Draft Defence Production Policy 2018: Key Features

The Draft Defence Production Policy 2018 aims to create an environment that encourages a dynamic, robust and competitive defence industry, as an important part of the Make in India initiative.

It also aims to facilitate faster absorption of technology and create a tiered defence industrial ecosystem in the country, besides reducing the dependence on imports to achieve self-reliance.

The features of the policy are

• 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.

Through the policy the government is targeting achieving self-reliance in the development and manufacture of fighter aircraft, medium-lift and utility helicopters, warships, land combat vehicles, autonomous weapon systems, missiles, guns, small arms, ammunition, explosives, surveillance, electronic warfare and communication systems and night fighting equipment. [Mint]