Remove Hurdles For Indian Firms In Defense Manufacturing: ASSOCHAM

Dilution of stringent conditions, removing nomination based Defense Public Sector Undertaking (DPSU) contracts, and setting indigenization target with a time frame will encourage Indian domestic companies to take part in defense equipment manufacturing.

The Indian government should set indigenization target within a time frame to encourage domestic companies to take part in Defense equipment manufacturing. Unless it is done, the home-grown companies will not be able to participate in the multi-billion dollar defense procurement, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said in a statement Tuesday.

In a detailed representation submitted to the Defense Ministry, the chamber has said, “stringent conditions” which block the entry of domestic firms into the defense procurement of the government should be diluted. This should be done “in order to make it easier and more attractive for Indian vendors who are investing in high risk areas”.

It said the existing arrangement of contracts to be awarded to Defense Public Sector Undertaking (DPSU) on a nomination basis proves to be disincentives for the private players, “thereby leading to lack of level playing field for the private players”. ASSOCHAM strongly recommended that the provision for nominations should be deleted / restricted to clearance by Cabinet Committee on Security (CCS).

“With billions of dollars worth of Defense contracts going to foreign firms, the Indian firms are denied access to the same, mostly on the ground of lack of track record and experience. It is a chicken and egg situation”, noted the chamber.

“Unless, the home –grown firms are allowed entry, how would they get experience and track record?  The entire mind set and system of procurement should be changed in a manner to support domestic industry and entrepreneurship. Several Indian companies like Mahindra and Mahindra, Tata group, Ashok Leyland and several others have built capabilities which are world class. However, more players need to join the defense purchases”, ASSOCHAM Secretary General D S Rawat said.

Following the letter and spirit of the government’s flagship program ‘Make in India’ the indigenization target should be achieved in different phases.  There is also a case for a review of the field trial parameters and methodology, the chamber’s communication to the government suggested.

It said eligible private sector players are currently not allowed to participate in a majority of programs where they have both the technical and financial competence to deliver the project because of nomination of such programs to DPSUs. “Nomination in such cases is detrimental to the objective of creating a vibrant private sector defense industry which is one of the prime recommendations of the Kelkar Committee.

It also does not allow private industry to have relevant experience which forecloses participation in future related programs/projects. ASSOCHAM firmly opposes this practice of Nomination and requests the government to allow for eligible private sector players to participate along with the DPSUs in a fair competition”.

In case a private sector system integrator meets the financial and technical capability specified in an RFI/RFP along with a minimum threshold specified for indigenization for the project, then for such a firm not having a track record should not be criteria not to allow for the firm’s participation in the Request for Information (RFI)/ Request for procurement (RFP) process, the chamber said.