Selecting Indian private sector defence manufacturers as strategic partners seen as a major positive move
Goa, 29 March 2016: Both Indian and foreign industry believes the new category, Indigenously Designed Developed & Manufactured (IDDM), will be a game changer for the future, leading to real participation of domestic companies. This category is expected to bring significant investments in R&D and will ensure that the scientific talent in India is engaged in developing cutting-edge technologies in defence.
These findings are part of the PwC - ASSOCHAM-Report – Make in India: Achieving self-reliance in defence production, released to coincide with the 9th edition of Defexpo India that took off at Naqueri Quitol in Goa.
According to the report, foreign OEMs (Original Equipment Manufacturers) have also welcomed the change but with some suggestions. They feel that this category will be difficult to implement as OEMs have moved away from manufacturing systems and components in their factories. They rely on a global supply chain and have limited influence in mandating suppliers to localise in a given country unless economics and technical capability justify the investment.
Dhiraj Mathur, Partner, Leader Aerospace and Defence, PwC India, said, “While the industry is upbeat about the IDDM category, some OEMs are apprehensive about achieving the indigenous content of 60% (most are struggling to achieve the existing 30%). They feel that this needs to be reduced or, at least, calibrated. For instance, almost 70% of the raw material in aerospace has to be imported as composites and many exotic alloys are not made in India.”
The industry also welcomes the proposal to identify select Indian private sector defence manufacturers as strategic partners, the report said. These companies would play central roles in developing complex and strategic systems within the country, or receive technology transferred from foreign suppliers in large defence contracts.
While the government has taken several policy initiatives to lower entry barriers and improve ease of doing business, there is a need to also focus on improving infrastructure to create aerospace and defence hubs. As per the report, creating clusters is particularly relevant for MSMEs (Micro Small and Medium Enterprises) who supply components and sub-assemblies to the defence PSUs, ordnance factories, DRDO (Defence Research and Development Organisation) and private players.
The palpable change in the government’s mindset regarding private players as equal partners rather than competitors to defence PSUs was also highlighted in the report, along with measures such as aligning tax policies to create synergies and treatment of private sector as equal partners have the potential to further boost industry sentiment.
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