DPIIT suggests to freeze changes in Defence Procurement Policy

On July 20, 2020, the Department of Promotion of Industry and Internal Trade has suggested to freeze changes in Defence Procurement Policy for 4 to 5 years.

Background

The Defence Procurement Policy has gone through six revisions between 2015 and 2017. This underlines lack of long-term stability in regulations.

Lack of long-term policy

The Defence industry of India accounts to 12% of government expenditure. In the fiscal year 2018-19, India spent 63 billion USD in defence sector. The total production of defence public sector undertakings and Ordnance Factory Board amount to 8 billion USD. Also, India accounts to 15% of global arms imports.

With the defence sector being huge and contributing extensively in the growth of the country, it is unlikely for GoI to make frequent changes in policies.

Suggestions by DPIIT

The DPIIT has come up with following suggestions to prevent unlikely circumstances in defence sector and also to boost Make in India initiative

  • The Ministry of Defence should increase the share of spending on defence and R&D
  • Incentives to boost domestic industry should be made more attractive to foreign investors.
  • The period of performance for offsets should be increased to 10-12 years to allow enough time to build necessary capabilities and ensure effective technology transfer.

DPIIT: “Hinderances to Make in India”

Th GoI recently increased the FDI (Foreign Direct Investment) limit from 49% to 74% to push Make in India. However, DPIIT believes that the new industrial policy stresses on development of large platforms and complex systems that are currently imported.

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