India’s first defence joint venture with Russia, the Brahmos missile, was described by former President Dr A.P.J.
India’s first defence joint venture with Russia, the Brahmos missile, was described by former President Dr A.P.J. Abdul Kalam as “a fine example of courage, showing excellent leadership through system design, system integration and system management has contributed in national development by providing opportunities in domestic industries: small, medium and large... This successful model must be replicated both in defence and civil.”
On June 30, 2016, India successfully test-fired thrice a medium-range surface-to-air missile from the Integrated Test Range off the Orissa coast. Jointly developed by DRDO and IAI of Israel for the Indian Air Force, the missile guided by a radar system and on-board avionics successfully hit a pilotless target aircraft. Many Indian industries like BEL, L&T, BDL, Tata group of companies, besides other private industries, have contributed to the development of a number of sub-systems that were used in this flight test. On the same day, India’s indigenous light combat aircraft Tejas was inducted into the IAF.
In March 2016, India successfully test-fired an indigenously developed supersonic interceptor missile capable of destroying any incoming ballistic missile. A lot more is happening on the defence industry front.
Formulated as late as 2005 with the aim of developing the domestic defence industry, the defence offset policy was incorporated in the Defence Procurement Procedure (DPP), 2005. The policy introduced a 30 per cent offset in contracts valued above Rs 3 billion under “buy” and “buy and make” categories.
However, Indian and foreign defence manufacturers lament that the policy lacks clarity in many aspects and that the bureaucratic process related to the policy and DPP was a frustrating quagmire. A paper by the Institute for Defence Studies and Analyses stated that the policy suffered from the absence of any designated agency in the ministry of defence (MoD) to guide, oversee, execute and monitor its implementation. Confusion reigned both in the South Block and in the minds of vendors on how to implement the offset obligations. The absence of any offset benefit to the Indian defence industry led to the MoD making significant changes in DPP in 2006, and again in 2008, which, despite repeated assurances by the then defence minister, A.K. Antony, failed to produce the desired results.
The book has 21 chapters from a wide range of analysts and compiles different perspectives of the primary stakeholders: the Government of India, global original equipment manufacturers (OEM), and Indian industrialists. It tries to understand the evolution, and trace the possible future trajectories, of defence procurement and offset policies in India. It opens with a bird’s eye-view of these, followed by three sections with chapters by individual stakeholders. It concludes with a section emphasising the importance of Indian manufacturing and provides a comprehensive overview of India’s complex offset policies in a reader-friendly language.
In July 2015, MoS for defence, Rao Inderjit Singh, informed Parliament about the steps taken by the government to promote indigenous manufacturing capabilities of defence equipment in the country: As per the reviewed and revised FDI policy in defence, composite foreign investment upto 49 per cent is allowed through government route (FIPB) and beyond 49 per cent with the approval of Cabinet Committee on Security on case-to-case basis. Restrictions such as single largest Indian shareholder to hold at least 51 per cent equity; complete restriction on foreign institutional investor (FII) from the earlier policy were also removed to facilitate investments in defence.
To promote private sector participation, guidelines have been formulated, mandating that each DPSU and Ordnance Factory Board have a short- and long-term outsourcing and vendor development plan to “gradually, increase the outsourcing from private sector including SMEs. The guidelines also include vendor development for import substitution.
To establish a level-playing field between Indian the private and public sectors, anomalies in excise duty/ custom duty have been removed. As per the revised policy, uniform custom and excise duties shall be levied on all companies in the public and private sector.
The Defence Products List for the purpose of issuing Industrial Licences (ILs) under Industries Development and Regulation Act of India Act has been revised and most of the components, parts, sub-systems, testing and production equipment have been removed from it to reduce entry barriers for industry, particularly small and medium segment.
The initial validity of the IL granted under the IDRA has been increased from three to seven years with a provision to extend it by three years on a case-to-case basis.
During Defexpo 2016, defence minister Manohar Parrikar announced that DPP-2016 uploaded on the ministry’s website, would give a push to the “Make in India” campaign. He said that the government has been proactive in the initiative and desires to also include “Startup India” which will find opportunities in the defence sector. He added that the government had tweaked policies to address the concerns of defence manufacturers and suppliers and enhance transparency.
DPP-2016 will ensure faster procurement, especially through newly introduced categories under indigenously designed, developed and manufactured (IDDM) provisions. Mr Parrikar added that the government aims to increase the exports of defence equipment by three to four times in five to seven years and that the new policy initiative will permit defence PSUs to export up to 10 per cent of defence equipment.
As export sales generate higher revenue, the profit accrued will be plowed back into capacity enhancement for improving supply to the armed forces in the long run. Export from DPSUs will be subject to clearances from the partner concerns and ministry of external affairs.
The book offers a fairly comprehensive reference to India’s aims to achieve self-reliance in defence requirements as well as becoming a defence exporter.
