Gujarat moots SEZ for defence offsets

With the increased efforts by the Ministry of Defence of opening up opportunities for private sector, the Gujarat government also seems to be leaving no stone unturned. The state government is planning to set up a dedicated special economic zone (SEZ) for offsets in the defence sector.

"We have floated the idea of setting up a dedicated SEZ for the defence sector, that too primarily for offsets, to the ministry of defence. We can allot land in any of the special investment regions (SIR). It is now upto the ministry of defence to support us in developing the SEZ," Saurabh Patel, minister of state for industries, finance, energy and petrochemicals, Government of Gujarat, told Business Standard.

Offsets are counter-trade obligations imposed by an importing country, in this case India, upon the original equipment manufacturer (OEM) that mandate the transfer of critical technologies and production of components. India obligates that offset related investments be strictly limited to defence. Currently, a foreign supplier has to invest back or purchase from India 30 per cent of the value of the deal.

Speaking at a seminar on 'Emerging Opportunities in the Defence Sector', Patel said, "The Gujarat government is very keen to leverage the capabilities of its industries to meet the national defence requirements and are seeking to explore the scope for setting up joint ventures with overseas companies engaged in supplying defence equipment to India by way of capital and technology inflows. Gujarat is on the forefront in the sectors of petrochemicals, pharmaceutical and telecommunications. To capitalize on the emerging opportunities, the state government is planning to set up an exclusive SEZ for defence supply industries. For providing a thrust to the defence sector in Gujarat, the central and the state governments will work in tandem for better coordination."

The seminar, fifth in the series of 12 pre-summit seminars being organised in the state in the run-up to the Vibrant Gujarat Global Investors' Summit (VGGIS) 2011, was organised in the context of the major reform in the Defence Procurement Policy of the Union government, which provides opportunities for the direct participation by Indian Industry in defence tenders on a level playing field with the PSUs. Currently, 70 per cent of India's defence products are being sourced from abroad, but now India is aiming to reverse the trend by manufacturing 70 per cent of its defence equipment in India.

"Now is the time for boosting the defence sector in the state as it is going to be the fastest growing sector in the coming years. We can produce the best quality defence equipment at a cheaper price due to low manufacturing and labour cost," Patel added.

The state government is also willing to take further initiatives for the promotion of this emerging sector in the state of Gujarat, the original equipment manufacturers (OEMs) perhaps can look for vendors who can meet with their specific requirements. The seminar was organized by iNDEXTb in association with Industries Commissionerate and Confederation of Indian Industries (CII).