India Streamlines Industrial Licensing on Defense Equipments

India’s Ministry of Commerce and Industry has streamlined various defense items requiring licensing to boost defense production.

The notification released on June 26, 2014 has restricted the conditions of defense license to Tanks and other armor fighting vehicles, defense aircrafts, space craft and parts thereof, warships of all kinds and arms and ammunition and allied items of defense equipment, parts and accessories.

In the list of defense items requiring industrial license, finalized by the Ministry of Defense, it states, defense items that are not included in the list would not require industrial license for defense purposes.

The relaxed norms, in Federation of Indian Chambers of Commerce and Industry (FICCI) opinion, will revive Indian defense industry including large number of Micro, Small and Medium Enterprises (MSME) engaged in manufacture of components in synchronizing with global supply chains of Original Equipment Manufacturers (OEM), as also benefit manufacturers of dual use item.

This move will also help Foreign OEMs harness frugal manufacturing by MSMEs working in niche technology and products so also expand offset relationships erstwhile restricted for participation due to cumbersome licensing procedure and requirements.

De-licensed companies, especially MSMEs will now have greater access to funds through liberalized automatic route of FDI. While this pruning down of industrial license is a welcome step, DIPP also needs to streamline procedures and adhere to strict guidelines for the industry requiring defense industrial license.

FICCI advocates the use of this list of Defense items in conjunction with SCOMET list (item 7; Security IT and Software (Special Chemicals, Organisms, Materials, Equipment) for Export Clearance.