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

Defence Spending & Offsets :  Indian Scenario

6

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 Offsets : Indian Perspective

17

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’s World Class Shipbuilding

Industry  for building new age Warships

38

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)

Doing Business In India

43

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

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• Any taxable services involved in the ToT agreementwould attract Service tax at applicable rates

AnnexureAnnexure

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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

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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

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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

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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

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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%

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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

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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

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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

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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

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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

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• 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 

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not exceed INR 50 million

Knowledge Partner National PartnerOrganized By

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