India to boost defence indigenisation to reduce imports

The Dollar Business Bureau

Russia (accounting for 75% of imports) and USA (7%) are the top arms suppliers to India

  The Ministry of Defence is streamlining its “Make policy” to reduce its dependence on imports of defence system and is planning to roll out at least 8-10 projects every year to get more and more into indigenisation, said G. Mohan Kumar, Secretary (Defence Production). “The make policy is under change, it is being streamlined and it is one of our agenda in ‘Make in India’ that at least 8-10 make projects will be started every year and once this happens, I'm sure the defence production and development will attain a critical volume which would be able to carry the industry forward,” said the Defence Ministry official yesterday. While inaugurating the “7th International Conference on Aerospace, Defence & Homeland Security” organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in New Delhi, Kumar said that indigenisation of the defence sector is more important than ever. He said, “In the current situation, indigenisation has become very important as we cannot have a defence system which is depending on imports all the time, we need to reduce imports and we have to get more and more into indigenisation.” Kumar also disclosed that the Defence Ministry is planning to establish a promotional body which will assess the producers in India not only in bringing investments but also in finding markets. As per The Dollar Business report, India’s defence manufacturing sector remained closed for several years post liberalisation reforms in the nineties. However, to improve self-reliance, the government opened the defence industry sector up to 100% for Indian private sector participation in May 2001 and allowed FDI up to 26%. This year, the government allowed more FDI in the defence sector to up to 49% through FIPB route and above 49% through Cabinet Committee on Security (CCS). As far as fiscal or taxation measures are concerned, Kumar said that the Ministry is trying to enable a level-playing field for the private sector. However, he added that the domestic defence manufacturing industry remains stunted. “Apart from a few large industrial houses and well known industries and some sporadic efforts in export of products, the small and medium industries have not been able to make much headway in the defence industry,” he said. Kumar also asked PSUs to leverage on the opportunities available in the private sector and improve efficiency and speed in delivery of services. PPPs in defence will not just decentralise the whole process of production but it will also bring overall efficiency in delivery and prices, productivity, the official added. Kumar urged the government to simplify government procedures to remove unpredictability in government policy. He said, “We have a very bulky procedural volume i.e. the Defence Procurement Procedure (DPP) and this is my dream to see that this procedure is reduced to 25-30 pages instead of hundreds of pages.” The Secretary also said that the government's effort will be on addressing the basic structural issues in the defence sector which will be key in taking India into the high trajectory of exports and defence production in future. According to Stockholm International Peace Research Institute (SIPRI), India is the world’s biggest arms importer with imports of major weapons increasing by over 110% between 2004-08 and 2009-13.  

This article was published on January 6, 2015.