Defexpo India 2012 kicks off today

Most of the 230-odd foreign companies that will display their wares at Defexpo India 2012 in New Delhi from 29th Mar to 1st April will be primarily targeting the Indian defence market

by Ajai Shukla

Business Standard, 29th Mar 12

Defexpo India 2012, the country’s biggest-ever land, naval and homeland security systems exhibition, would be inaugurated here tomorrow. About 580 exhibitors (compared with 425 exhibitors in Defexpo 2010, the last exhibition), spanning the spectrum from global defence giants to Indian small scale industries, have worked around the clock for over a week, putting together displays that might catch the eye of MoD acquisition managers in the capital city of the world’s biggest buyer of weaponry.

Scheduled to be inaugurated by defence minister A K Antony, this would be the seventh in the series of land, naval and internal security systems exhibitions India holds every other year. The exhibitors will include 232 foreign firms, mainly from the US, Russia, France, Israel, the UK and Germany, along with 60 official delegations.

While defence expos all over the world have forums for interaction between buyers and sellers from all countries, the Defexpo India series feature primarily one buyer: India. The bulk of the exhibitors frankly admit they focus solely on selling arms to this country alone.

Held at the capital’s Pragati Maidan, Defexpo India 2012 has been organised by the Defence Exhibition Organisation (DEO), an MoD organisation that promotes exports of the defence public sector undertakings (DPSUs), the Defence Research & Development Organisation (DRDO) and the Ordnance Factory Board (OFB). Besides the Defexpo, it is also the nodal and co-ordination agency for the Aero India show, an air show held every alternate year in Bangalore. Partnering the DEO as event manager is the Federation of Indian Chambers of Commerce and Industry.

For global defence vendors, Defexpo 2012 is an important opportunity for entering the Indian market, estimated at about $100 billion between now and 2022. Supplementing this figure would be another $19 billion by 2017 on homeland security. The Indian capital budget is already $16 billion this year, and rises at about 15 per cent annually.

Currently, foreign vendors supply an estimated 70 per cent of India’s weaponry. New Delhi has repeatedly declared, without setting any timeframe, it should source 70 per cent of its defence needs indigenously. Global majors, therefore, are establishing partnerships with Indian defence producers to become a part of the Indian defence business. Currently, there is a cap of 26 per cent on foreign direct investment in defence. The commerce ministry, however, is pressing for this to be raised to 74 per cent, or at least 49 per cent.

Tie-ups with Indian companies are also driven by foreign vendors’ offset liabilities, which would accrue from defence sales to India. The MoD’s offset regulations impose a minimum offset of 30 per cent of the contract value for all contracts above Rs 300 crore. This must be discharged through the purchase of products or services from Indian defence companies or investments into the industrial infrastructure of Indian defence joint ventures or investment into Indian research & development organisations. In all the cases, the foreign vendor must identify an Indian partner through which it would discharge its obligations. Defexpo 2012 provides defence companies a platform to meet prospective offset partners.