In a major policy reform aimed at giving impetus to defence manufacturing in India, which is also a core sector included in Prime Minister Modi's 'Make in India' initiative, the government has sought to rationalize the competitive landscape for private companies vis-a-vis the defence public sector undertakings ("DPSUs"). In order to level the playing field, the government has now withdrawn several exemptions available to DPSUs with effect from 1 June 2015.
Private companies have for long voiced their concerns regarding a systemic bias in India's defence procurement programs and contended that the prevalent scheme of things unduly favored the DPSU's. This recent policy reform by the government would go a long way in addressing many of the industry's concerns and provide private players, an opportunity to be cost competitive compared to state enterprises.
A summary of the exemptions withdrawn across the military and homeland security procurement is as follows:
*BCD – Basic Customs Duty, CVD- Countervailing Duty, SAD – Special Additional Duty
The upcoming release of revised Defence Procurement Procedure and revision of offset guidelines promise to further streamline the legal and regulatory framework and boost private participation in defence manufacturing in India.
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