Indian Government aims for more privatisation for defence sector

New Delhi(Indilens web team): Defence minister Manohar Parrikar told the Lok Sabha on Friday that in pursuance of the Defence Production Policy 2011, the government has taken several steps to promote the participation of the private sector in indigenous defence productions.

One of the prominent steps he underlined was doing away with compulsory industrial licensing for most of the components and raw materials used in defence production.

This means such components or raw materials required in castings, forgings, production machinery, testing equipment have been taken out of the purview of industrial licensing.

While this would ease manufacturing by private defence manufacturers, Parrikar also highlighted that indigenous industries are also being given preference for procurement. This is being done by giving the ‘Buy Indian’, ‘Buy and Make Indian’ and ‘Make’ categories of the defence industry’s preference over ‘Buy Global’ category.

Besides, Parrikar highlighted that the Indian private sector has also been allowed to receive maintenance transfer of technology (MToT) in ‘Buy (Global)’ cases.

What could further boost domestic defence industries is the mandate under India’s ‘defence offset policy’. Any foreign contractor having bagged government orders above Rs 300 crore is required to source components from local vendors for at least 30% of that value, under this policy.

Internally, only 40 percent of the defence procurement currently is from domestic industries and the government intends to increase this up to 70 percent in the next five years.

Also, so far, the country’s domestic defence industries have earned only about Rs 70 crore by export of military hardware.

On the other hand, whereas India’s defence budget is one of the largest in the world, it is also the second highest importer of arms and defence products , next only to Saudi Arabia.

Overall, between January 2014 to December 2014, 83 contracts have been signed for capital procurement of defence equipment for the three wings of the armed forces.

However, 27 requests for proposal (RFP) were retracted during this period due to various reasons such as noncompliance and non-extension of bid validity by vendor.

Up to February 2015, a total capital expenditure of Rs. 69,269.75 crore has been incurred in financial Year 2014-15.

Until January 2015, the government had issued 251 letters of intents (LOIs) / Industrial Licenses (ILs) covering 150 companies, belonging both to the public and private companies for manufacturing a wide range of defence items. Of these, 49 license companies covering and overall 72 licenses for manufacturing have so far reported commencement of production.

Posted by on March 22, 2015. Filed under Editorial. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.