:
• Leverage their strength ofinnovation, low economies ofscale & innovation to attainelusive Self‐Reliance
Proactive Governance
Land systems, subsystems and accessories
• Aerospace: sub systems and accessories, ground equipment and tooling
• IT hardware and electronics
• Leverage strength in IT andautomotive industry to takeDesign, Engineer andmanufacture defence &aerospace productsL l b l hift f
• Gujarat’s Small and Medium engineering companies will play a critical role in the entire supply chain for the Aerospace and
• Leverage global shift fromvertically integratedmanufacturing to design andintegration using local strengthProactive Governance
36
Defence sector• Collaboration of large business houses with Gujarat’s SME’s and MSME’s, can help transform Indian Aerospace & Defence
eco system into a robust sector and create a mark on international stage
Government Initiatives for MSMEs
Venture Capital andPatent AssistanceVenture Capital andPatent Assistance
Interest subsidy onEligible parametersInterest subsidy onEligible parameters
Venture Capital andPatent Assistance
Interest subsidy onEligible parameters
Cluster Development in PPP mode
Cluster Development in PPP modeAwards to best
MSMEsAwards to best
MSMEs
Cluster Development in PPP modeAwards to best
MSMEs
IntegratedIndustrial
Infrastructure
Assistance in Quality
Certification, Skill Enhancement and
Technology
Assistance in Quality
Certification, Skill Enhancement and
Technology
Assistance in Quality
Certification, Skill Enhancement and
Technology
Support for Vendor Development
acquisitionacquisitionacquisition
37
Gujarat Harnessing port infrastructure for Ship Building
Gujarat, is expected to harness huge investment in the Shipbuilding Sector The State Government along withMaritime Board (GMB) is committed to develop the industry and utilize all the competitive advantage of its po
Gujrat Maritime Board (GMB) is promoting Marine Shipbuilding Parks
(MSP) at multiple locations with
Naval Ship Building Ship
RepairGujarat boasts of 60% share of the
(MSP) at multiple locations with private player participation
Gujarat’s Ship
BuildingOpportunities
RepairIndian shipbuilding order book and is targeting a capacity of 3 million DWT
Opportunities
Amphibian aircraft*
Ship Recycling
Gujarat has one of the world’s largest ship recycling yards at Alang
39
Recycling
The high‐flying Shipbuilding cluster being developed is ‘Dahej Shipbuilding
cluster’
Gujarat Leveraging resources for building modern Warships
Alang located on the western coast of Gulf of Cambay, in the western part of India, is the largest ship‐recycling yard inJapan and the Gujarat government have joined hands to upgrade the existing Alang shipyard to make it the largest In
Maritime Organization‐compliant ship recycling yard in the world
Gujarat’s State‐of‐the‐art Shipbuilding infrastructure can be used for
construction of a widerange of warships and submarinesrange of warships and submarines
Presently, Gujarat has nine shipbuilding yards in operation, three under the
process of approval . Gujarat Maritime G j t
Nana Laija
The existing infrastructure in Gujarat
p pp jBoard (GMB) has envisaged for thirteen more notable shipbuilding projects.
Gujarat
Ghogha Dahej
Bedi
Jodiya Ratanpur
hThe existing infrastructure in Gujarat makes it ideal for dry dock,repairmaintenance, support services &
emergency refitsPipavav
JafrabadMahua
Bhavnagar
VelanMagdBillimDhola
40
There are around 50 Gujarat based SME’s that currently supply components' to ship and submarine building companies like Pipavav
Defence and L&T
Locations of Marine Shipbuilding Parks (M
Gujarat Homeland Security Scenario
Homeland Security in India has witnessed an increasing focus in the recent past.
