Policy & Government

Separate budget for Indian made defence items, negative import list: FM Nirmala Sitharaman

The government will make separate budgetary provisions for procuring only Indian made defence items and will generate a negative list of weapons that can be imported as part of larger reforms to boost the economy in the post Covid 19 world.

Announcing a series of reforms for defence production, Finance Minister Nirmala Sitharaman said that the idea is to bring down India’s large weapons import bill and while certain high technology systems will still be procured from abroad, emphasis will be on procuring locally made products.

The minister said that the long pending corporatisation of the Ordnance Factory Board (OFB) has been approved that will enable them to cut costs and overheads for more efficient operations. She also said that the OFB factories could be listed in the markets in the near future to bring in transparency in their operations.

The corporatisation of OFBs has long being contested by staffers but the defence ministry has gone ahead with the process, with a detailed roadmap for implementation ready. Sitharaman emphasised that this does not mean a privatisation of the factories but is being done to improve performance.

The government also announced that the Foreign Direct Investment (FD) limits are being enhanced from 49 percent to 74 percent under the automatic route, even though security clearances will still be required. It is not immediately clear how this much impact this could have, given that even 100 percent FDI is currently allowed in the Defence Sector on a case by case basis.

On imports, the minister said that while essential weapons not produced here will be sourced from abroad, a negative list will be generated and notified for which all imports will be banned. This list will be generated by the Department of Military Affairs and will have year wise timelines to reduce import dependency.

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