Big push to pri­vate par­tic­i­pa­tion in de­fence man­u­fac­tur­ing: Gov­ern­ment pro­vides level play­ing field with de­fence PSUs


De­fence man­u­fac­tur­ing is one of the key sec­tors among the 25 sec­tors iden­ti­fied un­der the ‘Make in In­dia’ cam­paign launched by the Gov­ern­ment of In­dia. A num­ber of ini­tia­tives have been taken by the new gov­ern­ment to in­cen­tivise pri­vate sec­tor, in­clud­ing for­eign OEMs to en­gage in the de­fence and civil aerospace sec­tor.

A se­ries of con­sul­ta­tions have been held across Min­istries/De­part­ments un­der the men­tor­ing of the Prime Min­is­ter’s Of­fice (PMO) to en­able sim­pli­fi­ca­tion of rules and pro­ce­dures to pro­mote pri­vate par­tic­i­pa­tion un­der de­fence man­u­fac­tur­ing and ex­ports. This is hoped to stim­u­late big-ticket in­vest­ments and in­cen­tivise man­u­fac­tur­ing.

There was a long-stand­ing de­mand of the pri­vate sec­tor man­u­fac­tur­ers to bring par­ity be­tween do­mes­tic pri­vate play­ers with Or­di­nance Fac­tory Board and de­fence PSUs in the mat­ter of pay­ment of cen­tral ex­cise and cus­toms duty.

As a ma­jor game changer, Gov­ern­ment of In­dia has with­drawn ex­cise and cus­toms duty ex­emp­tions presently avail­able to goods man­u­fac­tured and supplied to the Min­istry of De­fence by Or­di­nance Fac­tory Board and De­fence PSUs vide No­ti­fi­ca­tions No. 23/2015-Cen­tral Ex­cise and No. 29/2015-Cus­toms dated 30.04.2015.

This will pro­vide a level play­ing field to do­mes­tic pri­vate play­ers bid­ding for the gov­ern­ment con­tracts by tak­ing away the strate­gic ad­van­tage with PSUs for quot­ing lower rates in open bids.

With this ini­tia­tive, the gov­ern­ment has also ful­filled de­mand of for­eign orig­i­nal equip­ment man­u­fac­tur­ers (OEMs) such as Boe­ing, Air­bus, Lock­heed Martin, BAE Sys­tems, etc., who are ac­tively ex­plor­ing the scope of fu­ture in­vest­ments in In­dia.

The In­dian aerospace and de­fence mar­ket is among the most at­trac­tive glob­ally as In­dia is high­est im­porter of de­fence items in world. As Prime Min­is­ter has fa­mously said, this is one dis­tinc­tion In­dia is not keen to have much longer.

The gov­ern­ment has sys­tem­at­i­cally opened up the sec­tor for pri­vate in­vest­ment by in­creas­ing FDI cap in de­fence to 49 per cent and ra­tio­nal­is­ing con­di­tions: Al­most 60 per cent items re­quired for in­dus­trial li­cence have now been de-re­served and busi­ness re-en­gi­neer­ing process has been ef­fected across de­part­ments and min­istries for a favourable man­u­fac­tur­ing and ex­port plat­form for pri­vate sec­tor com­pa­nies.

The re­cent no­ti­fi­ca­tion from the Depart­ment of Rev­enue will pro­vide a de­fin­i­tive mes­sage to for­eign OEMs that In­dia is open to busi­ness for de­fence man­u­fac­tur­ing.

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