Privatisation of defence production gains momentum

As many as 379 licenses have been issued by the Department of Industrial Policy and Promotion (DIPP) to 230 Indian companies for manufacture of various licensable defence items

July 18, 2018

Till June 2018, 70 companies covering 114 licenses have reported start of production; To reduce the import bill, the Government has encouraged indigenous manufacturing

To reduce India’s defence import bill, Government of India has encouraged indigenous manufacturing. This has also opened up opportunities for sharing of technologies

Government has encouraged private participation in manufacture in four selected segments -- Submarines, Fighter Aircraft, Helicopters and Armoured Fighting vehicles/Tanks

The 10th edition of the Indian Defence Expo (DefExpo) held on the outskirts of Chennai in April 2018 was themed around Make in India in the defence, aviation and security

As many as 379 licenses have been issued to 230 Indian companies for manufacture of various licensable defence items. The issuance by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, comes as part of Government of India’s efforts to encourage privatisation in defence production. Apart from this, one manufacturing license has also been issued by Ministry of Home Affairs for manufacturing of small arms and ammunitions. Till June 2018, 70 license companies covering 114 licenses have reported commencement of production. Traditionally, India has been one of the top five spenders on defence and security. The Indian defence budget for financial year 2018-19 has been pegged at around US$44.5 billion – around 7.8 per cent higher than previous year – of which defence capital outlay is US$14.8 billion. To reduce the import bill, the Government has encouraged indigenous manufacturing. This has also opened up opportunities for sharing of technologies.

This comes under the aegis of “Make in India”, which has sought to revolutionise production and manufacturing activities in the country. So far, 41 foreign direct investment (FDI) proposals as well as joint ventures have been approved for manufacturing of various defence equipment both in public and private sectors. Government has encouraged participation of the private sector in manufacture of major defence platforms and equipment in four selected segments — Submarines, Fighter Aircraft, Helicopters and Armoured Fighting vehicles/Tanks. In line with this, the 10th edition of the Indian Defence Expo (DefExpo) held on the outskirts of Chennai in April 2018 was themed around Make in India in the defence, aviation and security. The event saw participation by a total of 670 defence manufacturers, including 154 foreign companies and over 500 domestic companies. Major international firms included Lockheed Martin (USA), Saab Group (Sweden), Dassault Aviation (France) and BAE Systems (UK).

Delegations from 47 countries attended the DefExpo. Among the many agreements signed, a few stand out: Boeing announced a partnership with Hindustan Aeronautics and Mahindra Defence Systems for production of FS/18 Super Hornet in India for its Air force.  Seven agreements were signed between India and Russia covering naval forces and future ready combat vehicles (FRCVs), opto-electronic sighting and navigation for Sukhoi Su-30MKI aircrafts and technical support in India for T-90 and T-72 tanks in the service of the army. Mahindra also signed an preliminary agreement with ShinMaywa Industries of Japan for manufacturing of amphibious aircraft US-2. On the eve of the DefExpo, India also issued an initial tender for procurement of 110 single and twin seater fighter jets for Indian air force in the biggest such initiative in recent years globally. India aims to achieve technical capabilities and economies of scale for its defence industry to reach a turnover of over US$25 billion in military goods and services by 2025.