Collaboration with private sector key to create 21st Century's defence sector- PM Narendra Modi

Feb 22, 2021

NEW DELHI, 22 February 2021: Mr Narendra Modi, Prime Minister of India today said that the role of the private sector has increased in Indian defence manufacturing over the years. Today's India is working to further increase its capacity and capability in the sector. "The 21st century defence sector cannot stand without private sector partnership," he added.

Addressing the virtual session 'Budget Announcements: 2021-22, Galvanizing Efforts for Aatmanirbhar Bharat', organized by the Ministry of Defence, jointly with FICCI and other industry chambers, Mr Modi said that to promote the Indian private sector, the government is giving more impetus on Ease of Doing Business. "We have taken a number of measures, including delicensing, deregulation, export promotion, foreign investment liberalization, in the defence sector. We are working ahead and focusing on transparency, predictability and ease of doing business," he added.

Elaborating on the recent Union Budget, Mr Modi said that this year's budget gives focus on increased private sector participation. There is a dedicated fund earmarked to boost the domestic procurement in the defence budget. "I would urge the private sector to come forward with not just manufacturing capabilities but also with design and development," he said.

Highlighting the importance of MSMEs, Mr Modi said that they act as a backbone of the defence manufacturing and the reforms that are introduced will give more independence to MSMEs to expand further.

Commenting on the negative list of 101 defence items announced by the government, Mr Modi said that he feels that this is a positive list under the Aatmanirbhar Bharat program. "This is a positive list that will increase our manufacturing capacities, generate new employment, reduce dependence on imports, and will give a guarantee to the products being manufactured in India to be consumed in India," he emphasized.

Mr Rajnath Singh, Union Defence Minister said that the Union Budget for the year 2021-2022, stands out as a unique initiative of our government. It brings a healthy mix of promise, potential and progress and its forward-looking agenda provides support for the defence and security of the country. The Defence Budget has seen an increase of 18.75 per cent in capital outlay, over the last year, and 30 per cent the year before, which is the highest in the last 15 years. "The Ministry has set a target to achieve a turnover of INR 1,75,000 crore (US$ 25 Bn) including export of INR 35,000 crore (US$ 5 Bn) in Aerospace and Defence goods and services by 2024," he added.

Mr Singh stated that the Ministry is also working on bringing down delays in timelines of capital acquisition and will make efforts to complete the defence acquisition within two years, instead of the existing 3-4 years being taken on the average.

Speaking on the 101-negative import list, Mr Singh said that the embargo on imports is planned to be progressively implemented between 2020 to 2024. All necessary steps would be taken to ensure that timelines for production of equipment as per the list are met. "We now intend to notify the next list of items and would also request Secretary DMA to also consider including certain spares currently being procured from outside so that we could indigenize the same," he added.

Mr Ajay Kumar, Defence Secretary said that this Budget provides a historic opportunity for the industry to come forward to make for the armed forces and make for the world. "The Ministry is focussing on procurement from the GeM portal in a big way and we will continue to give it more thrust. We would encourage the industry to come on the GeM platform," he said.

Mr SP Shukla, Chairman, FICCI Defence and Aerospace Committee and Group President (Defence, Aero, Agri and Steel); Member of the Group Executive Board, Mahindra Group said that there are many positive steps taken by the government on the policy front by users in the entire procurement process. He pitched for increasing the capital head for domestic procurement and raising the private sector's share on it to a minimum of 15 per cent in this FY to 25 per cent by FY 2023-24. He also requested the Ministry to consider giving a standard directive to SHQs to amend PBG / PWBG for all contracts (excluding the disputed ones) to 3 per cent in line with Ministry of Finance's order instead of doing it on case-to-case basis. He also suggested for operationalisation of hosting AON details online and to monitor the conversion of AON to contracts.

On Foreclosure/Retraction/Changes in AON he emphasised that a formal concurrence from AON issuing authority should be taken which will ensure formulation of appropriate AONs. He also brought the attention of the Defence Minister other senior officials to the issue of Indigenous Content (IC) where custom duty paid to government is presently being treated as foreign content and recommended that it should be excluded from IC calculation. Mr Shukla also urged if the ministry could consider promulgation of at least 10 projects in the scale of INR 500 - 2000 crore on competitive basis in the FY 2021-22 to energize the domestic defence manufacturing.

Mr Sudhakar Gande, Co-Chair, FICCI Defence & Aerospace Committee and CEO, Jupiter Capital Pvt Ltd, Non-Executive Director, AXISCADES Engineering Technologies Ltd said that the private sector over the last 20 years has matured a lot and can now take up large challenges. The observation of the Prime Minister, the Raksha Mantri for the MSME sectors is an extremely good idea. The partnership between start-ups and the MSME will go a long way in this sector, he added. He further recommended that if the government could categorise Defence as a priority sector and could enable easier borrowing options for the defence industry to meet the working capital expenses and invest in R&D.

Mr Arun T Ramchandani, Co-Chair, FICCI Defence & Aerospace Committee and EVP, Guns Missiles & Armoured Systems (GMA) BU, L&T Defence complimented MOD on its various path breaking reforms and requested if defence projects through MAKE 1 could be considered.

Mr N Raveeswaran, Member, FICCI Defence & Aerospace Committee and Head - A&D Strategic Business, Mahindra Defence spoke on the relevance of procurement through Strategic Partnership Model in the context of Aatmanirbhar Bharat that will ensure absorption of critical technologies and establish large scale manufacturing capabilities in the next 10 years.

Mr Ashish Saraf, Head of Region, India & South Asia Airbus Helicopters applauded the introduction of policy on leasing of equipment to the armed forces in the DAP 2020 and mentioned that it will strengthen our armed forces in expeditious manner.