Opportunities:• A significant market opportunity exists in severdomains comprising of the larger Homeland Security sector such as police modernization, c
.• The homeland security equipment manufacturing,
which involves a lot of advanced technologies,also offers a great opportunity for the State based
infrastructure protection and counter‐terrorismactivities
• Expected opening up of nuclear sector post sigof the Civil Nuclear Cooperation Treaty with thi lik l t t l d d f
g pp ySMEs which are ready to align themselves withthe latest technologies
• Gujarat with its well established Technical Textiles,Nanotechnology, and Science & Technology cancontribute immensely in emerging defence and is likely to create a large demand for
Nuclear/Radiological Threat Mitigation approa• Biometric identification systems and similar smID documents are expected to present a large opportunity
contribute immensely in emerging defence andhomeland security areas like:
• Textile technology• Nanotechnology, composite material and opportunity
metal research• Night vision• Electronic miniaturization• Defensive systems in satellites • Cyber warfare
41
Cyber warfare
Gujarat Educational Infrastructure and Skilled Manpower Availabilit
Number of Seats in Degree Engineering
Number of Degree Engineering Colleges, Gujarat 2013 • At the end of 2013, Gujarat is projected tog g g
Colleges, Gujarat, 20138,970
1,19454016 3
2
Gujarat, 2013 , j p jintake capacity of 60,883 degree stuengineering
• More than 3,060 seats have been addedalone along with 4 new engineering colinstitutions
50,179
95Government Colleges
Grant‐in‐Aid Colleges
PPP Colleges
Self Financed Colleges
institutions• The tally leads for Mechanical Engineering230 seats, followed by Civil, Electrical and
Gujarat Forensic Science University established bythe Government of Gujarat, under the flagship ofHome Department ‐ Government of Gujarat
18000 (16230)20102012
MechanicalEngineering
Ci il
Seat Matrix Year‐Wise
• It is the only university across the world, dedicatedto Forensic & Investigative Science
The Government of Gujarat has established “RAKSHASHAKTI UNIVERSITY” vide ‘The Raksha ShaktiUniversity Act, 2009’ 10000
12000140001600018000 (16230)
(9950) (9839)(8160)
(7080)
2012CivilEngg.
ElectricalEngg.
ComputerEngg. Electronics
& Comm. InformaTechnol
42
• The Raksha Shakti University is a unique and first ofits kind in India for conducting certificate, diplomaand degree courses in the field of police scienceand internal security
02000400060008000 (7080)
(3555)
Snap Shot of Investment Cycle
Li
B
Entry Options
Br
P
Exit Strategy
Repatriation DividBuy back Divid
Intere
Roy
Buy back
Sale of shares
Listing
44
Fees forLiquidation
Entry Options Permissible Activities
Particulars Liaison Office Branch Office / Project Office Joint venture / WOS LLP
• Acts as channel of • BO / PO is a mere extension of a • Any activities permitted • A hybrid structuActs as channel of communication between HO and parties in India
• Representing the
BO / PO is a mere extension of a foreign company and for all practical purposes is treated as a foreign company in India
Branch Office
• Export/ Import of goods
Any activities permitted by India’s Foreign Direct Investment Policy
A hybrid structuseparate businevis‐à‐vis designpartners with psuccession
parent company/group companies in India.
• Promoting exports /imports from/to India.
• Promoting t h i l/fi i l
• Rendering professional or consultancy services
• Research work, in which the parent company is engaged
• Promoting technical or financial
• Sectors/activitie100% FDI is allothrough automroute and thereFDI‐linked perforelated conditio
Permissible Activities
technical/financial collaborations between parent/group companies and companies in India.
collaborations between Indian companies and the parent company
• Representing the parent company in India and acting as buying/ selling agents in India
• Rendering services in Information• Rendering services in Information Technology and the development of software in India
• Rendering technical support to the products supplied by the parent/ group companies.
45
Project Office
• A foreign company may be permitted to open a PO in India provided it has secured from an Indian company, a contract to execute a project in India.
