The ‘Defence’ sector, considering its importance, is identified as one of the key sectors for ‘Make in India’. Defence sector would be given priority be it for capital acquisition, manufacturing or technology development. By 2025, turnover of USD 25 billion (including export worth USD 5 billion) is expected to be achieved in the Aerospace and Defence sector. Govt. announced separate budget allocation (in defence manufacturing) for procurements from domestic vendors, a mechanism must be laid forth to enable participation not only from domestic players but also foreign players in this sector. To increase foreign participation, the government recently enhanced the foreign investment limit in the defence sector from 49% to 74% under the automatic sector for companies seeking new industrial licences. Investments beyond 74% will require government approval.
As per the Union Budget for the financial year 2020-21, the total allocation for Defence is around USD 62.85 Bn. Around 1/4th of this amount is allocated for capital expenditure. India is among the top five countries with the highest military spending. Favourable government policy which promotes self-reliance, indigenisation, and technology upgradation. The policies also aim at achieving economies of scale, including the development of capabilities, for exports in the defence sectorIndia’s requirements on defence are catered largely by imports. The opening of the Defence sector for private sector participation will help foreign Original Equipment Manufacturers (OEMs) to enter into strategic partnerships with Indian companies. This will enable them to leverage the domestic markets as well as aim at global markets. Besides helping in building domestic capabilities, it will also bolster exports in the long term. Preference has been given to ‘Buy (Indian)’, ‘Buy and Make (Indian)’ and ‘Make’ categories over ‘Buy (Global)’ and ‘Buy and Make (Global)’ categories. A clear and unambiguous definition of indigenous content is provided.
The defence ministry on Thursday approved procurement of weapons and military equipment worth Rs 28,000 crore for the three services. All the weapons and military hardware approved for procurement will be acquired from domestic industry. “The Defence Acquisition Council (DAC) headed by Defence Minister Rajnath Singh approved proposals to procure equipment worth Rs 27,000 crore from domestic industry,” the defence ministry said in a statement.
Total of seven acquisition proposals were approved by the DAC, the defence ministry’s highest decision-making body on procurement. “Six of the seven proposals, that is, Rs 27,000 crore out of Rs 28,000 crore for which AoNs (Acceptance of Necessity) were granted will be sourced from the Indian industry to give a boost to the ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives,” the ministry said.
Road Ahead
The Defence Sector may witness demand in near term and also government focus would create edge for the manufacturer going forward. Growth stable and also forward growth to sustains as further orders in pipeline.
BENEFICIARIES : BHARAT FORGE, BEL, BHEL, BHARAT DYNAMICS GARDEN REACH, MAZGAON DOCK, HINDUSTANAERONAUTICS LTD, MISHRA DHATU NIGAM LTD. (MIDHANI)
