Defence Procurement: Not A Level Playing Field for Private Sector, PSEs Still Rule


The Indian government opened defence production to the private sector in May 2001 as an outcome of the recommendations of the post-Kargil Review Committee. Accordingly, issuance of Industrial Licenses to the private sector began in mid-2002, thereby opening the doors for Indian private sector companies, with a track record in manufacturing to prove their mettle against the well-entrenched monolith- Defence Public SectorUndertakings (DPSU). It allowed 100 per cent private equity with 26 per cent Foreign Direct Investment (FDI). It was a major policy change. Subsequently, the Department of Industrial Policy and Promotion (DIPP) issued detailed guidelines for the issuance of licence for the production of arms and ammunition. Currently, foreign investment up to 49 per cent is permitted under the automatic route, foreign investment beyond that up to 100 is permitted through government approval.

The Department of Industrial Policy and Promotion (DIPP), in consultation with Ministry of Defence, has so far issued several letters of intent for the manufacturing of various types of defence hardware which include armoured and combat vehicles, radars, electronic warfare equipment Read more

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