Remove entry barriers for Indian firms into Defence procurement: ASSOCHAM to Govt.

In the spirit of 'Make in India' programme, the government should set an indigenization target within a time frame to encourage domestic companies to take part in manufacturing of the Defence equipment and facilities, the ASSOCHAM has said.

It is only then the home-grown companies will be able to participate in the multi-billion dollar Defence procurement, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

In a detailed representation submitted to the Defence Ministry, the chamber has said, stringent conditions which block the entry of domestic firms into the defence procurement of the government should be diluted. This should be done in order to make it easier and more attractive for Indian vendors who are investing in high risk areas.

It said the existing arrangement of contracts to be awarded to Defence Public Sector Undertaking (DPSU) on a nomination basis proves to be disincentives for the private players, thereby leading to lack of level playing field for the private players. ASSOCHAM strongly recommended that the provision for nominations should be deleted / restricted to clearance by Cabinet Committee on Security (CCS).

With billions of dollars worth of Defence contracts going to foreign firms, the Indian firms are denied access to the same, mostly on the ground of lack of track record and experience. It is a chicken and egg situation, noted the chamber.

Unless, the home -grown firms are allowed entry, how would they get experience and track record? The entire mind set and system of procurement should be changed in a manner to support domestic industry and entrepreneurship. Several Indian companies like Mahindra and Mahindra, Tata group, Ashok Leyland and several others have built capabilities which are world class. However, more players need to join the defence purchases, ASSOCHAM Secretary General Mr. D S Rawat said.

Following the letter and spirit of the government's flagship programme 'Make in India' the indigenization target should be achieved in different phases. There is also a case for a review of the field trial parameters and methodology, the chamber's communication to the government suggested.

It said eligible private sector players are currently not allowed to participate in a majority of programmes where they have both the technical and financial competence to deliver the project because of nomination of such programmes to DPSUs. Nomination in such cases is detrimental to the objective of creating a vibrant private sector defence industry which is one of the prime recommendations of the Kelkar Committee.

It also does not allow private industry to have relevant experience which forecloses participation in future related programmes/projects. ASSOCHAM firmly opposes this practice of Nomination and requests the government to allow for eligible private sector players to participate along with the DPSUs in a fair competition.

In case a private sector system integrator meets the financial and technical capability specified in an RFI/RFP along with a minimum threshold specified for indigenization for the project, then for such a firm not having a track record should not be criteria not to allow for the firm's participation in the Request for Information (RFI)/ Request for procurement (RFP) process, the chamber said.

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