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While India has made it mandatory for international firms selling military equipment to procure 30 per cent of the components locally through its defence procurement and offset policy in 2006, the move has not generated a substantial amount of business.
Defence Industry officials noted that the local Indian firms who were meant to supply the components are importing a majority of the raw materials needed for developing them.
Although the offset policy was meant to increase the business of the local firms, nearly two-thirds of the material needed for making the desired components have to be imported. In effect, only a third of the value of such deals is coming into India.
India’s defence exports plunged below $100 million for the year that ended in March 2009, while its imports are skyrocketing to about $30 billion by year 2012.
India is the third largest importer in the fighter plane and tank segment and almost 70 per cent of its weaponry requirement is imported.
According to the above-mentioned statistics, India will have close to $10 billion worth of offset orders from international military equipment makers and a huge opportunity for local firms to collaborate and develop the components.
However, the rising imports are deterring the growth of local firms.
Officials said that Indian firms end up buying aerospace grade materials like aluminum from foreign firms.
Quest, an engineering services company that has set up India’s first special economic zone for aerospace manufacturing in a 300-acre campus in Belgaum in northern Karnataka, says it imports most of the material it needs for making components.
Other aerospace firms like Taneja Aerospace and Aviation Limited has felt that until now, it was not viable to make those components. However, since the potential and market for these components will not be limited to India, the effort to manufacture them locally will increase.
As of now, local Indian firms are concentrating on quality development to match up the global standards in the aerospace industry. For instance, Gujarat-based Kemrock Industries and Exports Limited is setting up a unit jointly with Germany’s Saertex GmbH and Company to make and export carbon composite aerospace parts to global aircraft makers.
Other firms like Boeing India are gaining immense experience from US Boeing Company which has $ 2.5 billion in offsets deals in India which includes surveillance planes to the Indian Navy.
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