Wel­come move for In­dian de­fence in­dus­try

SP's MAI - - MILITARY - [ By Ran­jeet Ku­mar ]

In ac­cor­dance with the move to re­lax FDI norms in de­fence sec­tor to the max­i­mum limit of 100 per cent, the govern­ment has come out with an­other for­ward look­ing de­ci­sion which will not only boost the pri­vate de­fence in­dus­try in In­dia but also ex­pand the base of the man­u­fac­tur­ing sec­tor in the coun­try, which is in ur­gent need of govern­ment care. The pri­vate sec­tor can now freely man­u­fac­ture the de­fence-re­lated sys­tems not ex­actly meant for use in bat­tle­ground like the bat­tle tanks, fighter planes, mis­siles, war­ships, am­mu­ni­tions, heavy ex­plo­sives, etc. In fact, just within the first month of Naren­dra Modi Govern­ment, the Com­merce Min­istry in con­sul­ta­tion with the De­fence Min­istry has heav­ily pruned the list of de­fence items which can­not be man­u­fac­tured by the pri­vate sec­tor. The rest of the weapon plat­forms, sys­tems and equip­ments can be pro­duced by the pri­vate sec­tor, with­out re­quir­ing any li­cence. Since the Press Note No.3 is­sued by the govern­ment has not spec­i­fied the limit of the FDI in these de­fence re­lated dual use pro­duc­tion fa­cil­i­ties, the in­dus­try watch­ers have as­sumed that they can at­tract 100 per cent FDI in these sec­tors.

In fact this will largely stream­line the in­dus­trial li­cens­ing process for de­fence equip­ment for which per­mits would not be needed for pro­duc­tion. Till now the mo­nop­oly for pro­duc­ing these items was re­tained by the pub­lic sec­tor de­fence un­der­tak­ings and ord­nance fac­to­ries. Even the sol­dier’s shoes and spe­cial gar­ments were re­quired to be sourced by the three ser­vices from the ord­nance fac­to­ries which re­sulted in lack of com­pe­ti­tion and hence low qual­ity and high price prod­uct thrust on the armed forces and its soldiers. Now the ord­nance fac­to­ries will have to com­pete with the pri­vate sec­tor de­fence in­dus­tries, pro­duc­ing non-sen­si­tive de­fence prod­ucts. Till now the de­fence items were cov­ered un­der com­pul­sory li­cens­ing un­der the In­dus­tries (De­vel­op­ment and Reg­u­la­tion) Act, 1951.

Ac­cord­ing to the Min­istry of Com­merce and In­dus­try state­ment Items not in­cluded in the list would not re­quire in­dus­trial li­cence for de­fence pur­pose. Fur­ther, it is clar­i­fied that dual-use items, hav­ing mil­i­tary as well as civil­ian ap­pli­ca­tions, other than those spe­cially men­tioned in the list, would also not re­quire in­dus­trial li­cence for de­fence an­gle.

Since the move would boost man­u­fac­tur­ing sec­tor, the in­dus­try cham­bers have widely wel­comed the de­ci­sion. Com­ment­ing upon the de­ci­sion of far reach­ing sig­nif­i­cance, A. Di­dar Singh, Gen­eral Sec­re­tary, Fed­er­a­tion of In­dian Cham­bers of Com­merce and In­dus­try (FICCI) said, the re­laxed norms “will re­live In­dian de­fence in­dus­try in­clud­ing large num­ber of MSMEs en­gaged in man­u­fac­ture of com­po­nents in syn­chro­nis­ing with global sup­ply chains of OEMs, as also ben­e­fit man­u­fac­tur­ers of dual use item. This will give im­pe­tus to In­dian In­dus­try to in­vest in de­fence R&D, man­u­fac­tur­ing and en­ter into strate­gic sec­tor to strengthen the indige­nous ca­pa­bil­i­ties and march to­wards self-re­liance and greater in­di­geni­sa­tion.”

The other in­dus­try cham­ber the Con­fed­er­a­tion of In­dian In­dus­try (CII) was equally ef­fu­sive in its wel­com­ing state­ment, say­ing “It is im­por­tant to main­tain a fair bal­ance be­tween ad­dress­ing gen­uine se­cu­rity con­cerns and pro­mot­ing In­dia’s de­fence in­dus­try. Given the op­por­tu­nity, this in­dus­try has the po­ten­tial to gen­er­ate large em­ploy­ment op­por­tu­ni­ties and pro­vide much needed im­pe­tus to In­dia’s man­u­fac­tur­ing sec­tor leading to its pro­fessed goal of self-re­liance. Baba N. Kalyani, Chair­man, CII Na­tional Com­mit­tee on De­fence, said, “We are happy to see that Min­istry of De­fence has taken cog­ni­sance of CII’s rec­om­men­da­tions to prune the list and keep­ing it to the bare min­i­mum.”

Con­sid­er­ing the fact that the In­dian armed forces pur­chase weapons sys­tems and spare parts worth more than $15 bil­lion from do­mes­tic and for­eign sources (last year’s de­fence budget was $38 bil­lion), the In­dian de­fence in­dus­try can now hope to bag this huge de­fence mar­ket, a big chunk of which till now was mo­nop­o­lised by the for­eign arms man­u­fac­tur­ers. In fact the lat­est Govern­ment de­ci­sion on re­lax­ing the norms will not only pro­gres­sively make In­dia self-de­pen­dent on de­fence-re­lated items, but will also help the coun­try be­come a hub for de­fence-re­lated spares, as we have seen in the auto sec­tor, which is now play­ing a very sig­nif­i­cant role in In­dian man­u­fac­tur­ing, sim­ply be­cause of the fact that the govern­ment en­cour­aged the multi­na­tional auto com­pa­nies to set up their shops in In­dia.

Now, sim­i­lar pol­icy regime for the de­fence sec­tor will have a spin-off ef­fect for the other sec­tors also and will def­i­nitely help In­dia to evolve into a ma­jor de­fence ex­port­ing coun­try. This will gen­er­ate such con­fi­dence in In­dian pri­vate de­fence sec­tor that they can one day hope to man­u­fac­ture on their own ma­jor de­fence sys­tems in the coun­try.

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