Tweak In Defense Production Policy Soon To Help Indian Industry

Aerospace Defense Daily Report
February 12, 2010

NEW DELHI — India is making a significant change in its
defense industrial policy in the next two months, adding a
new Defense Production Procedure (DPP) under its present
Make category.
The Make category was introduced to provide a framework
for increased participation by Indian industry in the
defense sector. But it did not take off as there was no financial
boost to the industry for research and development
(R&D), as well as uncertainty over orders from the military.
The news comes on the eve of India’s sixth bi-annual
land and naval DefExpo 2010 here, set to kick off Feb. 15.
Now, a review is in place. “We are re-looking at the Make
procedure to make it easier for Indian industry to participate,”
said Defense Production Secretary R.K. Singh. “Since
R&D will be involved, we will meet part of the cost for it and
[ensure] they get a minimum order quantity.
“The government will identify 2-3 companies, and if the
prototype succeeds, the lowest bidder gets the [65 percent]
order and the second lowest bidder (L2) will get 35 percent
of the order,” Singh said. “The thinking is based on the need
to increase indigenized capability in defense equipment
which is at present around 30-35 percent. The idea is to target
Indian companies and to help them set up R&D [that will
lead to manufacturing].”
The government will bear 80 percent of the R&D costs
each for the two companies.
“We have to combine transparency and equity in our defense
production policy,” Singh added. “Equity ensures we
give opportunity to all of the domestic manufacturers and
transparency demands that it be done openly.”
Aerospace DAILY has learned there also is a review in the
offing on the offset banking clause introduced in 2008.
Meanwhile, despite initial roadblocks, DefExpo is set to
be launched with 30,000 square meters of exhibit space,
versus 17,200 square meters in 2008, and 650 exhibitors,
half from India.
The largest foreign participant is Israel, with 23 companies.
U.S. companies have the highest number of
outdoor exhibits. Defense minister A.K. Antony will inaugurate
the event.
- Neelam Mathews (mathews.neelam@gmail.com)