Government Eases Rules For Private Sector Entry In Defence Production

The Commerce and Industry Ministry can now grant licences to companies for manufacturing tanks, fighter jets, warships and other defence equipment, the Home Ministry has said in a gazette notification. The Home Ministry said the secretary in the Department of Industrial Policy and Promotion or DIPP can now issue licences for manufacturing defence hardware.

However, the licences will be issued to manufacturers by the DIPP under the Home Ministry's "supervision and control", the notification said. The decision has been taken to boost the Make in India programme by inviting the private sector in defence equipment manufacturing, an official with knowledge of the matter said.

The DIPP comes under the Ministry of Commerce and Industry. The power of issuing licences was exclusively with the Home Ministry earlier. The private sector can now apply to the DIPP for licences.

The categories which will come under the new arrangement are tanks and other armoured fighting vehicles, military vehicles fitted with mountings for arms or equipment for mine lying, all tracked and wheeled self-propelled armoured and non-armoured weapon systems, and all-wheel drive vehicles capable of off-road use.

Defence aircraft, spacecraft and their parts, helicopters, unmanned aerial vehicles and warships of all kinds, among others, will also come under its purview. The Home Ministry has given security clearance to some 3,300 investment proposals in the last three years after conducting national risk assessment.

It issued policy guidelines for assessment of proposals for national security clearance on July 1, 2015 with the objective of ensuring a balance between requirements of national security and the imperatives of rapid economic growth.

The objective of national security clearance is to evaluate potential threats, visible or embedded, in the proposals received by the Home Ministry, another official with knowledge of the matter said.

The Home Ministry launched the national security clearance policy to fast-track the process within four to six weeks as part of the government's ease of doing business goal. According to the policy, the promoters, owners and directors of an applicant company must disclose any criminal history, whose verification used to take two to three months earlier. It has been reduced to four to six weeks now.

Security inputs from the Intelligence Bureau, the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and other agencies are sought only in serious crimes, and not for minor offences.

The Home Ministry has also said it does not welcome investments in some locations such as areas near India's border.