The move is aimed at boosting the defence manufacturing sector in the country, which the government hopes can act as an engine to revive long-term economic growth.
Pursuant to Finance Minister Nirmala Sitharaman’s announcement in May to boost the domestic defence sector, the government on Sunday announced a ban on import of 101 weapons, platforms, and equipment.
The negative import list will come into effect from December, and will be progressive, which means the import ban could be extended to more items.
The move is aimed at boosting the defence manufacturing sector in the country, which the government hopes can act as an engine to revive long-term economic growth. An estimated Rs 4 lakh crore worth of orders for the armed forces are likely to be placed with domestic manufacturers over the next seven years.
The government also wants to cut its large defence import bill. India has for years been among the world’s top three importers of defence equipment.
“The embargo on imports is planned to be progressively implemented between 2020 and 2024. Our aim is to apprise the Indian defence industry of the anticipated requirements of the armed forces so that they are better prepared to realise the goal of indigenisation,” Defence Minister Rajnath Singh said while announcing the policy.
The Defence Ministry, Singh said, is “ready for a big push to Atmanirbhar Bharat initiative”, and will “introduce import embargo on 101 items beyond the given timeline to boost indigenisation of defence production”.
“Taking cue” from Prime Minister Narendra Modi’s “clarion call for a self-reliant India”, the Defence Ministry has prepared a list of items to be embargoed from import over the next four years, Singh said. It is a “big step towards self-reliance in defence”, he said.
The “five pillars” of Modi’s self-reliant India are “economy, infrastructure, system, demography, and demand”, Singh said.
Sources in the Ministry said orders for items in the list, including those likely to be sought by the three services over the next 5-7 years will be given only to domestic players. In cases where some content is imported, Indian vendors will be encouraged to increase the indigenous content progressively, the sources said.
Singh said the decision had been taken after consulting all stakeholders. “The list was prepared by the MoD after several rounds of consultations with all stakeholders, including the armed forces, public and private industry to assess current and future capabilities of Indian industry for manufacturing various ammunition and equipment within India,” he said.
The stakeholders who were consulted before the list was drawn up include the Army, Air Force, Navy, Defence Research and Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) and private industry.
The list has been prepared by the Department of Military Affairs (DMA) headed by Chief of Defence Staff Gen Bipin Rawat. The negative imports list “offers 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 DRDO to meet the requirements of the armed forces in the coming years”, the Defence Ministry said in a statement.
The DMA can add more items to the list over the coming years. “More such equipment for import embargo would be identified progressively by the DMA in consultation with all stakeholders”, Singh said, and a “due note of this will also be made in the DAP (Defence Acquisition Procedure) to ensure that no item in the negative list is processed for import in the future”.
The Minister said that “almost 260 schemes of such items were contracted by the tri-services at an approximate cost of Rs 3.5 lakh crore between April 2015 and August 2020”, and the government has estimated that “contracts worth almost Rs 4 lakh crore will be placed upon the domestic industry within the next six to seven years”.
Of these, “items worth almost Rs 1,30,000 crore each are anticipated for the Army and the Air Force while items worth almost Rs 1,40,000 crore are anticipated by the Navy over the same period”, he said.
The 101 items in the list released on Sunday “comprises not just simple parts but also some high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, light combat helicopters (LCHs), radars, and many other items to fulfill the needs of our defence services”, the government said. It 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 5,000 crore”.
For the Navy, the government 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 42,000 crore”.
For the Air Force, “it is decided to enlist the light combat aircraft MK1A with an indicative embargo date of December 2020, of which 123 are anticipated at an approximate cost of over Rs 85,000 crore”.
The government has bifurcated the Defence Ministry’s capital procurement budget for 2020-21 between domestic and foreign capital procurement – something that Finance Minister Sitharaman had mentioned in May.
“A separate budget head has been created with an outlay of nearly Rs 52,000 crore for domestic capital procurement in the current financial year,” the government said.
Former finance minister P Chidambaram said “the Defence Minister promised a ‘bang’ on a Sunday morning and ended with a ‘whimper’.”
“Import Embargo is high sounding jargon. What it means is we will try to make the same equipment (that we import today) in 2 to 4 years and stop imports thereafter!” Chidambaram posted on Twitter.
“The only importer of defence equipment is the Defence Ministry. Any import embargo is really an embargo on oneself. What the Defence Minister said in his historic Sunday announcement deserved only an Office Order from the Minister to his Secretaries!”