Defence Industry

Impact of Offset Policy on India's Military Industrial Capability - II
Star Rating Loader Please wait...
Issue Vol 26.2 Apr-Jun 2011 | Date : 25 Oct , 2011

Dr. Rama Rao’s Committee strongly advocates such technology for Air Traffic Control, Imaging for Agriculture, Water and Mineral Resources, Met.

And Oceanographic Study and Disaster Warning.69 In the area of flight display, avionics & inflights entertainment and propulsion systems, dual use technology will have excellent commercial spin off.70

Malaysia’s MOD has given primacy to promoting priority dual use items71 as it helps sustainment of business.

The civil shipbuilding could be considered for offsets. In the Report of PM’s group on Growth of Indian Manufacturing Sector- Shri Krishnamurthy has advocated mission made approach for building domestic shipbuilding capability and new shipyards.72

To meet the growing demand of ships both for maritime trade and to meet the requirement of Navy and Coast Guard, it is crucial that the shipbuilding sector be provided due impetus. This requires a multi-pronged strategy to revitalise the Indian shipbuilding industry. This would encompass modernisation of shipyards, induction of contemporary technologies and construction processes, enhancements in ship-design knowledge, fiscal incentives and public-private partnership.

The implications of a vibrant and competitive shipbuilding industry, on maritime security, energy security, trade security and indeed the overall economic development of the nation are enormous. Shipbuilding should be viewed in this overall strategic context. We have made considerable progress and today we are amongst the few select nations which build their own warships and submarines. However, with our expanding maritime responsibilities and interests, the shipbuilding sector could be considered as part of the products eligible for meeting Offsets obligations.

Also Read:

Warship shipbuilding is a crucial sector and its revitalisation could benefit from the offsets route especially in light of the number and value of acquisitions planned in respect of warships and submarines.73 Joint Secretary (Shipyard) MOD is fully supportive of such dual use.

Major Russia military aviation companies are also eyeing seriously for diversification to civil aircraft sector through Joint programme as Military Aviation constitutes 92% of their business.74 Joint R&D & production programmes like Regional Transport Air Craft for the civil segment makes eminent commercial sense.75 However, some critics view that it is much more cost effective to go after civilian technology directly rather than reshaping military oriented technologies to fit civilian uses. (Dumas 1982). 76

Road Ahead

The primary objective of Indian defence offset is to be self reliant by acquiring key technologies, absorbing manufacturing capability of major systems, upscaling skills levels, participating in Joint development of (R&D) and building long term win win investment partnership with foreign OEMs.

As per assessment, acquisition proposals in the pipeline are of $23 bn with likely offset realization of around $9 bn. IAF will account for 70%, Army 20% & Navy 10%. For meaningful realization offsets the following is recommended

  • Focus on transfer of Key technologies like Seeker, FPA, AESA, Stealth & Single Crystal & allow suitable multiplier.
  • Increase FDI cap to 50% for investment proposals which bring in such niche technology or major manufacturing capability of systems/subsystems.
  • Govt. has to play the pivot through Bilateral Defence Cooperation discussion at the level of RM with strategic partners like Russia, France, Israel & USA.
  •  Bolster manufacturing capability to make India a potential hub in OEM’s global supply chain. China is a good example to replicate.
  • Need for synergy between Design, Development & Production Agency.
  • Foster Public Private partnership.
  • Substantial increase in R&D spend by public & private sector players.
  • Have a properly empowered & technically equipped Defence offset Facilities Agency.


