KPMG Forcasts Mega Contracts for US Defence Companies

By admin • November 2nd, 2010

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India Defence Online, New Delhi — Ahead of US President Barack Obama’s visit to India, Indo-US defence deals are gaining more momentum than ever before. While it has been suggested that no big-ticket defence deal will be formalized during the visit, the US has already claimed a substantial chunk of defence contracts from India in recent times.

During a recent seminar on the release of the KPMG-American Chamber of Commerce report on the “Indian Defence sector: The improving landscape for US business and Indo-US commercial enterprise”, India has acknowledged the fact that the US is a key partner in the defence arena because it fulfils developmental goals and aspirations.

While the US has already ousted Russia to be become the leading exporter of defence wares to India, US companies have bagged over 40 per cent of the recent defence deals in India. According to the KPMG-American Chamber of Commerce report on the Indian Defence sector, Boeing, Lockheed Martin and GE Aviation totally won contracts worth around $3.75 billion among 13 overseas companies that won different orders from the Indian Government.

The report corroborated the details of the contracts won by US suppliers and indicated that Boeing achieved 21 per cent of the orders given worth $2.1 billion followed by Lockheed Martin with 11 per cent of the contracts worth $1 billion and GE Aviation 7 per cent at $650 million. Some of the major defence deals that the US bagged include deals such as 12 P-8I (Poseidon maritime reconnaissance aircraft) worth over $3 billion, ultra-light howitzers worth $647 million, F 414-GE-INS6 engines for the Light Combat Aircraft (LCA) worth $650 million, Harpoon anti-ship missiles worth $170 million and six Martin C-130 J Super Hercules aircraft for Indian special forces worth $1 billion.

As per the report, nearly half a dozen US companies are eyeing the upcoming market as the country goes on a buying spree estimated at $112 billion by 2016 to modernise the Armed Forces. According to US giant Boeing, it intends to bid for Indian deals worth $31 billion by year 2020. Besides, both Boeing and Lockheed Martin are contenders for the 126 Multi medium role combat aircraft (MMRCA) for the Indian Air Force (IAF) estimated to cost $10 billion besides other global majors.

While releasing the KPMG- American Chamber report, the Minister of State for Defence Production M.M. Pallam Raju said that the multi-billion dollar defence deals under negotiation are expected to give Indian firms offset works worth around $10 billion over the years. However, there are concerns being raised as to how the Indian industry can create such a capacity. KPMG, the leading provider in corporate governance as well as financial and risk management, has indicated that by the current foreign direct investment (FDI) limit, Indian companies would have to invest $20 billion on their part to meet the offset supply demand. Since this will be too much to expect from Indian firms, the FDI limit of 26 per cent in defence ventures needs to address and the offset policy also needs a re-look.

Source: India Defence Online

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