FM Nirmala Sitharaman announced a slew of measures to boost ‘Make in India’ in defence sector, including raising the FDI limit in manufacturing to 74%
While raising the foreign direct investment (FDI) limit in defence manufacturing to 74 per cent from the current 49 per cent as part of the fourth tranche of the economic stimulus package, Finance Minister Nirmala Sitharaman said the government will notify a list of weapons and platforms for ban on import with year-wise timelines.
This is a first for the sector in India.
The FM also stressed that there would be indigenisation of imported spares and separate provisioning for domestic capital procurement.
The indigenisation of spare parts has been in the works for long. It was kickstarted by former defence minister Manohar Parrikar.
Calling these “structural reforms”, Sitharaman said these steps will reduce the huge defence import bill.
Last year, India ranked as the second biggest importer of defence equipment in the world. India was the top importer for over a decade but last year’s ranking did not take into account the slew of multi-billion-dollar deals — S-400 Triumf air defence system, lease of a nuclear submarine, manufacturing of frigates and AK 203 — signed between India and Russia in the last three years, deliveries of which are yet to start.
Sitharaman also said the Ordnance Factory Board (OFB) would be corporatised, but underlined that this was not privatisation. The OBF runs 41 factories across the country and its corporatisation has been under public discussion for some time.
The hike in FDI limit in defence manufacturing will come as a huge relief for foreign companies who have been consistently asking the Ministry of Defence (MoD) to give them the controlling stake in a joint venture.
The FM also announced a time-bound defence procurement process besides setting up of a Project Management Unit (PMU) to support contract management. She stressed setting up realistic demands for weapons and platforms that are intended to be purchased.
She also said the government has decided to overhaul trial and testing procedures.