The government has revised the defence budget to modernise armed forces of India, recognised as the fourth major military power of the world

The defence budget 2020-2021 has been updated to Rs 1,14,320.30 from Rs 90,047.80. During the last five financial years (2015-16 to 2019-20) and current year (upto January 2021), 304 contracts were signed, Minister of State for Defence Shripad Naik said in a written reply to a question in the Rajya Sabha on Monday.

Out of total 304 contracts, 190 contracts have been signed with Indian vendors for capital procurement of defence equipment for Armed Forces, he said.

In May 2001, defence industry sector, which was hitherto reserved for the public sector, was opened up to 100% for Indian private sector participation, with Foreign Direct Investment (FDI) up to 26% both subject to licensing, the minister said in the written statement.

Further, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry vide Press Note No. 4 (2020 Series), has allowed FDI under automatic route upto 74% and above 74% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded, he said.

In addition, 44 FDI proposals / Joint Ventures have been approved so far in the defence sector for manufacturing of various defence equipment. FDI inflows of over Rs 4191 crores have been reported by the defence and aerospace sector till January, 2021.

The Minister revealed that under the Buy and Make (Indian) category, Indian vendor(s) can tie-up with a foreign Original Equipment Manufacturer (OEM), for indigenous production involving transfer of technology of critical technologies.

Buy(Global-Manufacture in India) category refers to an outright purchase of equipment from foreign vendors, in quantities as considered necessary, followed by indigenous manufacture of the entire/part of the equipment and spares/assemblies/sub-assemblies/maintenance along with repair and overhaul (MRO) facility(only in cases where these are part of the main contract) for the equipment, through its subsidiary in India/through a Joint Venture/through an Indian Production Agency(PA)(with ToT of critical technologies to the Indian PA), meeting a minimum of 50 % Indigenous Content (IC) on cost basis of the Base Contract price.

Further he noted that the government has notified the ‘Strategic Partnership (SP)’ Model in May 2017, which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.

He said, initiatives have been taken to facilitate Defence Public Sector Enterprises (DPSUs), Ordnance Factory Board (OFB) and Private Defence Players to explore business opportunities abroad.