India removes licences for private defence industry

August 1st, 2008 - 6:41 pm ICT by IANS  

New Delhi, Aug 1 (IANS) The concept of awarding well-performing private industries that manufacture military hardware has become redundant with the defence ministry saying they don’t require a licence from it to commence production - thereby creating a “level playing field” with the defence public sector undertakings. “This DPP is revolutionary. We are doing away with the licence raj. Till now the industries had to get licence from the defence ministry and department of industrial production. Now, they don’t need a licence from us. this will create a level playing field,” Defence Minister A.K. Antony said Friday while releasing the Defence Procurement Procedure-2008 (DPP-2008) here.

In May 2001, the government had permitted 100 percent private participation in defence production, as also Foreign Direct Investment of up to 26 percent of the host company’s equity. However, private firms could produce defence item only after obtaining a licence from the defence ministry.

In 2006, the ministry came out with the concept of Raksha Udyog Ratnas (private industry leaders) to treat well-performing companies on par with defence public sector undertakings such as Hindustan Aeronautics Limited, Bharat Electronics, Bharat Earth Movers Limited, Bharat Dynamics, Goa Shipyard and Mazagon Docks.

The RUR status would give these companies better access to foreign technologies and to substantial government investment of up to 80 percent for design, development and manufacture of defence products, including fighter aircraft, tanks and warships.

Despite several promises the RUR status was never awarded to any company. With the removal of the licensing criteria for the private sector, the concept has become redundant.

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