This is another step towards self-reliance. India defence minister Rajnath Singh declared a list of 101 items that the contry will no longer import from next year. The items mainly belong to the armed forces, army, navy and air force and these three defense establishments will procure these products from the country’s domestic manufacturers. The manufacturers can be private companies or public sector undertakings.
Starting from December, military will rely exclusively on indigenous vendors for 69 categories of defence equipment. @rajnathsingh estimated that, within next 6-7 years, contracts worth almost Rs 4 trn will be placed @ajaishukla #AtmanirbharBharathttps://t.co/aC3LOUjTlF
— Business Standard (@bsindia) August 9, 2020
Big change in defence sector
This is a big change in India’s defence item procurement status. India has been among the world’s top countries that import a large number of defence equipment. We have seen how the recent India-China clashes in Ladakh has changed the status quo in the defence sector. Banning Chinese apps was a major decision to put a halt on China’s unstoppable tech trade in India, now the Centre aims to lessen its dependence on imported items in defence.
Let’s understand India’s Atanirbhar arms procurement plan in 8 questions
1. Growth opportunity for domestic firms
By denying the possibility of import of arms and artillery, the Centre has given the domestic industry a major opportunity to buck up and grab the market. As per Stockholm International Peace Research Institute, which tracks defence exports and imports globally, India has been the second-largest importer between 2014 and 2019 with US$ 16.75 billion worth of imports during this period.
The embargo on imports is planned to be progressively implemented between 2020 to 2024. Our aim is 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.
— Rajnath Singh (@rajnathsingh) August 9, 2020
The Centre said from now on Defence Research and Development Organisation (DRDO) will use their own design and development capabilities or adopt technologies to meet the requirements of the armed forces.
2. What are some of the 101 items?
The list has a range of items. Some of them are water jet fast attack craft to survey vessels, pollution control vessels, light transport aircraft, GSAT-6 terminals, radars, unmanned aerial vehicles, to certain rifles, artillery guns, bulletproof jackets, missile destroyers and the like.
3. Did the armed forces know about it?
The Centre said that the list was consulted with all stakeholders involved, including the three services who use such equipment and weapons. Rajnath Singh said the Centre consulted public and private sectors too to analyse the current and future capabilities of the industry to develop arms, ammunition and equipment within India.
4. How much the imported arms cost?
Rajnath Singh said the 101 items almost cost Rs 1,30,000 crore for the army and the air force each, while for the navy, the anticipated items are worth almost Rs 1,40,000 crore over the same period.
5. When will the new plan come into effect?
It will come into effect from next year. As Rajnath Singh said, the “embargo on imports is planned to be progressively implemented between 2020 to 2024” and the Centre 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”.
As per the list, of the 101 items, 69 have an indicative embargo of December 2020. Another 11 have an indicative embargo of end of next year. Twelve will be embargoed by December 2023. Eight more by 2024 end. Long Range – Land Attack Cruise Missile will not be allowed to be imported after December 2025.
6. What is the background of this policy?
The Centre was mulling about it no doubt, especially after Prime Minister Narendra Modi announced to build a self-reliant India based on five pillars – economy, infrastructure, system, demography and demand in May. The Centre had already declared that it will bring out a negative imports list for defence sector. While announcing the self-reliant India package, finance minister said the Centre was preparing a negative imports list. She said the government will “notify a list of weapons/ platforms for ban on import with year-wise timelines” and work on “indigenisation of imported spares”.
7. How is the industry reacting to it?
The industry leaders welcomed the Centre’s move to stop import of defence items. As per a report, director-general of the Confederation of Indian Industry Chandrajit Bannerjee said: “The defence minister’s announcement for negative import list of defence systems and platforms marks the launch of a ‘new glide path’ for ‘AtmaNirbhar Bharat’.” FICCI also welcomed the move. It said it is a “great leap forward for AtmanirbharBharat programme in defence production”.
.@ficci_india applauds the announcement of 101 defence items for embargo on imports. A great leap forward for #AtmanirbharBharat in Raksha Utpadan: Mr @Prakashukla, Chair, FICCI Defence Committee. #Vocalforlocal #MakeinIndia pic.twitter.com/m82wDl1m71
— FICCI (@ficci_india) August 9, 2020
FICCI was always vocal about military and industry partnership. The earmarking of ₹52,000 crore for domestic capital procurement “fulfils a request by FICCI Defence Committee to provide long-term visibility on defence procurement plans,” SP Shukla, head of FICCI’s defence committee, said.
8. When will the industry have its impact?
Experts told The Economics Times that the defence stocks may gain some immediate boost following the Centre’s announcement. But they added that the exact impact will be understood when the plan translates into order flows.
Ladakh clash played big role for this
India accelerated military purchases following the border clash with Chinese troops in June. The Centre approved the purchase of 33 Russian fighter jets and upgrades to 59 other planes next month. Tensions between India and China in eastern Ladakh saw the death of 20 Indian soldiers. According to a report, India is short of combat planes, helicopters and field guns because of years of low funding.
Another report highlights, India traditionally bought military equipment from Russia, but is increasingly purchasing from the United States and Israel. The Prime Minister has always pushed for reducing the military’s dependence of imports. Between April 2015 and August 2020, India’s defence services had contracted Rs 3.5 trillion worth of items that are now on the hold list. The Centre estimates around Rs 4 trillion worth of orders will now be placed with the domestic industry in the upcoming years.
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