More reports on: Government policies

Govt prunes list of items requiring defence licensing

27 June 2014

The government on Thursday announced a list of defence equipment that needs an industrial licence and items that will not need an industrial licence in order to streamline licensing process for production of defence equipment.

Under the pruned list, dual-use items that have military as well as civilian applications that are not specially mentioned in the list will not require industrial licences for defence production.

Industrial licenses will now be required only to make items such as defence aircraft, space aircraft and parts, tanks and other armoured fighting vehicles, warships of all kinds, arms and ammunition and allied items of defence equipment, parts and accessories.

The move, which will help attract investment from private companies in defence-related production, will boost self-reliance in defence production, reduce expensive imports, bring more clarity on the guidelines and curb corruption, sources said.

The move comes amidst indications that the Modi government's will allow 100 per cent foreign direct investment in defence, in a major departure from the current policy of defence FDI to 26 per cent.

The previous UPA government had allowed FDI above 25 per cent in the production of state-of-the-art defence equipment with the approval of the Cabinet Committee on Security effective April 2014. That policy, which was announced during the last leg of the UPA government, however, has not been invoked yet.

So far there has been no single list that specifies what constitutes a ''defence'' product or component-level items and dual-use technology. For that companies have had to refer to at least four lists, depending on the product.

Welcoming the move, Baba N Kalyani, chairman, CII National Committee on Defence, said, ''We are happy to see that the ministry of defence has taken cognisance of CII's recommendations to prune the list and keeping it to the bare minimum.''

''CII's recommendations were guided by only one objective simplification of the current policy and procedures. This step is important as it would bring more clarity to the procedures and will encourage new entrants into the defence sector,'' he added.

According to CII, the Indian defence industry is already at the bottom of the value chain and there is little incentive in it for various reasons.

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