Tax Environment in India
Taxes in IndiaTaxes in India
C t d tC t d t
Indirect taxIndirect tax
I tI t
Direct taxDirect tax
S iti t tiS iti t ti
Levies on transactionsLevies on transactions
Customs dutyCustoms duty
Sales Tax/ Value Added Tax (‘VAT’)Sales Tax/ Value Added Tax (‘VAT’)Wealth taxWealth tax
Income taxIncome tax Securities transaction tax
Securities transaction tax
Stamp dutyStamp duty
Service taxService tax
Excise dutyExcise duty
Octroi/ Entry taxOctroi/ Entry tax
R&D CessR&D Cess
46
Direct and Indirect tax regimes are being overhauled; to be replaced with Direct Tax Code (‘DTC’) and Goods and Services Tax (‘GST’) in near future
India Tax rates
• No Consolidation Rule, No Thin Capitalization Rules and No Controlled Foreign Companies Rules
A ti b i i GAAR t li bl f fi i l 2015 16− Anti‐abuse provisions :GAAR to applicable from financial year 2015‐16
• Transfer pricing regime in existence – APAs mechanism in place
• Advance Ruling possible for taxation issues of Non‐ Residents
• Double taxation avoidance agreements with around 85 countries of the world• Double taxation avoidance agreements with around 85 countries of the world.
• Wealth Tax at 1 % on aggregate taxable value exceeding INR 3 Million
• Securities transaction tax at 0.1% on the sale and purchase of equity shares listed on the stock exchange.
• Commodities transaction tax at 0 01% on commodities transactions
Corporate Taxes Indian Company Foreign ComCorporate Tax 33.99% 43.26%
Minimum Alternate Tax (MAT) 20 96% 20 01%
• Commodities transaction tax at 0.01% on commodities transactions
Minimum Alternate Tax (MAT) 20.96% 20.01%
Dividend Distribution Tax (DDT) 16.995% Nil
Buy Back Tax (BBT) 22.66% Nil
Long Term Capital Gain Tax 22.66% 21.63%
47
g p
Short Term Capital Gain Tax 33.99% 43.26%
Withholding tax in royalties / fees for services 25%
Withholding tax on interest 20%
Indirect Tax Regime
Indirect Tax Regime
• Indirect Taxes at Central level –
• Excise duty on manufacture of goods – 12% (plus education cess and higher education cess)
• Service tax on services except covered under negative list – 12% (plus education cess and
higher education cess)
• Custom duty to be paid on import of goods – 28% (plus education cess and higher education
)cess)
• Central Board of Excise and Customs (‘CBEC’) deals with the formulation, implementation and
administration of Customs & Central Excise duties and Service Tax Laws.
• VAT / GST at state level
• Central sales tax on interstate sale of goods at 2% or the prevailing state value added tax of
48
g p g
selling state, as the case may be
• Credit of the indirect taxes paid also available to avoid any cascading effect
Tax Exemption for Defence Services / Technology
Tax exemption under section 10 (6C)Tax exemption under section 10 (6C)
Royalty / Fees for Technical Services
Agreement between GOI & Foreign Company for security of India
Exemption notified by Gthe official Gazette of I
Exemption not available
49
For supply contract – profits arising to Foreign Enterprise on account of supply of equipment could be taxable in India if Foreign Enterprise
has a PE in India
Defence Offset India Tax Regime
The fiscal regime plays a critical role in any Defence market in creating an environment tincentivizes and supports the long term risk taking, investment and R&D required by the indpp g g q y
Indirect Tax RegimeIndirect Tax Regime• Indirect tax laws provide various exemptions andconcessions applicable in the Defence sector
• Various exemptions and concessions from payment ofCustoms duty (on imports) and Excise duty (ony ( p ) y (domestic manufacture) of capital goods, machinery,equipment, spares, tools etc. for use by the armedforces and Defence sector
• A tax exemption is available on royalties and fee fortechnical services under ‘Buy and Make with ToT’category procurements
• R&D Cess is chargeable at the rate of 5 % on import oftechnology in India under a foreign collaboration
A bl i i l d i h T T
50
• Any taxable services involved in the ToT agreementwould attract Service tax at applicable rates
Defence Offset Glossary
APAC A i P ifiAPAC Asia‐Pacific
DRDO Defence Research and Development Organization
FDI Foreign Direct Investment
GIDC Gujarat Infrastructure Development Corporation
GSDP Gross State Domestic Product
PPP P bli P i P hiPPP Public Private Partnership
SMEs Small and Medium Enterprises
52
ToT Transfer of Technology
Defence Offset Joint Ventures (1/4)
Entity Involved Details
HAL, SNECMA ofFrance
• HAL and SNECMA of France signed an agreement to form a JV that would be a ceexcellence for the manufacture of key components and assemblies of aero engineHAL would bring its manufacturing experience in India, SNECMA wouldtechnology to the JV, providing HAL additional export avenues and greater accessaerospace industryaerospace industry.
