Imports growing; Make it lucrative for foreign OEM’s to invest in India

IDD Bureau

An officially constituted committee of the Indian Parliament has recommended to the Government to make India a ‘lucrative place’ for foreign military equipment manufacturers to be ‘investing’ in the defence industrial sector.

It has also, separately  asked for promotion of India industry, as imports were not decreasing.

These are part of suggestions to improve India’s target of becoming a defence manufacturing hub, opening jobs and boosting trade. The Committee’s recommendation comes at a time when New Delhi has kick-started the ‘Strategic Partnership’ model, or the SP Model, of producing equipment. It lays down the need for a  foreign original equipment manufacturer (OEM) to partner with an Indian Company to produce – Fighter  jets, helicopters, submarines and infantry carrying vehicles.

The recommendations have come from the Parliamentary Standing Committee on Defence, a body of Members of  Parliament from India’s bi-cameral   legislative system. A report tabled in the Indian Parliament said : “There should be regular interaction with foreign Defence industry partners to make India a lucrative place for investing and making it a Defence industry hub”. It asks for monitoring Government initiatives at regular intervals, to remove any bottlenecks.

The level playing for Indian Private sector:

Since big-ticket items will be under the ‘SP Model’ of procurement, Parliamentarians  have recommended that an environment may be created where “Indian Private Industry be allowed to tie up with foreign manufacturers to develop certain equipment based on the requirements of users”. The users in this case would be the Indian Armed forces.  The Committee desired monitoring of Government initiatives be done at regular intervals to remove bottlenecks, if any.

Dependence on foreign vendors:

The Indian Ministry  of Defence has supplied data to the parliamentary committee which indicates ‘dependence on the foreign vendors is rising.

In the year 2014-15, The total procurement of weapons and equipment was Rs 65,859 crore (approx $ 9.40 billion). Off this, the procurement from foreign vendors was Rs  25,980 crore ( approx $ 3.71 billion) which works out to be 39.62 per cent of the total expenditure. India’s financial year runs from April 1 to March 31 of the next calendar year. So the  reference year 2014-15 would mean from April 1, 2014 to March 31, 2015.

Data; Parliamentary Standing Committee report

During the last four financial years (2015-16 to 2018-19) total of  210 contracts were signed, off  these  75 contracts worth about Rs 1,67,898 crore ( $ 23.98 billion)  have been signed with foreign vendors including those from USA, Russia, Israel, France etc. for procurement of Defence equipment for Armed Forces. The Defence equipment imported during this period includes helicopters, aircrafts, missiles, rifles, artillery guns, simulators and ammunition.

Improve procurement from Indian Sources:

“Procurement from foreign vendors and would affect our indigenous industry in long run,” is a fear expressed by the Committee. It has asked the Ministry of Defence to chalk out a plan in consultation with Public sector undertakings, Ordnance  Factory Board, the armed forces, Indian Industry, educational institutions of high repute and other stakeholders, all to work out a plan to reduce dependence on the foreign vendors.

India procures its weapons and equipment from various domestic as well as foreign vendor based on operational requirements of the Armed Forces.

Sweden-based think-tank Stockholm International Peace Research Institute (SIPRI)  assessment a five-year period (2014-2018) and titled ‘Trends in International Arms Transfers-2018’, says, “India was the world’s second largest importer of major arms in 2014-18 and accounted for 9.5 per cent of the global total.” The report was released in March 2019.

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