This is a big step towards self-reliance in defence. It also offers a great opportunity to the Indian defence industry to rise to the occasion to manufacture the items in the negative list by using their own design and development capabilities or adopting the technologies designed and developed by Defence Research and Development Organisation (DRDO) to meet the requirements of the Armed Forces in the coming years.

The list is prepared by MoD after several rounds of consultations with all stakeholders, including Army, Air Force, Navy, DRDO, Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) and private industry to assess current and future capabilities of the Indian industry for manufacturing various ammunition/weapons/platforms/equipment within India.

Almost 260 schemes of such items were contracted by the Tri-Services at an approximate cost of Rs 3.5 lakh crore between April 2015 and August 2020. With latest embargo on import of 101 items, it is estimated that contracts worth almost Rs four lakh crore will be placed upon the domestic industry within the next five to seven years. Of these, items worth almost Rs 1,30,000 crore each are anticipated for the Army and the Air Force while items worth almost Rs 1,40,000 crore are anticipated by the Navy over the same period.

The list of 101 embargoed items comprises of not just simple parts but also some high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircrafts, light combat helicopters (LCHs), radars and many other items to fulfil the needs of our Defence Services. The list also includes, wheeled armoured fighting vehicles (AFVs) with indicative import embargo date of December 2021, of which the Army is expected to contract almost 200 at an approximate cost of over Rs 5,000 crore.

Similarly, the Navy is likely to place demands for submarines with indicative import embargo date of December 2021, of which it expects to contract about six at an approximate cost of almost Rs 42,000 crore.

For the Air Force, it is decided to enlist the light combat aircraft LCA MK 1A with an indicative embargo date of December 2020. Of these, 123 are anticipated at an approximate cost of over Rs 85,000 crore. Hence, there are highly complex platforms that are included in the list of 101 items, of which details of three examples are given above.

The embargo on imports is planned to be progressively implemented between 2020 to 2024. The aim behind promulgation of the list is to apprise the Indian defence industry about the anticipated requirements of the Armed Forces so that they are better prepared to realise the goal of indigenisation. The MoD has adopted many progressive measures to encourage and facilitate ‘Ease of Doing Business’ by the defence Production entities. All necessary steps would be taken to ensure that timelines for production of equipment as per the Negative Import List are met, which will include a co-ordinated mechanism for hand holding of the industry by the Defence Services.

More such equipment for import embargo would be identified progressively by the DMA in consultation with all stakeholders.

A due note of this will also be made in the Defence Acquisition Procedure (DAP) to ensure that no item in the negative list is processed for import in the future.

In another relevant step, the MoD has bifurcated the capital procurement budget for 2020-21 between domestic and foreign capital procurement routes. A separate budget head has been created with an outlay of nearly Rs 52,000 crore for domestic capital procurement in the current financial year.

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An order to this effect has been issued today by the acquisition wing of the Ministry, duly approved by Raksha Mantri Shri Rajnath Singh. It states, “Force Majeure shall be applicable for a period of four months i.e. 25th March 2020 to 24th July 2020.”

The order adds, “Duration of this Force Majeure will be excluded while calculating the delay in delivery of contracted equipment/service and imposition of Liquidated Damages charges.”

This measure would bring a big relief to the domestic defence industry, whose production schedules have been adversely affected by COVID-19 situation.

The MoD order, however, adds that the Indian vendor is free to deliver the contracted items well within the extended delivery period.

Further, as per the order, no separate contract specific amendments are required to be made to give effect to this decision.

With respect to the foreign vendors they can approach the MoD which may consider cases on the basis of the situation prevailing in their respective countries.

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