Lockheed Martin,Wi T h l i
• Lockheed Martin of the US, the world’s largest defense manufacturing compaWipro Technologies of India, together announced opening of a Network Operationin Gurgaon, near New Delhi. Known as “Ambar Jyoti”
• This lab will develop, demonstrate and experiment with emerging networkWipro Technologies
of India
p, p g gcapabilities and applications.
• Lockheed Martin and Wipro will utilize cutting‐edge technologies and real enviroemulation to develop net‐enabled capabilities and solutions to employ againstreal world problems.
Boeing, Tata
• Boeing and Tata utilizes existing Tata manufacturing capability and also develosupply sources throughout the Indian manufacturing and engineering communboth commercial and defense applications.
• Manufacturing capabilities established within the joint‐venture company wouldphases be leveraged across multiple Boeing programs including the Medium Mu
53
phases be leveraged across multiple Boeing programs, including the Medium MuCombat Aircraft competition
• This involved USD 500 million of defense related aerospace component work
Defence Offset Joint Ventures (2/4)
Entity Involved Details
• French defense and aerospace major Thales and Samtel group announced a joint v
Thales, Samtel
p j g p jto design, manufacture and sell avionics systems in the Indian market.
• Samtel and Thales would hold 74:26 in the venture that was started with a capital12.5 million with more investments to be pumped in as the joint developmentwould progress
TCS, SAAB• IT services provider Tata Consultancy Services (TCS) announced its partnership wit
a provider in products and services catering to military and civil security, festablishment of Saab’s Aeronautical Design and Development Center (ADDC) in In
L&T, DRDO• Larsen & Toubro (L&T) tied up with DRDO to setup a research facility for w
conceptualization for all commercial production under‐taken by DRDO
D lt S t• Dassault Systèmes (DS) the world leader for Product Lifecycle Man‐agement
Dassault Systems,KPIT CumminsInfosystems Lt
y ( ) y gsoftware solutions and KPIT Cummins Infosystems Ltd a specialist solutions partglobal manufacturing corporations, signed a go‐to‐market partnership for joint solubusiness devel‐opment on ENOVIA Platform
54
Wipro, GE Security• Wipro forged a JV with GE Security of US during to jointly produce and market p
security solutions for Indian defense forces
Defence Offset Joint Ventures (3/4)
Entity Involved Details
TAAL,TIDC• Bangalore based Taneja Aerospace is planning to float a joint venture with T
Nadu owned TIDCO to create a new facility at Hosur, manu‐facture aero partswould exploit opportunity in the MRO
HAL, CA • HAL and Canada’s CAE jointly set up a new helicopter training centre
• SAERTEX, the world leader in non‐crimp glass, carbon and aramide fabrics, plato set up a 50:50 Joint Venture company in India with KEMROCK Industries
SAERTEX, KEM‐ROC
to set up a 50:50 Joint Venture company in India with KEMROCK IndustriesExports Limited, Vadodara, Gujarat; and accordingly, an MOU was entered intand between SAERTEX and KEMROCK to form the JV.
• The joint venture named as SAERTEX‐KEMROCK INDIA LIMITED, would set up afacility for producing various components for Indian and global aeronauindustry
Sikorsky, Tata Advanced System
• Sikorsky signed a joint venture with Tata advanced Systems in to pro‐duce cabinthe S‐92 helicopter and aerospace parts in Hyderabad
55
Airbus, Airspace Infrastructure Pvt.Ltd ,
Airlogic Ltd
• Airbus, Airspace Infrastructure Pvt. Ltd and Airlogic Ltd have estab‐lished aspare parts and logistics support joint venture ‐ Spares Support Solutions India,Ltd. (SSSI).
