IT department mulls made-in-India hardware to offset defence purchases

The department of information technology (DIT) is proposing the inclusion of electronic hardware manufactured in the country to offset the country?s defence purchases from other countries as part of the defence ministry’s Defence Offset Policy.

The offset provision applies to all capital acquisitions where the estimated cost of the acquisition proposal is Rs 300 crore or more. A minimum offset of 30% of the indicative cost is required in such acquisitions.

?The defence ministry has constituted a committee for this and we want the incorporation of made in India electronic equipment in the offset to help the cause of the Indian manufacturing industry. We will articulate the same to them but the process will entail other departments also,? said a DIT official.

The offset obligations of the foreign vendors can be met either through investment in India?s domestic defence industrial infrastructure, including defence R&D, leading to joint ventures, co-development and co-production of defence items or through purchase or execution of export orders for defence goods and services produced by Indian defence enterprises, both in the public and private sector.

DIT wants the country?s electronics manufacturing industry to benefit to offset the purchases made by the defence ministry from other countries. Almost $20 billion of electronics manufacturing is done in India while the annual demand for electronics stands at $45 billion.

?At present, the policy is between defence equipment of India and the other countries. We want the policy to broaden its reach to include electronic goods also so that electronic hardware manufacturing is enshrined as an important constituent of the policy. We want more of our products in the offset arena,? the official added.

Offset is a way of government procurement and the department – through a task force it constituted last year- proposed steps to encourage the ?Made in India? goods by proposing that 30% of the demand can be met through such products if they are technically and commercially competitive for government procurements.

The task force estimate puts the exports from IT and ITeS sector at $82 billion by 2014 and $175 billion by 2020. The demand for electronics hardware in the country has been projected to increase from $5 billion in 2009 to $125 billion by 2014 and $400 billion by 2020. To give a fillip to indigenous manufacturing, the govt plans to create a dedicated Electronic Product Development Fund with an initial corpus of Rs 5,000 crore.