Explained: The negative imports list for defence announced by Rajnath Singh
Announcing the policy, Singh said that the Defence Ministry is “now ready for a big push to Atmanirbhar Bharat initiative” and will introduce “import embargo on 101 items beyond given timeline to boost indigenisation of defence production”.
The government has been hoping that the defence manufacturing sector can play a leading role in boosting the economy, not just for the domestic market, but to become an exporter as well.
Defence Minister Rajnath Singh on Sunday announced a list of 101 items that the Defence Ministry will stop importing. It essentially means that the Armed Forces—Army, Navy and Air Force—will only procure all of these 101 items from domestic manufacturers. The manufacturers could be private sector players or defence Public Sector Undertakings (DPSUs).
For years India has been among the top three defence importers in the world, the government wants to reduce the dependence on imported items in defence and give a shot in the arm to the domestic defence manufacturing industry. By denying the possibility of importing the items on the negative list, the domestic industry is given the opportunity to step up and manufacture them for the needs of the forces. As per Stockholm International Peace Research Institute, which tracks defence exports and imports globally, India has been the second largest importer between 2014 and 2019 with US$ 16.75 billion worth of imports during this period.
The private players and the DPSUs, Singh said are given a “great opportunity” to manufacture the items in the negative list “by using their own design and development capabilities or adopting the technologies” that can be designed by the government Defence Research and Development Organisation (DRDO) “to meet the requirements of the Armed Forces”.
Announcing the policy, Singh said that the Defence Ministry is “now ready for a big push to Atmanirbhar Bharat initiative” and the ministry will introduce “import embargo on 101 items beyond given timeline to boost indigenisation of defence production”.
The government has been hoping that the defence manufacturing sector can play a leading role in boosting the economy, not just for the domestic market, but to become an exporter as well.
However, Sunday’s embargo list is meant for the domestic market, largely. Singh called the negative import list a “big step towards self-reliance in defence”.
What does it include?
The list, shared by the government on Sunday, has a range of items. From simpler items to advanced technologies. The items mentioned in the negative imports list include water jet fast attack craft to survey vessels, pollution control vessels, light transport aircraft, GSAT-6 terminals, radars, unmanned aerial vehicles, to certain rifles, artillery guns, bullet proof jackets, missile destroyers, etc.
Singh said that “almost 260 schemes of such items were contracted” by the Armed Forces at an “approximate cost of Rs 3.5 lakh crore between April 2015 and August 2020” and the government expects that “contracts worth almost Rs 4 lakh crore will be placed upon the domestic industry within the next 6 to 7 years”.
Were the Army, Navy and the Air Force consulted?
Yes. The government announced that the list was announced after due consideration by all stakeholders involved, including the three services who use the equipment, weapons and platforms that will be embargoed.
Announcing the negative imports list, Singh said that the Defence Ministry prepared the list “after several rounds of consultations with all stakeholders, including the Armed Forces” and also the public sector and private players “to assess current and future capabilities of the Indian industry for manufacturing various ammunition & equipment within India”.
Singh, in fact also mentioned that of the “items on the list worth almost Rs 1,30,000 crore each are anticipated for the Army and the Air Force” while for the Navy, the anticipated items are worth almost Rs 1,40,000 crore over the same period.
He mentioned that the list includes wheeled Armoured Fighting Vehicles (AFVs) with indicative import embargo date of December 2021, “of which the Army is expected to contract almost 200 at an approximate cost of over Rs 5,000 crore”.
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Will it come into effect immediately?
Not immediately, but starting this year, yes. However, not all the 101 items mentioned in the list will be embargoed starting this year. The list is progressive.
Singh said that the “embargo on imports is planned to be progressively implemented between 2020 to 2024” and the government wants to “apprise the Indian defence industry about the anticipated requirements of the Armed Forces so that they are better prepared to realise the goal of indigenisation”.
He added that the list is likely to grow as “more such equipment for import embargo would be identified progressively” by the Department of Military Affairs headed by the Chief of Defence Staff after consulting all stakeholders. “A due note of this will also be made in the DAP (Defence Acquisition Procedure) to ensure that no item in the negative list is processed for import in the future”.
As the list shows, of the 101 items mentioned 69 have an indicative embargo of December 2020. Another 11 have an indicative embargo of end of next year. The 12 are likely to be embargoed by December 2023, another 8 by end of 2024, and one item Long Range – Land Attack Cruise Missile will not be allowed to be imported after December 2025.
Is this a new policy?
It was announced in May. Singh has taken cue from Prime Minister Narendra Modi’s “clarion call” of “a self-reliant India based on the five pillars, i.e., Economy, Infrastructure, System, Demography & Demand and announced a special economic package for Self-Reliant India named ‘Atamnirbhar Bharat’”.
But the announcement was not unexpected as the government had already declared that it will come out with a negative imports list for the defence sector in May.
In her fourth presentation about the package for an Atmanirbhar Bharat, Union Finance Minister Nirmala Sitharaman had announced on May 16 that the government was working on a negative imports list. In her fourth presentation on the package for creating the ecosystem for a self-reliant India, to bring Indian economy back on the path of growth, Sitharaman had mentioned that the government will “notify a list of weapons/ platforms for ban on import with year-wise timelines” and work on “indigenisation of imported spares”.
Sitharaman had stated that the government will create a “separate budget provisioning for domestic capital procurement” all of which will together “help reduce the huge defence import bill”.
On Sunday, the Defence Minister announced that the ministry “has also bifurcated the capital procurement budget for 2020-21 between domestic and foreign capital procurement routes” and a “separate budget head has been created with an outlay of nearly Rs 52,000 crore for domestic capital procurement in the current financial year”.
The other things Sitharaman had mentioned in May for the defence sector included raising the Foreign Direct Investment in defence manufacturing from 49 per cent to 74 per cent under the automatic route, improving the autonomy and accountability of the Ordnance Factory Board by their corporatisation, and building a time-bound defence procurement process and faster decision-making, including setting realistic general qualitative requirements of the weapons and equipment.
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