Defence Offset Joint Ventures (4/5)
Entity Involved Details
Wipro, CA
• Wipro signed an agreement with CAE in to provide simulation‐based trainareas like war gaming, C4ISR and a range of defense plat‐forms expectedacquired by India’s defense forces.
• The two companies also agreed to help original equipment manufacturers meset obligations in India that are required by defense ministry.
BEL, Suriname Armed Force
• BEL signed a contract with Suriname Armed forces for delivery ofcommunication system network server
Rolls Royce, HALRolls Royce and HAL forged a 50:50 joint venture to manufacture compressor shrorings and construction of a new production facility that would incorporate the latemodern manufacturing techniques
M&M Ltd, BAEMahindra & Mahindra Ltd and BAE forged a JV to develop strike vehicles for IndiaArmy. M&M owns 74 % equity and BAE owns 26%
56
L&T, CassdianGovernment altering its current foreign direct investment (FDI) limit in the defenssector from 26% to a higher percentage
Defence Offset Joint Ventures (5/5)
Entity Involved Details
• Agusta westland and Tata Sons Ltd signed to create a Joint Venture with dwhich would be concentrating on assembly work of AW119 helicopter for
Agusta Westland, Tata Sons Ltd
which would be concentrating on assembly work of AW119 helicopter forworldwide market, with a production rate of 30 a year and the first airpotentially ready for delivery in 2011.
• The AW119 would be proposed to Indian military Reconnaissance and SurveillHelicopter program.
Larsen & Toubro,Europe's EAD
• Announced the formation of a joint venture company for defense electroniIndia aim at development, design, manufacturing and related services in the fof electronic warfare, radars, military avionics and mobile systems for mirequirements
57
Defence Offset List of Products and Services Eligible for Discharge of Offset Obligations
Defence Products
• Small arms mortars cannons guns howitzers anti tank weapons and their ammunition including fuzes• Small arms, mortars, cannons, guns, howitzers, anti tank weapons and their ammunition including fuzes• Bombs, torpedoes, rockets, missiles, other explosive devices and charges, related equipment and accessoriesdesigned for military use, equipment specially designed for handling, control, operation, jamming and detectio
• Energetic materials, explosives, propellants and pyrotechnics• Tracked and wheeled armoured vehicles, vehicles with ballistic protection designed for military app, p g y pparmoured or protective equipment
• Vessels of war, special naval systems, equipment and accessories to include following: ‐ Design, manufacture or upgrade of weapons, sensors, armaments, propulsion systems, machinery
systems, navigation equipment/instruments other marine equipment and hull forms of warships, subauxiliariesauxiliaries
Facilities and equipment required for testing, certification, qualification and calibration of hull forms, ppropulsion and machinery control systems, weapons sensors and related equipment including enhancestealth features and EMI/EMC studies for warships, submarines and auxiliaries
Software specially designed, developed and modified for design of all types of warships, submariauxiliaries or their hull forms
Setting up of maintenance and repair facility for equipment/weapons and sensors and other marineincluding related technical civil works.
• Aircraft, unmanned airborne vehicles, aero engines and air craft equipment, related equipment specially desmodified for military use parachutes and related equipment
58
modified for military use, parachutes and related equipment• Electronics and communication equipment specially designed for military use such as electronic counter
and counter measure equipment surveillance and monitoring, data processing and signalling, guidanavigation equipment, imaging equipment and night vision devices, sensors
Defence Offset List of Products and Services Eligible for Discharge of Offset Obligations
Defence Products• Specialized equipment for military training or for simulating military scenarios, specially designed simula
of armaments and trainers and training aids viz. Simulators, associated equipment, software and comptraining modules
• Forgings, castings and other unfinished products which are specially designed for products for military aand troop comfort equipment
• Miscellaneous equipment and materials designed for military applications, specially designed environMiscellaneous equipment and materials designed for military applications, specially designed environfacilities and equipment for the certification, qualification, testing or production of the above products
• Software specially designed or modified for the development, production or use of above items. Thsoftware specially designed for modeling, simulation or evaluation of military weapon systems, msimulating military operation scenarios and Command, Communications, Control, Computer and Intell
li tiapplications• High velocity kinetic energy weapon systems and related equipment• Direct energy weapon systems, related or countermeasure equipment, super conductive equipment a
designed for components and accessories.