  1. DPP-2005
  3. Ibid
  4. ibid
  5. DPP-2011 (P/57)
  6. ibid (P/55)
  8. DPP-2011 - P/56
  9. DPP-2005
  11. Email from Prof. Ron Matthews dt.20.4.2011
  12. Annual Reports MOD
  13. Ibid
  14. Ibid
  15. Annual Report, Midhani (2009).
  16. Annual Report, MOD
  17. Ibid
  18. Reply to Parliamentary Standing Committee on Defence (2009-10)
  19. DPP-2009
  20. DPP-2011
  21. Report of the Review Committee To Evolve A Ten year plan for self - reliance in Defence system.
  22. Ibid
  23. Air Commodore Jasjit Singh: Indian Aircrafts Industry: Knowledge World (2011)
  24. Ibid
  25. Tony Saich, ‘Reference of China Science & Technology Org. System in Fred & Goldman-eds
  26. Defence Expenditure Review Committee Report (2009)
  27. MD(M): HAL
  28. 15 Year Indigenisation Plan (Navy) (2003)
  29. Reply from COM, NHQ dt. 8.06.2011
  30. SIPRI Year Book (2010)
  31. Ibid
  32. A. Bhaskaran
  33. Ibid (P-224)
  34. Dr. Kelkar Committee Report (April 2005)
  35. Indian Express dt. 31.05.2011
  36. Email reply dt. 8.05.2011 from Lockheed Martin
  37. Study on Effect of offsets on the dev of EDA & Market - A. A. Eriksson12th July 2007.
  38. Kogila Balakrishna – Evaluating effectiveness of Offsets as Mechanism of promoting Malaysian Defence Industrial Development (April 2007)
  39. Strys - W(2004) “Offsets in Belgium” Arms Trade & Eco. Development, London :Routledge.
  40. Martin S & K Hartley (1996) “The UK Experience with Offsets” Economics of offsets.
  41. Lloyd J.Dumar- “Do Offsets Mitigate of Magnify Military Burder? Arms Trade & Economic Development
  42. Prof. K. Hartley – The Future of EDA- Economic Perspective- Defence Peace Economics (2009)
  43. Chinworth & Mathew - Defence Industries Through Offset - Japan, Arms Trade & Economic Development, London : (Routledge)
  44. Parliamentory Standing Committee on Defence (2009-2010)
  45. http:/ 20 industries pdf
  46. http:/ papers 17th May 2010.doc.
  47. Interview with Dr. Kelkar & Deepak Parekh 3rd Sept. 2010 & 31/8/2010
  48. Air Commodore Jasjit Singh – Indian Defence Industry (2011)
  49. Nelie Yan - China’s Search for Indigenous Industrial Development, Ph.D Thesis (June 2009)
  50. Email reply dt. 20.6.2011
  51. Meeting with SA to RM dt 6.09..2010
  52. Email from Dr. APJ Abdul Kalam dt. 5.05.2011
  53. CII Conference, New Delhi, on 12th June, 2011 - Address by Dr Kalam
  54. Shri J.D.Patil, VP, L&T: Conference on Offsets (12/07)
  55. Economic Survey - 2010-2011
  56. Meeting with Country Head Thales & VP, BAE System 3rd June 2011.
  57. Meeting with VP, Boeing(India)dt.4.1.2010
  58. Stephen Martin - N-35
  59. Email - Prof.J Brauer - Economic Aspects of Arms Trade 25.4.2011
  60. Meeting with Dr. APJ Abdul Kalam dt. 3rd June 2011
  61. Inaugural Address in International Seminar on Defence Finance, New Delhi (11/06)
  62. Ex Chairman, HAL dt. 13.05.2011
  63. Ex CMD HAL
  64. Stephen Martin- Overview of Theory & Evidence - Economics of Offsets London :( Routledge) (P/38)
  65. DGIDSA (15/06/2011)
  66. Stephen Martin N 118
  67. Reply dt. 30.03.2009
  68. Sr. Advisor HCL (Overseas)
  69. Rama Rao Committee Report (2008)
  70. Meeting with CEO - SAMTEL dt. 3rd June 2011
  71. Kogila Balakrishna - N -29
  72. Report of the PMs Group: Measure for Ensuring Sustained Growth of Indian Man. Sector (9/2008)
  73. Feedback from NHQ dt. 16.05.2011
  74. SIPRI Year Book - 2011
  75. Interaction with Chairman, UAC, Russia
  76. Lloyd - J. Duma N56A
1 2 3
Rate this Article
Star Rating Loader Please wait...
The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Prof (Dr) SN Misra

was previously Joint Secretary (Aerospace), Ministry of Defence, Government of India.

More by the same author

Post your Comment

2000characters left