An MP-IDSA Fellows Seminar conducted by Dr. S. Samuel C. Rajiv, Research Fellow, on ‘Private Sector Defence Joint Ventures: Exports and Role of Offsets’ took place on 20 June 2025. It was chaired by Col. (Dr.) Rajneesh Singh (Retd.), Research Fellow and Coordinator of the Defence Economics and Industry Centre at MP-IDSA. The External Discussants for the paper were Shri Amit Cowshish, former Financial Advisor (Acquisition), Additional Secretary and Member of the Defence Procurement Board at the Ministry of Defence (MoD), and Shri Puneet Sharma, Indian Defence Accounts Service, Additional CDA (Air Force), PCDA Air Force, New Delhi. The Internal Discussant was Cmde. Abhay K. Singh (Retd.), Research Fellow and Coordinator of the Southeast Asia and Oceania Centre at MP-IDSA.

Executive Summary

The presentation focused on the private sector defence industry’s role and contribution to India’s defence exports. It examined the exports of private sector defence joint ventures with US, French, and Israeli original equipment manufacturers (OEMs). Dr. Rajiv highlighted that the private sector has contributed to India’s defence exports through policies such as offsets. Dr. Rajiv added that changes to offset policies will impact the private sector’s share of exports. With India targeting INR 50,000 crore in defence exports by 2028–29, the private sector will be crucial in reaching this target.

Detailed Report

Col. (Dr.) Rajneesh Singh (Retd.) began the proceedings by highlighting the growing role of India’s private sector in defence exports, driven by policy reforms and strategic imperatives. In FY 2024–25, India’s defence exports reached a record ₹23,622 crore, with the private sector contributing ₹15,233 crore—about 64.5 per cent. Defence Public Sector Undertakings (DPSUs) also saw a sharp 42.85 per cent rise in exports. As the government aims for ₹50,000 crore in defence exports and ₹3 lakh crore in total defence production by 2029, the private sector—now contributing 21 per cent of defence production—is expected to play a crucial role through innovation, efficiency, and global competitiveness. Col.(Dr.)Singh (Retd.) noted that while the defence offsets policy may have contributed to exports by private sector defence companies, it has not effectively enabled meaningful technology transfers and access to advanced technologies.

Dr. Rajiv began his presentation with an empirical overview of India’s defence export performance over the last decade. Between 2015 and 2025, India achieved cumulative defence exports worth ₹109,997.6 crore. A striking feature of this growth trajectory has been the pivotal role played by the private sector, which accounted for ₹71,328.97 crore, representing 65 per cent of total exports. Even as the public sector dominates India’s defence industrial base, the private sector has played an essential role in contributing a larger share of India’s defence exports in recent years.

Dr. Rajiv gave the historical background of the policy framework relating to offsets, from the 2006 Defence Procurement Procedure (DPP) to the 2020 Defence Acquisition Procedure (DAP), highlighting their respective stipulations for offset obligations. The 2006 DPP mandated 30 per cent offsets for defence procurements above ₹300 crore under ‘Buy (Global)’ or ‘Buy and Make with Transfer of Technology’ (ToT) categories. Over the years, the framework became more nuanced with multipliers for Micro, Small and Medium Enterprises (MSMEs), DRDO-oriented ToTs, and investments in Defence Industrial Corridors (DICs). By 2020, offset applicability was limited to contracts above ₹2,000 crore and excluded intergovernmental agreements (IGAs) and single-vendor cases. The cumulative offset contracts reached US$13.2 billion by March 2025, with verified claims worth US$6 billion.

Dr. Rajiv then highlighted Indian private sector joint ventures with foreign OEMs. India has procured defence equipment from the US under the Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) programmes. India was designated a Major Defence Partner in June 2016. Dr. Rajiv highlighted that Tata Advanced Systems Limited (TASL) is a prime example of a successful offset-driven private sector company. TASL subsidiaries such as Tata Boeing Aerospace Limited (TBAL) have become the global sole supplier of Apache AH-64 fuselages, having delivered nearly 200 units. TASL also collaborates with Raytheon to produce Stinger missile control assemblies.

The 2016 Rafale fighter aircraft deal marked a significant advancement in Indo-French defence cooperation, with an offset requirement of 50 per cent, significantly above the typical 30 per cent. Three joint ventures—Dassault Reliance Aerospace Ltd. (DRAL), Thales Reliance Defence Systems Ltd. (TRDSL), and L&T MBDA Missile Systems Ltd.—have been formed to fulfil these commitments. DRAL, a partnership between Reliance Infrastructure and Dassault Aviation, commenced operations in 2018, producing fuselage components for the Falcon 2000 and Rafale aircraft. TRDSL, on the other hand, became the first Indian company to assemble and test the AESA radar for export to France. L&T MBDA Missile Systems, established in 2017, constructed a missile integration facility in Coimbatore, investing heavily in infrastructure and Technology Transfer (ToT).

