Privatization in Defence Production on the Rise

By Editor 04-Apr-2018

The central government’s call for active participation by private manufacturers in the defence production receives good response as the number of private players in the sector is on the rise. According to the statistics released by the Defence Ministry, till February 2018, Department of Industrial Policy & Promotion (DIPP) has issued 348 licenses to 210 Indian Companies for manufacturing various licensable defence items. Apart from this, one manufacturing license has also been issued for Small Arms and Ammunitions by Ministry of Home Affairs. Till February 2018, 70 license companies covering 114 licenses have reported commencement of production.

The information has been provided by Dr. Subhash Bhamre, Minister of State for Defence, while replying to a question in the Rajya Sabha. Bhamre has said that the government is promoting privatization in Defence Production. In order to promote privatization, the government has partially withdrawn the public investments in respect of Defence Public Sector Undertakings (DPSUs) Bharat Electronics Limited (BEL) and Bharat Earth Movers Limited (BEML). The government shareholding now in BEL and BEML are 66.72% and 54.03 % respectively, he said.

With an aim to promote foreign investment in defence production, the government has taken several measures and is getting warm responses. So far, 40 FDI proposals / Joint Ventures have been approved for manufacturing of various defence equipment both in public and private sectors, he said. As per extant Foreign Direct Investment (FDI) policy, in defence sector, foreign investment up to 49% is permitted under automatic route. Foreign investment beyond 49% (up to 100%) is permitted through government approval in cases resulting in access to modern technology in the country or for other reasons to be recorded. 

FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959. Further, foreign investment in defence sector is subject to other conditions of extant FDI Policy as amended from time to time.