Notwithstanding the emphasis on ‘Make in India’, defence ministry has not signed any major deal (of more than Rs 2,500 crore) with any private Indian defence company since the BJP government came to power two years ago. This is despite the government’s stated aim to promote defence manufacturing in India in the private sector.
According to data provided by the defence ministry, only five deals of more than Rs 2,500 crore have been signed since May 2014. Three of them have gone to foreign companies while two have gone to Indian defence public sector units.
The biggest deal of the last two years, worth Rs 45,021 crore, for construction of seven Shivalik class frigates under Project 17-A has been given to public sector Mazagon Docks Limited and Garden Reach Steel Industries. Public sector Bharat Electronics Limited has also bagged the deal worth Rs 7,910 crore for additional Integrated Air Command and Control System (IACCS) for the Indian Air Force.
During his visit to the United States in September last year, Prime Minister Narendra Modi had announced the signing of the Rs 13,970 crore deal for Apache helicopters, and Rs 8,047 crore deal for Chinook helicopters with American aerospace giant, Boeing. The Rs 2,625 crore deal for Smerch multi rocket launcher system for the army has been signed with Russian firm, Rosoboronexport. Defence ministry sources also said that the next deal likely to be signed very soon, for 12 mine counter measure vessels will also go to public sector Goa shipyard.
The government is also concerned that despite allowing 49 per cent FDI through automatic route, only a paltry sum of Rs 1.12 crore has come as FDI in defence sector in the last two years. Last month, to kick-start ‘Make in India’ in defence, the government further liberalized FDI norms to allow FDI up to 100 per cent with government approval if it leads to access to ‘modern technology’. Earlier, FDI above 49 per cent was only permissible in defence sector if it led to access to ‘state of the art technology’.
Since taking over as the defence minister in November 2014, Manohar Parrikar has repeatedly spoken about bringing the Indian private sector into defence manufacturing in a big way. It is, however, not reflected in the deals being inked with the private players. Private defence manufacturers displayed their impatience with the current state when they raised the matter in a meeting with the PMO officials last month.
“We told the Principal Secretary to the PM that for all the talk, no deals have been signed with anyone of us so far. This was our complaint even in the previous meeting. He passed certain instructions to the defence ministry officials present but we are still waiting for concrete outcomes,” a top official of a private defence firm which attended the meeting told The Sunday Express.
Private defence manufacturers contend that the current situation is also due to the delay in finalising the defence procurement procedure (DPP). While the rest of the DPP has been finalised and put online, the critical chapter on “strategic partnership” model is still being discussed in the ministry. Under the strategic partnership, an Indian private company will be selected by the government to make one type of defence platform, say submarines, aircraft or tanks, and given assured orders for next 20 years. One company will however be allowed to become a strategic partner only for one type of platform. An internal committee of the defence ministry has been told to come with a final proposal by the end of the month.
“Unless there is a clarity on strategic partnership, we will not see any deals for private players. But this is going to take time even after defence ministry finalises it, as other ministries are also involved,” explained a defence ministry official directly dealing with the matter.