Govt aims at making India a global exporter for defence

By OEM Update Editorial February 26, 2021 1:54 pm IST

Union minister allocates 64 percent Defense modernisation budget for Indian players. The budget amounts to about ₹ 70,000 crore and is to be used for purchases from the domestic sector.

 The Union Defence Ministry has decided to earmark around 64 per cent of its modernisation funds under the capital acquisition budget for 2021-22.  Total money amounts to over ₹ 70,000 crore is allocated for purchases from the domestic sector.

 This marks an increase from 2020-21, when a capital budget allocation for domestic vendors was first made. At 58 per cent, this came to an amount of ₹ 52,000 crore.

The announcement was made by Union Defence Minister Rajnath Singh at a recent seminar on defence budget organised by Society of Indian Defence Manufacturers (SIDM). It is part of the government’s push for making India the world’s second largest arms importer. SIDM is an association that represents domestic industry players.

In his address, Singh also spoke about widening the ‘negative import list’, which lists items that India seeks to stop buying from other countries. In 2020, the government listed 101 items including weapons systems, assault rifles and specified an indicative date by which the import embargo will kick in for each of them. Discussions are already underway for including certain spares in the list. 

Announcing the increase in allocation, Singh said, “it will have a positive impact on enhanced domestic procurement, having a multiplier effect on our industries including MSMEs and start-ups … and also increase employment in the defence sector”.  He also said that the defence ministry also plans to channelise about ₹1,000 crore in 2021-22 for procurement from iDEX, a defence ministry initiative to encourage start-ups. 

Experts say the decision is a welcome step towards encouraging Atma Nirbhar Bharat and Make in India campaign. Under this campaign defence sector has been identified as the core areas for boost. However, they added, its success is something that will only be known with time.

Currently the projects being pursued under the campaign includes transport aircraft C-295 (to be manufactured by Tata-Airbus, Light combat Aircraft Tejas (83 of which have been ordered), and the AK-203 rifles (to be made in India as part of a joint venture between the Ordnance Factory Board, Kalashnikov Concern, and Rosoboronexport, the Russian state agency for military exports). In 2021-22, the Army was allocated with a capital outlay for acquisitions, repair ₹36,000 crore, the Navy with ₹33,000 crore, and the IAF with ₹58,000 crore. 

The 64 per cent allocation for domestic vendors in 2021-22 means the import legroom has shrunk to 36 per cent. According to government sources, the three defence services were asked to arrive at a ratio of planned procurements from the domestic and global sectors before finalising this figure.

PM Modi mentioned that the government has taken several initiatives like de-licensing, de-regulation, export promotion, and foreign investment liberalisation, to give the defence manufacturing sector a boost.