Union Government delicensed manufacturing of defence items

Union Ministry of Commerce and Industry on 26 June 2014 delicensed manufacturing of defence items. Almost 55 percent of the defence items have been removed from the compulsory licensing list.

In this regard Department of Industrial Policy and Promotion (DIPP) under the Commerce Ministry released the Press Note No. 3 (2014 series).

As per the Press Note there is now a smaller negative list of defence items in which compulsory licensing is still required. These include items such as tanks, vehicles fitted with military mountings of arms and ammunition or with equipment for mine laying, defence aircraft, including helicopters, UAVs and warships.

With this decision, private companies like Tata, Mahindra and Larsen & Toubro will no longer require a license to manufacture components, castings and sub-assembly.

Comment

After the liberalization of 1991, only a handful of industries such as defence, cigarettes, explosives, distillation and brewing of alcoholic drinks and hazardous chemicals were covered under comulsory licensing.

Since the initiation of the Industrial Policy of 1948, the defence items production has been kept under compulsory licensing on ground of sensitivity and security issues. However, over the years this practice has bred unnecessary delays, inefficient and inadequate defence production, and corruption.

The basic objective of allowing private sector participation is to harness available expertise in the private sector towards the total defence efforts and search for self-reliance. In-built advantages of the private sector are its reservoir of management, scientific and technological skills coupled with its ability to raise resources.

The involvement of private sector with its world-class expertise and high technology would not only augment India’s indigenous defence production capability but also lead to creation of employment and infrastructure in the country, giving a strong impetus to the economy.

After opening up of defence production for the private sector, the industry has shown keen interest in this field. Many large industries have shown definite inclination to invest both in R&D and infrastructure to develop capabilities in defence production to assume the role of system integrators.