New defence measures a game changer for indigenous firms: India Inc

The measures announced by the Narendra Modi government to embargo 101 defence items for import starting December can be a game changer for indigenous companies and help scale up local manufacturing base.

Chief executive officers (CEOs) of defence companies said if the plan is implemented well, this will help India become a net exporter, instead of net importer of these defence items.

“This will be a step towards making the Make In India vision become real. This is how the US became a world leader in manufacturing military hardware. It is the private sector which delivers state-of-the-art platforms and equipment in the US. Virtually the entire world wants its products,” said the CEO of a defence company.

The government needs to give long-term contracts on a cost-plus basis to local companies and, if needed, may bring these companies under the Comptroller and Auditor General of India audit like the US, so that these firms do not profiteer.

“India can produce anything and the private sector can bring in partners and investment from the global market to produce indigenously, if long-term contracts are assured. India needs to select credible firms for such contracts,” he said.

Other CEOs said the announcement to earmark Rs 52,000 crore for domestic capital procurement fulfils a long-standing recommendation made by Indian companies to provide long-term visibility on defence procurement plans.

“The industry can now plan its capital expenditure and production capacity,” said S P Shukla, chair, Ficci defence committee and group president, Aerospace & Defence, and member–group executive board of Mahindra Group.

Sangita Reddy, president, Ficci, said the new policy measures will provide much-needed impetus to make India Atmanirbhar in defence technology and products. “The industry is looking forward to more items being added progressively to this list, so as to deepen the process of indigenisation by leveraging the capabilities of the Indian industry,” said Reddy.

The decision to introduce an import embargo on at least 101 items signals the government’s resolve to push forward the Vocal for Local campaign. Manufacture and production of high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, light combat helicopters, radars, etc in India will have cascading benefits to upstream industries, especially micro, small and medium enterprises (MSMEs).

While liberalisation of the sector has allowed several MSMEs to enter the market, lack of demand from India has meant the sector is yet to realise its full potential.

“The current announcements will spur industry recovery and lead to spin-off benefits, such as increased research and development, employment generation, corridor development, which will go a long way in strengthening local defence industrial base of the country,” said Reddy.

Mahindra is the only group present across the full spectrum of defence technologies for the Army, Navy, and Air Force, claimed Shukla. “We are uniquely placed to address the needs of our defence forces in several categories — not just 101 items, but more,” added Shukla.

Mahindra is already manufacturing and exporting wheeled armoured vehicles, torpedo defence systems, radars, he added. The company has collaborated with leading global original equipment manufacturers for fighter aircraft and combat helicopters, said Shukla.