Govt plans higher FDI, local weapons
NEW DELHI: From raising foreign direct investment (FDI) in defence manufacturing to creating a separate budget for buying locally made military hardware and notifying a list of weapons and equipment that cannot be imported, finance minister Nirmala Sitharaman on Saturday announced measures to boost self-reliance in defence sector.
The other steps announced by Sitharaman to give a push to Prime Minister Narendra Modi’s ‘Atmanirbhar Bharat Abhiyan’ (Self-Reliant India Movement) include corporatisation of the Ordnance Factory Board (OFB), indigenisation of imported spares and setting realistic qualitative requirements of weapons to support the local industry.
The minister said the FDI limit in defence manufacturing under the automatic route will be hiked from 49% to 74% subject to security clearances.
“The increase in FDI limit to 74% through the automatic route is a welcome step. But care must be taken to safeguard our startups from being bought over,” said Air Vice Marshal Manmohan Bahadur (retd), additional director general, Centre for Air Power Studies.
The minister said the list of weapons banned for import will be reviewed every year and more items will be added to it after discussions with the department of military affairs. This implies India will have to compulsorily develop technology for defence systems and platforms figuring on the negative import list.
Imports account for 60-65% of India’s military requirements and it has signed contracts worth billions of dollars in the last decade for weapons and systems.
Sitharaman highlighted the need for the “realistic setting” of general staff qualitative requirements (GSQRs) of weapons and platforms. “Sometimes unrealistic quality requirements are set and quite a lot of time is spent in searching for suppliers who will meet all those requirements…,” she said. GSQRs are the specifications put out by the armed forces for the equipment they need.
“The point about having ‘realistic’ GSQRs is debatable; it is inconceivable that the forces are given equipment that doesn’t meet their operational requirements fully. Phase-wise development of a war fighting system is an accepted methodology but GSQRs must meet operational necessity in full,” said Air Vice Marshal Bahadur.
The Confederation of Indian Industry said the government’s focus on domestic manufacturing was encouraging as the country.
CII director general Chandrajit Banerjee said: “The list of nonimportable items and corporatisation of OFB are landmark steps and will boost the confidence of domestic manufacturers. The increase in FDI limit will attract foreign funds into this sector along with technology infusion.”
Sitharaman also announced giving the private sector a role in India’s space programme, including in satellites, launches and space-based services. For boosting private participation in space activities, government will provide level playing field for private companies. Also, the government will provide predictable policy and regulatory environment to private players, she said.