Indo-Israeli defence collaborations have mainly concentrated on missile systems and unmanned platforms. The Kalyani Rafael Advanced Systems (KRAS) joint venture, founded in 2015, was India’s first private missile subsystem manufacturer. KRAS showcases successful high-technology exports from India, with 95 per cent of its revenues derived from exports. The Adani Group, another major player, has partnered with Elbit Systems through several entities, including Adani Elbit Advanced Systems and Atharva Advanced Systems. These joint ventures produce Sky Striker loitering munitions and Drishti-10 (Hermes 900) UAVs in Hyderabad for international markets. Linked to the Adani group, Alpha Design Technologies also has significant export sales.

Dr. Rajiv concluded the presentation by noting that while the offset policy has historically catalysed private sector participation and exports, its evolving scope—especially under DAP 2020—raises both opportunities and challenges. However, these challenges are offset by promising trends. Private defence firms like Kalyani Strategic Systems Limited (KSSL), Solar Industries, and Zen Technologies have secured substantial export orders independent of offset obligations. Moreover, global defence spending—particularly by European countries—offers vast opportunities for Indian firms to integrate into global supply chains.

Shri Amit Cowshish

Shri Cowshish began by commending the speaker for a well-structured presentation. He highlighted the limitations of the Defence Offsets Policy in enhancing domestic defence capabilities, noting that only one offset contract was signed between 2021 and 2025. Shri Cowshish pointed out that the 2020 reforms raised the contract value threshold to ₹2,000 crore and excluded intergovernmental and single-vendor deals. Although contracts worth US$13.52 billion were signed, only US$6.85 billion in claims were processed by 2024, with limited success in integrating Indian firms into global supply chains and minimal gains in technology transfer or innovation capability.

Design flaws, such as permitting vendors to opt for easier offset routes like direct purchases and burdensome bureaucratic procedures, further weakened the policy’s impact, leaving it disconnected from broader self-reliance goals under Atmanirbhar Bharat. While acknowledging that the offsets have indeed contributed to India’s defence exports, as succinctly brought out by the presenter, Shri Cowshish stressed the need for India to move beyond offsets and develop a cohesive defence industrial strategy focused on targeted R&D, greater private sector participation, long-term partnerships with OEMs, and co-development models built on trust and innovation.

Shri Puneet Sharma

Shri Sharma commended the presentation and stressed the importance of assessing whether current measures effectively enhance indigenous technological capacity. He highlighted the need for focused training in core manufacturing skills to strengthen domestic capabilities. Shri  Sharma highlighted some key changes in the policy framework relating to Atmanirbharta, including revisions to the Offset Policy with an emphasis on attracting investment and facilitating technology transfer through the provision of higher multipliers, the establishment of two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu, the opening of defence research and development (R&D) to industry, start-ups, and academia, with 25 percent of the defence R&D budget earmarked for this purpose, and the gradual increase in the defence budget allocation for military modernisation through procurement from domestic sources.

Shri Sharma emphasised the importance of monitoring offset obligation compliance through audits and progress reviews, to use capital acquisitions to strengthen India’s defence industry by promoting globally competitive enterprises, boosting R&D capacity in defence, and supporting related sectors like civil aerospace and internal security.

Commodore Abhay K. Singh (Retd.)

Commodore Singh appreciated the presentation for effectively highlighting India’s offset policy’s evolution, outlining its strengths and weaknesses and its contributions to India’s defence exports. He noted the significant rise in defence exports, especially by the private sector, which reached a record ₹21,083 crore in FY 2023-24, marking a 32.5 per cent increase over the previous year and a 31-fold jump since 2013-14. With exports now reaching over 100 countries, India’s defence sector appears to be at a turning point. India’s defence industrial ecosystem is also buttressed by the government’s large defence order pipeline and increasing private sector participation.

Q&A Session

The Q&A session mainly focused on technology transfer, defence exports, foreign vendor involvement, research and development, joint ventures, and high-value technological collaborations. Col. (Dr) Singh (Retd.) observed that India has adopted an offset policy to leverage large arms imports to build a strong indigenous defence industry. Despite numerous offset contracts signed since 2005, Col. (Dr.) Singh (Retd.) reinforced Shri Cowshish’s point that only one offset contract has been signed in recent years. Moreover, reports by the Comptroller and Auditor General (CAG) and various analysts have highlighted the policy’s limited success in ToT, among other factors.

It was also pointed out that the offset policy has not been able to attract foreign direct investment (FDI) or bring high-end manufacturing and technology into India. However, the policy has benefited civilian aerospace component exports. Dr. Rajiv stated that the paper was limited to investigating whether offsets have supported defence exports by enabling domestic sourcing of parts for imported platforms and facilitating joint ventures and component exports by Indian offset partners. The Chair, Col. (Dr.) Singh (Retd.) mentioned that the Defence Acquisition Procedure (DAP) 2020 is being revised and stated that it will be interesting to see if there will be changes to the offsets policy as well. Dr. Rajiv expressed gratitude for the constructive comments and suggestions for future research.

Report prepared by Dr. Shayesta Nishat Ahmed, Research Analyst, Defence Economics and Industry Centre, MP-IDSA.