EXCLUSIVE  

Ministry of Commerce 'facilitator' of 'Make in India' initiatives

The Narendra Modi-led Government is going aggressive on several initiatives and top of them all is the ‘Make in India’ plan. All the ministries are working in that direction, more so the Ministry of Commerce and Industry which is key to the push that is required for not just self-reliance in several sectors but also to give it an export momentum.

In response to questions from Jayant Baranwal, Editor-in-Chief of SP’s M.A.I., the ‘Make in India’/Invest India team at the respective offices, on behalf of the Minister of Commerce and Industry, Nirmala Sitharaman, has outlined the ‘Make in India’ plans in the aerospace and defence sectors, the sectors that are going to give a massive thrust to development. The team on behalf of the Minister has responded to SP’s specific questions. Excerpts:

Issue No. 5-6 | March 1-31, 2016

SP’s M.A.I. (SP’s): When you say ‘Make in India’ what exactly is the destination – (a) to get foreign OEMs to manufacture the military platforms in India for Indian market and (b) to get foreign OEMs to manufacture for the overseas markets?

Ministry: The main objective of the ‘Make in India’ campaign is to transform India into a global design and manufacturing hub. The products manufactured in India can be used for domestic consumption and can be exported as well.

SP’s: What all incentives the foreign OEMs are supposed to get under the campaign?

Ministry: As per the extant Defence Procurement Procedure 2013, foreign direct investment (FDI) in joint ventures with Indian enterprises is considered as an eligible avenue for discharge of offset obligations in India.

SP’s: In view of creating a solid India-based industrial complex, what all steps are being taken?

Ministry: The government has taken the following initiatives in order to build an indigenous defence manufacturing base in India:

  • Liberalisation of FDI cap in defence manufacturing. FDI up to 49 per cent is allowed under the automatic route. FDI beyond 49 per cent is allowed under government route on a case to case basis, which is likely to result in access to modern and state-of-the-art technology in the country.
  • Issue of list of equipment requiring an industrial licence and liberalising regulations. The detailed list can be accessed from the link pasted (http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2014.pdf)
  • Finalisation of security manual for licensed defence industry? The security manual can be accessed from the link pasted (http://ddpmod.gov.in/showfile.php?lid=151)
  • Increase in initial validity of industrial licence? The initial validity of industrial licence has been extended to 15 years, which is further extendable up to 18 years for existing as well as future licences.
  • Notified strategy for export of defence products? The detailed strategy can be accessed from the link pasted (http://ddpmod.gov.in/showfile.php?lid=174)
  • Notified list of military stores requiring No Objection Certificate from Department of Defence Production? The detailed list can be accessed from the link pasted (http://dgft.gov.in/exim/2000/NOT/NOT13/not11513.pdf)

SP’s: Will the technologies be borrowed/purchased from overseas?

Ministry: Yes, the technologies will be transferred by the foreign companies.

SP’s: Will the route of transfer of technology (ToT) be used to enable fast establishment of industries offering instant delivery possibilities?

Ministry: No, transfer of technology will only enable the foreign companies to get more incentives. It will not enable faster establishment of such industries.

SP’s: Research & development – it has been confined to DRDO (Defence Research and Development Organisation), in our country so far. What all is being done to expand the number of players in India?

Ministry: The government is considering providing incentives for undertaking R&D activities in India. As per the information available in public domain, the government is considering to fund private R&D for building a defence technology base in the country for which various norms will be stipulated in the Defence Procurement Procedure 2016. Moreover, the first budget of the current government had also provided for creating a Rs. 100-crore technology development fund to provide resources to public and private sector companies to support research and development (R&D) of defence systems.

SP’s: Will the government be funding any programmes in case private sector companies are willing to work on development of certain military programmes?

Ministry: Yes. The fund is being created to support companies to invest in R&D.

SP’s: How about stronger accountability within DRDO ensuring that there is less wastage of public monies, while the results do not really align with those dimensions?

Ministry: The government is taking steps to improve the performance of DRDO to transform the organisation into a hub for defence manufacturing.

FOREIGN DIRECT INVESTMENT (FDI)

SP’s: As current level is 49 per cent (raised from 26 to 49), which kind of programmes may still attract beyond the limit of 49 per cent?

Ministry: As per the FDI policy, now FDI beyond 49 per cent is allowed under approval route in cases which result in access to modern and state-of-the-art technology in the country.

SP’s: What has been the total of FDI till now as a result of the referred raise?

Ministry: As per the statistics published on DIPP (Department of Industrial Policy and Promotion) website, defence sector has managed to received FDI amounting to Rs. 0.48 crore between September 2014 to December 2015 (i.e the time since the FDI cap was increased from 26 to 49 per cent).