Dashing temporarily the hopes of India Inc that is keen to tap the lucrative defence procurement business, the government has ruled out any exemption from customs duty and countervailing duties on raw materials, components and sub-assemblies imported by private sector companies for now. It has decided not to tinker with the existing system – where defence public sector undertakings (PSUs) get duty exemptions on imports, making them more competitive – as per the recommendations of a high-powered committee under the Finance Secretary. The committee was set up to recommend ways to ensure a level playing field for the private sector vis-a-vis defence public sector undertakings (PSUs) and Ordnance Factory Boards (OFBs)."A view on extending such sops to the private sector will be taken once the defence ministry selects Raksha Udyog Ratnas (RURs) is finalised by the defence ministry," a senior government official said. This was decided at a meeting of senior officials from the departments of defence, finance, public enterprises and commerce called by Cabinet Secretary KM Chandrasekhar earlier this month.had The Centre had short-listed 14 top private sector companies for granting the RUR status, but had postponed a decision following strong protest from the Left parties.According to the official, the private sector companies' costs will go up by about 5 per cent compared with defence PSUs and OFBs if they were not extended the duty sops. "But the private sector gets the benefit of Cenvat credit that is not available to defence PSUs and OFBs," he said, adding the additional cost could be absorbed by the private sector. In India, the private sector has been enthusiastic of tapping the defence contract market estimated to be as big as $10 billion. Private companies that have increased investment in the sector had recently written to Defence Minister A K Antony to immediately notify the RURs. The officials said the defence production department would soon consult the revenue department and other concerned ministries and firm up a proposal for selection of RURs.
