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NEW DELHI: Clearing the way for Indian private firms to enter the global defence supply chain on a large scale, the government has eased several bureaucratic hurdles in export regulations and done away with a provision that demanded multiple assurances by foreign governments even for the sale of components and parts by Indian entities.
The Manohar Parrikar-led defence ministry has come up with a new set of rules for exports for both the private and public sector that does away with the controversial 'ultimate end user' certificate clause for parts and components of military equipment and opens up sectors like armoured equipment, engines, software and sensor systems for easy exports.
According to the current global practice, all major defence firms source components from across the world, finally integrating the systems at a central facility. A small part exported by an Indian entity to, say, Germany could well find its way into a component that is then exported to the UK before finally making its way into an American fighter aircraft.
Going by the earlier rules, the Indian firm would need to produce certificates of assurance from all governments in this 'chain', making business almost impossible. There have been cases of small and medium enterprises losing out on major international orders for parts and spares as foreign buyers would not agree to such cumbersome clearances.
With the new rules, Indian players will now need certifications only from the immediate buyer of the component—like Germany in the example given above—and not the entire set of nations in the list. The ministry has also mandated a definite time line of two to four weeks for the issuance of no objections certificates for defence exports.
Defence analysts say the measures would help make Indian suppliers more competitive. "Majority of Indian high-tech manufacturing is at the Tier 2/3 level though there are notable exceptions. By significantly enhancing the flexibility around the end user certification for component level exports, the MoD has just made Indian suppliers far more attractive than they previously were," said Ankur Gupta of Ernst and Young India.
The government has, however, kept a strict control on export of entire systems like fighting vehicles, vessels, small arms and explosive, mandating that the ultimate user of the equipment must be declared and certified before export permissions are given.
While critical and dual use items from the SCOMET (special chemicals, organisms, materials, equipment and technologies) list have been kept out of the ambit of the relaxed rules, the defence ministry has made it easier to export specific defence products like armoured equipment, weapon control systems, countermeasure equipment, engines, underwater detection devices and military software.
All these systems will need certification from only the immediate buyer, not the ultimate user. While defence exports have been increasing—to about Rs 800 crore last year from Rs 512 crore in 2011—the growth has been slow and the size is not even a fraction of the country's potential, given that the offset policy is favoured towards Indian companies selling products abroad.
Government eases export regulations for private defence firms - The Economic Times
The Manohar Parrikar-led defence ministry has come up with a new set of rules for exports for both the private and public sector that does away with the controversial 'ultimate end user' certificate clause for parts and components of military equipment and opens up sectors like armoured equipment, engines, software and sensor systems for easy exports.
According to the current global practice, all major defence firms source components from across the world, finally integrating the systems at a central facility. A small part exported by an Indian entity to, say, Germany could well find its way into a component that is then exported to the UK before finally making its way into an American fighter aircraft.
Going by the earlier rules, the Indian firm would need to produce certificates of assurance from all governments in this 'chain', making business almost impossible. There have been cases of small and medium enterprises losing out on major international orders for parts and spares as foreign buyers would not agree to such cumbersome clearances.
With the new rules, Indian players will now need certifications only from the immediate buyer of the component—like Germany in the example given above—and not the entire set of nations in the list. The ministry has also mandated a definite time line of two to four weeks for the issuance of no objections certificates for defence exports.
Defence analysts say the measures would help make Indian suppliers more competitive. "Majority of Indian high-tech manufacturing is at the Tier 2/3 level though there are notable exceptions. By significantly enhancing the flexibility around the end user certification for component level exports, the MoD has just made Indian suppliers far more attractive than they previously were," said Ankur Gupta of Ernst and Young India.
The government has, however, kept a strict control on export of entire systems like fighting vehicles, vessels, small arms and explosive, mandating that the ultimate user of the equipment must be declared and certified before export permissions are given.
While critical and dual use items from the SCOMET (special chemicals, organisms, materials, equipment and technologies) list have been kept out of the ambit of the relaxed rules, the defence ministry has made it easier to export specific defence products like armoured equipment, weapon control systems, countermeasure equipment, engines, underwater detection devices and military software.
All these systems will need certification from only the immediate buyer, not the ultimate user. While defence exports have been increasing—to about Rs 800 crore last year from Rs 512 crore in 2011—the growth has been slow and the size is not even a fraction of the country's potential, given that the offset policy is favoured towards Indian companies selling products abroad.
Government eases export regulations for private defence firms - The Economic Times
