Swifter decisions by Defence Acquisition Committee for purchasing equipment for the armed forces (many of these purchases are being made from Foreign OEMs and Ordnance Factories to enable quicker deliveries, followed by a ‘Make-in-India’ purchase)
Delegation of power to Secretary (DP) for Tier I sub-vendors in certain specified scenarios, and to Army Commanders for securing bases of armed forces
Formation of a high-level ‘Defence Planning Committee’ under the Chairmanship of National Security Advisor and membership of the Foreign Secretary, three Service Chiefs, and the Secretary (Expenditure), Ministry of Finance, to draft the national security strategy and facilitate a comprehensive and integrated planning for defence matters, including in-country capacity creation
In a clear indication of its desire to focus on exports of indigenous equipment, India invited all of its 44 ‘Defence Attaches’ posted across the world for a specialised briefing along the side lines of the recently concluded DefExpo 2018, for exploring new markets for indigenous defence equipment and promoting ‘Make-in-India’ (India is already in talks with Vietnam for export of its Akash Surface to Air Missile)
FDI liberalisation: A much-awaited decision pertains to increasing the FDI cap from the present 49% to now 74% – this proposal is contained in the Defence Production Policy 2018, a draft of which was circulated by Department of Defence Production (“DDP”), Ministry of Defence for comments to the public. However, the draft has not yet been notified in light of conflicting views from the industry. If this proposal gets notified, a significant number of concerns envisaged by foreign defence manufacturing companies are likely to be addressed under India’s corporate laws framework applicable to 74% holding structures. Concerns of domestic industry, however, are not misplaced and will need to be resolved.
Swifter discharge of offset obligations: The government has invited comments on Draft Modifications to Defence Offset Guidelines wherein the Ministry of Defence has proposed three additional avenues for discharge of offsets (investment in Specified Projects, invest in defence manufacturing through equity investment, and investment in specified SEBI regulated Funds for Defence, Aerospace and Internal Security), which, if notified, are likely to ease access to funds and technology and benefit foreign vendors by providing quicker ways of discharging offset obligations. Furthermore, a draft amendment modifying the Offset Procedure proposes very high multipliers (4/5) for all investments made in the Defence Industrial Corridors towards discharge of an OEM’s offset obligation.
Announcement to setup Defence Industrial Corridors: In February 2018, Government of India announced setting up of Defence Industrial Corridors (“DIC”) in two states in India (Tamil Nadu and Uttar Pradesh). Investment in these Corridors is likely to attract many incentives such as 10-25% reimbursement of land cost, 70-90% GST reimbursement, etc., details of which are under finalisation- Defence Production Policy 2018 – This Policy was expected to be publicly announced and notified at DefExpo 2018 in Chennai earlier this year. When notified, the Policy has several measures including Competency Mapping of Indian Industry, simplifying MAKE II procedure, liberalising licensing norms, including lifetime support for large platforms which would enable making a credible business case for Industry, etc. and stands to benefit all the stakeholders in the industry.
