Govt mandates purchase of 26 military equipment only from domestic firms

The defence ministry on Wednesday issued directives providing for procurement of 26 spares and equipment for military use only from domestic suppliers in sync with the government's focus on encouraging indigenous defence manufacturing, officials said.

The move came days after Finance Minister Nirmala Sitharaman unveiled a series of reform measures to promote the domestic defence industry and cut India's reliance on imported weapons and military platforms.

All the items identified for procurement from domestic defence manufacturers are used in shipbuilding.

So far, the defence ministry has notified 127 items where purchase preference is given to local suppliers.

"In order to further encourage procurement from local suppliers, 26 items out of 127 already notified, have now been notified under clause 3(a) of the Public Procurement (Preference to Make in India) Order 2017," the defence ministry said in a statement.

"Henceforth, procuring entities will procure these items only from local suppliers, irrespective of purchase value, provided that the local suppliers meet the minimum local content (MLC) as prescribed for each item," it said.

The local content prescribed for the 26 items is in the range of 40 per cent to 60 per cent.

The reform measures announced by Sitharaman included making separate budgetary outlay to procure Indian-made military hardware, increasing FDI limit from 49 per cent to 74 per cent under the automatic route and generating a year-wise negative list of weapons whose import will not be allowed.

India is one of the most lucrative markets for global defence giants as it figured among top three importers of military hardware in the world for the last eight years.

According to estimates, the Indian armed forces are projected to spend around USD 130 billion in capital procurement in the next five years.

Experts said increasing the existing Foreign Direct Investment (FDI) cap to 74 per cent will encourage global players like Lockheed Martin, Boeing, Airbus and Dassault Aviation to set up manufacturing hubs in India and bring niche technology without hesitation as the firms will have majority stakes in their Indian subsidiaries.