Defence Ministry’s import embargo to open up Rs 4,000 bn opportunity for domestic industry

The list of 101 embargoed items comprises of not just simple parts but also some high technology weapon systems. Of these, items worth almost Rs 1,300 bn each are anticipated for the Army and the Air Force while items worth almost Rs 1,400 bn are anticipated by the Navy.
Defence Ministry’s import embargo to open up Rs 4,000 bn opportunity for domestic industry
New Delhi

The decision of Defence Ministry to stop imports of 101defence items is expected to open up Rs 4,000 billion business opportunity for the domestic industry. In a big push to Aatmanirbhar Bharat initiative, the Department of Military Affairs (DMA), Ministry of Defence (MoD), on Sunday (August 9, 2020) announced that it has prepared a list of 101 items for which there would be an embargo on the import beyond the timeline indicated against them.

Between April 2015 and August 2020, almost 260 schemes of such items were contracted by the Tri-Services at an approximate cost of Rs 3500 billion. With latest embargo on import of 101 items, it is estimated that contracts worth almost Rs 4,000 billion will be placed upon the domestic industry within the next five to seven years. Of these, items worth almost Rs 1,300 billion each are anticipated for the Army and the Air Force while items worth almost Rs 1,400 billion are anticipated by the Indian Navy over the same period.

The list of 101 embargoed items comprises of not just simple parts but also some high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircrafts, light combat helicopters (LCHs), radars and many other items to fulfil the needs of our Defence Services. The list also includes, wheeled armoured fighting vehicles (AFVs) with indicative import embargo date of December 2021, of which the Army is expected to contract almost 200 at an approximate cost of over Rs 50 billion. Similarly, the Navy is likely to place demands for submarines with indicative import embargo date of December 2021, of which it expects to contract about six at an approximate cost of almost Rs 420 billion. For the Air Force, it is decided to enlist the light combat aircraft LCA MK 1A with an indicative embargo date of December 2020. Of these, 123 are anticipated at an approximate cost of over Rs 850 billion. Hence, there are highly complex platforms that are included in the list of 101 items.

On May 12, 2020, Prime Minister Narendra Modi announced a special economic package for Self-Reliant India named ‘Aatmanirbhar Bharat’ and had given a clarion call for a self-reliant India based on the five pillars, i.e. Economy, Infrastructure, System, Demography & Demand. 

Ministry of Defence’s latest announcement of import embargo on 101 items is a big step towards self-reliance in defence and will offer a great opportunity to the Indian defence industry to rise to the occasion to manufacture the items in the negative list by using their own design and development capabilities or adopting the technologies designed and developed by Defence Research and Development Organisation (DRDO) to meet the requirements of the Armed Forces in the coming years.

The list is prepared by MoD after several rounds of consultations with all stakeholders, including Army, Air Force, Navy, DRDO, Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) and private industry to assess current and future capabilities of the Indian industry for manufacturing various ammunition/weapons/platforms/equipment within India.

The embargo on imports is planned to be progressively implemented between 2020 to 2024. The aim behind promulgation of the list is to apprise the Indian defence industry about the anticipated requirements of the Armed Forces so that they are better prepared to realise the goal of indigenisation. The Ministry of Defence has adopted many progressive measures to encourage and facilitate ‘Ease of Doing Business’ by the defence Production entities. All necessary steps would be taken to ensure that timelines for production of equipment as per the Negative Import List are met, which will include a co-ordinated mechanism for hand holding of the industry by the Defence Services.

More such equipment for import embargo would be identified progressively by the Department of Military Affairs in consultation with all stakeholders. A due note of this will also be made in the Defence Acquisition Procedure (DAP) to ensure that no item in the negative list is processed for import in the future.

In another relevant step, the MoD has bifurcated the capital procurement budget for 2020-21 between domestic and foreign capital procurement routes. A separate budget head has been created with an outlay of nearly Rs 520 billion for domestic capital procurement in the current financial year.

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