Government announces technology push, boost to private sector in defence

Government announces technology push, boost to private sector in defence

NEW DELHI: The government has announced a technology push for private sector participation in the defence and space sectors and plans to link up the startup ecosystem with the nuclear sector, as part of the larger reforms to boost the economy in a post-Covid-19 world.

Finance Minister Nirmala Sitharaman has announced separate budgetary provisions for procuring only India-made defence items, a hike in foreign direct investment (FDI) limits, private sector participation in outer-space travel and inter-planetary exploration and technology incubation centres for private companies linked to nuclear research.

On promoting indigenous defence production, the minister said budgetary provisions would be made for India-made defence products. But it is not clear if these will be in additional to the annual allocation or if it will be culled out from the capital budget of the armed forces. The minister announced that the long-pending corporatisation of the Ordnance Factory Board (OFB) was being implemented ahead of schedule.

She also said the OFB factories could be listed in the stock market in the near future to bring in transparency. The government said the FDI limits were being enhanced from 49% to 74% under the automatic route, though security clearances would be required. It remains to be seen how much impact the reform could have, given that even 100% FDI is allowed in the defence sector on a case-by-case basis.

On imports, the government will generate a list of banned items to promote local procurement. It is yet to be notified but Indian companies have developed competencies in areas like small arms, artillery systems, warship building, ammunition and explosives, UAVs, helicopters and bullet-proofing. In the nuclear sector, public-private partnerships would be allowed to establish research reactors focused on production of medical isotopes that could help in developing affordable cancer treatment drugs. On startups, the minister said that technology development and incubation centres would be set up for fostering synergy between nuclear research facilities and tech entrepreneurs.

The government said that it would also move towards indigenisation of military spare parts for foreign systems that were already in service. Indian industry will be encouraged to produce spare parts locally for the consumption of the armed forces.

The minister announced the government’s intention to speed up the procurement process by bringing in mechanisms to make realistic General Staff Qualitative Requirements (GSQRs) for weapon systems — the performance criteria set by the forces to procure new systems. The minister said unrealistic GSQRs have resulted in a lengthy search for weapons.

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