Products for Inland/Coastal Security• Arms and their ammunition including all types of close quarter weapons• Specialized Protective Equipment for Security personnel including body armor and helmets• Vehicles for internal security purposes including armoured vehicles, bullet proof vehicles and mine
hi l
59
vehicles• Riot control equipment and protective as well as riot control vehicles• Specialized equipment for surveillance including hand held devices and unmanned aerial vehicles• Equipment and devices for night fighting capability including night vision devices
Defence Offset List of Products and ServicesEligible for Discharge of Offset Obligations
Products for Inland/Coastal Security
• Navigational and communications equipment including secure communications• Specialized counter terrorism equipment and gear, assault platforms, detection devices, bre
gear etc• Specialized equipment for Harbor Security and Coastal Defence including seabed/maSpecialized equipment for Harbor Security and Coastal Defence including seabed/ma
surveillance sensor chains, sonar's, radars, optical devices, AIS• Vessel Traffi c Management Systems (VTMS/VATMS) and appropriate vessels/crafts/boats• Miscellaneous maritime equipment for undertaking investigations, Boarding, Search and Seiz
ships/vesselsships/vessels• Software specially designed, developed and modified for all types of Coastal and Maritime se
domain awareness, operations and data exchange
Services (related to eligible products)( g p )
• Maintenance, repair and overhaul• Up gradation/life extension• Engineering, design and testing
60
g g, g g• Software development• Quality assurance• Training• Research and Development services (from government recognized R&D facilities)
Defence Offset Critical Defence Technology Areas and Test facilities
Li t f C iti l D f T h l A d T t f iliti f A i iti b DRDO th h OffList of Critical Defence Technology Areas and Test facilities for Acquisition by DRDO through Offsereviewed periodically) Critical Technology Areas Navigational and communications equipmentsecure communications• MEMs based sensors, actuators, RF devices, Focal plane arrays• Nano technology based sensors and displays• Nano technology based sensors and displays• Miniature SAR & ISAR technologies• Fiber Lasers Technology• EM Rail Gun technology• Shared and Conformal Apertures• Shared and Conformal Apertures• High efficiency flexible Solar Cells technology• Molecularly Imprinted Polymers• Technologies for Hypersonic flights (Propulsion, Aerodynamics and Structures)• Low Observable Technologies• Low Observable Technologies• Technologies for generating High Power Lasers• High Strength, High‐modulus, Carbon Fibers, Mesosphere pitch‐based fibre, Carbon Fiber P
Facility• Pulse power network technologies
61
• Pulse power network technologies• THZ Technologies
Defence Offset Definition of Micro, Small and Medium Enterprise
D fi iti f Mi S ll d M di E t iDefinition of Micro, Small and Medium Enterprise:
a. In the case of enterprises engaged in manufacture of goods:
• Micro enterprise is that where investment in plant and machinery does not exceed INR • Small enterprise is that where investment in plant and machinery is more than INR 2.5 does not exceed INR 50 million
• Medium enterprise is that where investment in plant and machinery is more than INR 5but does not exceed INR 100 million
b. In the case of enterprises engaged in providing services:
• Micro enterprise is that where investment in equipment does not exceed INR 1 million• Small enterprise is that where investment in equipment is more than INR 1 million but dexceed INR 20 million
• Medium enterprise is that where investment in equipment is more than INR 20 million
62
not exceed INR 50 million