Draft Defence Production Policy, 2018

Relevancy

  • G.S. Paper 2 and 3
  • Objective questions: Draft Defence Production Policy 2018
  • Subjective questions: India’s rising defense imports and need for indigenous production

Vision of the Draft Defence Production Policy, 2018

  • To make India among the top five countries of the world in Aerospace and Defence industries, with active participation of public and private sector, fulfilling the objective of self-reliance as well as demand of other friendly countries.

Aims of the policy

  • The DProP 2018 has embarked on an ambitious journey to mark India’s position among the top defence production countries in the world.
  • The DProP 2018 is focused on self-reliance.
  • It seeks to change India’s position from being the largest importer of arms in the world.

Key features

  • It proposes to increase the foreign direct investment (FDI) cap in niche technology areas to 74% under the automatic route in a bid to boost local manufacturing and catapult India into the league of countries housing top defence and aerospace industries. At present, the FDI cap for the defence sector is 49% under the automatic route for all categories.
  • India hopes to achieve a turnover of Rs1.7 trillion in defence goods and services by 2025.
  • It has a goal of becoming an arms exporter to the tune of Rs35,000 crore in defence goods and services by 2025.
  • It also hopes to transform itself into a global leader in cyberspace and AI (artificial intelligence) technologies.
  • The government will list its requirements in terms of platforms and weapon systems for the next decade to help private sector companies understand the opportunities.
  • Simplify procedures for private firms to enter defence production, i.e., liberalize the regime by issuing licences in 30 days and pruning no-go areas to a small ‘negative list’ for licensing.
  • Doing away with capacity assessment, except for critical projects. It will introduce earnest money deposits and performance guarantees as safeguards for others.
  • Setting up an ombudsman for resolving offset claims. Offsets—investments through a local partner to set up an ecosystem of suppliers—would be investment linked.
  • Rationalisation of taxes on import of capital goods for services and inputs for defence and aims to prevent inversion of taxes.

Challenges

  • Several categories listed for complete indigenisation are already available.
  • Realising the aims demands difficult changes.
  • g. the military will have to abandon its insistence on imported, state-of-the-art weaponry.
  • However the military has traditionally insisted on inducting into service only cutting-edge, fully proven weaponry.
  • The policy involves multiple ministries which could delay the establishment of defence production ecosystem within an optimistic time frame.
  • There is a need for an overarching infrastructural, fiscal and legal environment, and essential testing and validating facilities that individual firms cannot cost-effectively create.