As per Stockholm International Peace Research Institute, which tracks defence exports and imports globally, India has been the second largest importer of defence equipment between 2014 and 2019 with US$ 16.75 billion worth of imports during this period. For years India has been among the top three defence importers in the world.
In a bold move towards self reliance, the government 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). This is called the negative list.
The private players and the DPSUs, will 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. This will give a 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.
What does this list include?
The items mentioned in the negative imports list include water jet fast attack crafts, survey vessels, pollution control vessels, light transport aircraft, GSAT-6 terminals, radars, unmanned aerial vehicles, AFCs ( armoured fighting vehicles), certain rifles, artillery guns, bullet proof jackets, missile destroyers, etc.
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”.
Involvement of the stake holders – Army, Navy and the Air Force.
The government announced that the list was announced after due consideration by all stakeholders involved, including the three services who use the equipment, the PSUs and the private players, having made an assessment of current and future capabilities of the Indian industry for manufacturing various ammunition & equipment within India.
The items in the pipe line in the list are worth almost Rs 1,30,000 crore 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. 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.
Timeline of this Embargo
Not all the 101 items mentioned in the list will be embargoed starting this year. The list is progressive. The embargo on imports is planned to be progressively implemented between 2020 to 2024. By scheduling it iver a period of time, 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. 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. 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.
Fitting into Prime Minister’s call for Atam Nirbhar Bharat
Cue has been taken 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’”.
Budgetary Provisions
The government will create a separate budget provisioning for domestic capital procurement all of which will together help reduce the huge defence import bill.
One of the economic reforms for 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.