State-owned enterprises continue to dominate defence production in India | Doonited.India

December 11, 2019

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State-owned enterprises continue to dominate defence production in India

State-owned enterprises continue to dominate defence production in India
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Under the Make in India initiative, the defence production in India has seen a major boost. According to the latest figures released by the Indian Ministry of Defence (MoD), State-run defence enterprises in India have undertaken production activity worth INR1.71 trillion (USD24.79 billion) over the past three fiscal years (FYs), representing nearly 80% of total capital procurement funding during the same time frame.

Citing a parliamentary reply by Minister of State for Defence Shripad Naik on 22 July, the MoD said the total production value of Defence Public Sector Undertakings (DPSUs) and the Ordnance Factory Board (OFB) reached INR552.5 billion, INR583.1 billion, and INR576.4 billion in FYs 2016–17, 2017–18, and 2018–19, respectively. It added that capital procurement funding over the same three years were INR691.5 billion, INR727.3 billion, and INR759.2 billion, respectively. The figures point out that total production value of the DPSUs and OFB is equal to 79% of total capital procurement funding of INR2.17 trillion during the three FYs. However, these figures did not show the estimated value of private-sector defence production.

There are many reasons for this domestic boost in defence production. The MoD attributed the strong figures for public-sector defence production to a series of reforms it has introduced in recent years that are also benefitting private-sector companies. “These measures are enabling self-reliance, wider participation of Indian industry in defence procurements, and are providing impetus to production including by the MSME [micro, small, and medium enterprises] sector,” said the MoD, citing Naik’s parliamentary response.

Such reforms included the introduction in 2016 of the ‘Buy Indian Designed, Developed, and Manufactured’ (IDDM) procurement category, which the MoD regards as the “most preferred acquisition category in the Defence Procurement Procedure [DPP]”. Under the IDDM classification, at least 40% of all locally designed defence equipment needs to be indigenously sourced. The requirement climbs to 60% if the equipment is built under license from a foreign contractor. Other reforms include the launch of the Strategic Partner policy in 2018 that aims to enhance competition, increase efficiencies, facilitate faster and more significant absorption of technology, create a tiered industrial ecosystem, ensure development of a wider skill base and trigger innovation, leading to reduction in dependence on imports and greater self-reliance in meeting national security objectives.

In its statement, the MoD also said that the government has accorded ‘Acceptance of Necessity’ clearance to 113 proposals worth INR 2.39 trillion under these various defence procurement methods over the past three FYs (2016–17 to 2018–19). Other procurement methods cited by the MoD as supporting local procurement include Buy (Indian), which mandates a minimum of 40% local content, and Buy and Make (Indian), which supports collaborative production through partnerships between foreign and local manufacturers.

Referencing the IDDM, buy (Indian), Buy and Make (Indian), Strategic Partner, and ‘Make’ categories of capital procurement, the MoD said that “request for proposals [RFP] for such categories is issued only to Indian vendors under DPP”.

In addition to figures showing the value of public-sector defence production in India, the MoD also issued on 22 July – citing another parliamentary reply by Naik – statistics showing the value of annual turnover recorded by the state-owned DPSUs and the OFB compared with that of private-sector defence companies.

Like the value of the defence production, these MoD figures also suggest that state-owned enterprises continue to dominate India’s defence industrial sector to a large degree.

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Post source : New Delhi Times

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