New defence policy to focus on domestic industry, self-reliance

NEW DELHI - India Thursday unveiled its first-ever Defence Production Policy aiming to give an edge to domestic industry in manufacturing of weapons for its armed forces and cut down arms import that currently meets nearly 70 percent of its military requirements.

Defence Minister A.K. Antony also released the Defence Procurement Procedure-2011 through which it aspires at speedy acquisition of weapons, yet maintain transparency in the deals, estimated to be worth over $50 billion in the next five years.

“For the first time, we have come out with a stand-alone production policy, as self-reliance in defence has been a long-standing demand of the country since the Nehru era,” Antony told a press conference here.

The new production policy, approved in December last by the Antony-led Defence Acquisition Council (DAC), focuses on building a robust industrial base for achieving self-reliance in meeting armed forces’ needs.

Under the policy, the government will give preference to indigenous design, development and manufacture of defence equipment. In particular, the policy will hold good for long-term needs such as those required over 10 years into the future.

Accordingly, the government will rely on foreign sources to buy arms for the Army, Navy and Air Force only in case of critical technologies in which indigenous industries do not have capabilities and in cases where they cannot meet delivery time lines.

“The thrust of the production policy is speedy indigenisation. Wherever the Indian industry is not in a position to make and deliver the equipment as per the Services Quality Requirements in the requisite time frame, procurement from foreign sources would be resorted to,” he said.

Noting that Indian scientists at the DRDO, Defence PSUs and Ordnance Factories have produced large quantities of equipment and systems for defence, Antony said the armed forces requirements were increasing substantially every year as India grew as a power, which could not be met only by the government agencies.

“We are far behind in self-reliance in the defence sector. Self-reliance is a distant dream. Our status as a nation is growing and so is our economy. But the security situation situation in our neighbourhood is very volatile causing anxiety to us. So we have to strengthen our security,” he said, noting that the armed forces needed the “most latest, state-of-the-art and modern” equipment.

Reasoning the shift in the policy on defence imports, Antony said: “Our past experience has shown that at times this dependence on imports of weapons could create problems. So we have to increase indigenous production of defence equipment.”

India has faced a ban from several developed nations including the US on export of critical technologies that can be used for both defence and civilian purposes following its 1998 nuclear tests. It also had trouble with Soviet-era and Russian defence equipment due to certain delay in delivery of spares.

Among the other policy initiatives under the procurement policy-2011 were the changes in the offsets clause in future deals.

Under the existing 2008 offsets policy, the winner of a contract worth over Rs.300 crore was to plough back 30 percent of the deal back in Indian defence industry. But the 2011 policy has expanded the areas for offsets commitment - instead of restricting it only to defence sector - to internal security, aerospace and training infrastructure in critical technology.

Antony disagreed with a view that the changes meant the government was allowing “indirect” offsets in defence deals and said the new areas - aerospace, internal security and training in critical technologies - were interlinked with defence sector due to the spin-offs it generated.

Another critical change in the ministry’s policy was on shipbuilding in which the government would allow a level-playing field for private shipyards to compete in all future warship tenders of the navy.

“From now on, there will be no nomination of defence shipyards for building warships for the navy. Both the defence and private shipyards will have to compete for the tenders in the future,” Antony said.