Manohar Parrikar's $2 billion export target is ambitious, but challenges are abound

In May 2016, defence minister Manohar Parrikar had announced his ambitious plan to hike India's defence exports to two billion dollars by 2018, while adding the government would take into account the concerns while forging strategic partnership in the critical sector.

The former Goa chief minister had also taken a dig at defence players who were objecting to proposed strategic partnerships, saying it seems they have realised that they will not be able to “go through the window.” The Ministry of Defence's Strategic Partners Model aims to allow a select few Indian private defence firms to develop key defence technology within the country as part of the larger 'Make in India'policy of the government. The policy was part of the government's major impetus to moderninse, as well as, indigenise India's defence system.

However, The Indian Express in January 2016 reported that the private sector was unhappy over the initial recommendations of the policy. The issues, that private players had, were pertaining to the restriction of companies to just a particular stream of the strategic sector, which they believed might affect their investments in other sectors. Many also objected to the provison of not allowing cross-holding in another strategic partner company. Smaller companies had felt that the policy will help bigger companies reap benefits, leaving them in the lurch.

 Manohar Parrikars Manohar Parrikar. File photo. PTI billion export target is ambitious, but challenges are abound

Manohar Parrikar. File photo. PTI

The defence minister later commented, “After the windows have been well-defined, (some) people, who have realised they would be not be able to go through the window, have started canvassing that the ministry is facing problems over strategic partnerships.”

Parrikar had added that he received many letters from VIPs expressing concern about strategic partnerships. He said, many a time the letters had similar content, which showed that at times the VIPs were signing off letters written by some other party.

“Their concerns are well expressed. We are taking into account those concerns. We are soon sitting for second round of small groups (to discuss strategic partnerships). I intend to take up strategic partnership model further and work out strategic partnerships in couple of projects where otherwise there is no solution,” the Rajya Sabha MP had said.

Few weeks later however, a report in the Economic Times suggested that private players had had a change of stance after several groups from industrial bodies like Ficci, CII and Assocham made presentations suggesting several changes to make the plan workable.

The significant push to defence sector by the current dispensation seems to have had a positive impact on defence exports. The Indian Express noted that India's defence exports have doubled since 2013-14 - from Rs 1,153 crore in FY 2013-14 to Rs 2,059 crore in FY 2015-16.

In a departure from the license-raj, the government diluted the need for a No Objection Certificate, helping boost exports in the last one year. The biggest impact, according to the report, has been the decision to liberalise the rule regarding issuance of end-user certificate for exporting components.

The change in policy to allow domestic public sector defence producers to keep 10 percent of the their production for exports, a far cry from earlier days, when domestic defence PSUs had to first prioritise Indian market demand before exporting their military hardware. The report added that allowing private sector a greater role in the defence sector was another positives.

However, the report noted that reaching the two billion dollar goal won't be easy. India, the report said, is not known to be a major defence exporter. India's defence exports mainly consist of personal protective equipment, offshore patrol vessels, and spares for helicopters and radars, while military equipment like Su30 fighters and T-90 tanks are produced under Intellectual Property regulations, leaving it ineligible to be exported.

With just Akash missile in India's export basket, while indigenously built Dhanush Howitzers are yet to be regularised in the Indian Army, before they could be export-ready, the report concluded that that the target may ultimately remain only a target.

With inputs from PTI

Updated Date: Jan 13, 2017 19:26:39 IST