The defence procurement policy unveiled by the Government recently has been termed a step in the right direction by private and foreign players.
While most say it would help boost local industry, others wished for more clarity and a defined time-frame.
Twin objectives
Given the twin objectives of infusing greater efficiency in the procurement process and strengthening the manufacturing base in the country, the Defence Acquisition Council, which is the apex decision making body of the Ministry of Defence (MoD), outlined a series of measures on April 20, including amendments to the Defence procurement procedure.
Tata Motors said the new rules would provide private Indian defence OEMs (original equipment manufacturers) such as Tata Motors a level field not only with regard to foreign players, but also with regard to Defence public sector undertakings.
“The Ministry of Defence agreeing to release a public version of the long-term integrated perspective plan (LTIPP) is particularly noteworthy, as this would help us to strategise research and development (R&D), technology and infrastructural investments,” said an official spokesperson.
Indigenisation
Tata Motors recently entered the combat vehicle sector by bidding for the Future Infantry Combat Vehicle programme, to design and develop an indigenous infantry combat vehicle.
Textron India, part of the US-headquartered Textron Inc with total revenues of $12.2 billion, welcomed the the Government’s initiative for rapid indigenisation of its defence products, but asked for an increase in FDI (foreign direct investment).
Inderjit Sial, President and Managing Director, Textron India said, “We are looking for partnership with the Indian public and private industry for transfer of technology. But the transfer will only take place when foreign players have a higher equity than present.” Sial added that an increase in “foreign direct investment would motivate the OEM’s to transfer technology.”
S.P. Shukla, President, Defence Sector, Mahindra Group, stated that Mahindra has had a long-standing relationship with the defence sector.
“We look forward to supporting the armed forces with the latest technology and highest quality equipment backed by excellent OEM support.”
Welcoming the amendments, Shukla added, “The prioritisation of projects under the ‘Make’ or ‘Buy and make Indian’ category are welcome, for we believe that is the only way that the nation can be self-reliant in defence.
“Transparency and awareness of the defence LTIPP will also allow us to position ourselves better with the appropriate technologies.”
However, Neelu Khatri, Head, Defence and Security Advisory Services, at KPMG, an audit and taxation firm, said the MoD’s measures “do not have a time-frame to them, nor is there any process detailed out.
“We have all seen those changes, but these have not been translated to practise.
“However, the changes announced are definitely more defining than what were announced earlier, though the will to implement them, or even to reduce global imports, is still debatable,” she said.
Speaking to Business Line , Khatri said with regardto the release of the LTIPP, “the announcement was made in 2009-10.
“Till date, it has not come about. Why is it taking so long? Do we have a timeline,” she queried.
Noting that the 15-year plan for the LTIPP was still unclear, she said,
“How does a company invest money in R&D?
“Though there is a talk of a R&D fund, there is no clarity on how one will get the full potential of the fund.
“How does the government plan to implement the policy on the ground too is unclear”.
Stating that the consultations on security guidelines for the domestic defence industry have been followed by industries in the UK and the US, Khatri said introducing it in India would prove to be a bottleneck for any company eager to enter the sector.
“One only hopes, this does not turn out to be licence raj all over again.
It is clear that industry voices and the overall frustration are being addressed by the MoD.
“Though the government is trying to address the roadblocks of the defence industry, there are no timelines and processes in place. This might defeat the entire purpose,” Khatri added.
Didar Singh, FICCI Secretary-General, added that clarity in the definition of indigenous content and resolution of issues related to taxes and duties, with respect to the private sector, were welcome steps.
He, however, noted that the fine print was awaited on certain issues related to the loading of taxes and duties on Indian offset partners, where system integration is done within India by the private sector.