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Assocham calls for clarity on military items to boost pvt sector participation Print E-mail
Written by Ganesh   
Saturday, 04 June 2011
New Delhi: Even small and medium enterprises can develop a new range of military technologies in the country if certain restrictions are removed, industry body Assocham said today advocating cutting out industrial licenses for production of defence items.

"Industrial licences for production of military items should be scrapped entirely and replaced with control on technology transfer and exports," said the defence committee of The Associated Chambers of Commerce and Industry of India (Assocham).

"As of now, there is no exhaustive list or a set of characteristics to define a military item which is not sustainable. There are several non-exhaustive lists which in some cases are contradictory."

These are: schedules to the Industries Development and Regulation Act 1951, the Arms Act 1959, the 1991 Statement on Industrial Policy (press note 9), the Special Chemicals, Organisms, Materials, Equipment and Technologies) SCOMET list and defence products eligible for discharge of offset obligations under Defence Procurement Procedure (DPP) 2011.

Against this backdrop of uncertainty, Assocham supports in principle the process to better define what constitutes military items in one definitive document, said its secretary general D.S. Rawat.

There is legitimate government interest in regulating military equipment to ensure that it is used for legitimate purposes and does not fall into the hands of individuals or organisations that may constitute a threat to national security.

But there is widespread discontent with the current industrial licence system, said Mr Rawat. "The current system of obtaining licences is extremely slow with response time often measured in years, rather than in months or days. This is significantly hampering the development of defence industry."

Due to uncertainty about what are military items, many companies acting prudently are forced to make industrial licence applications because they cannot decide if they are military or not.

Some categories like castings, forgings, all sub-assembly of systems / sub-systems of defence equipment / and systems proposed on the list titled ‘Defence Items and Electronic Aerospace Items for Inclusion in IDR Act for Licence’ are directly opposed to the Defence Procurement Procedure (DPP) 2011 and the Defence Production Policy (DProP) where private sector is encouraged to get involved in defence manufacturing.

"If such barriers continue to be placed in the way of entering the marketplace, not only will it stifle growth for many years to come but it will actively deter Indian and foreign companies from investing in skills and capabilities so desperately needed in India to keep pace with defence equipment modernisation requirements," said Mr Rawat.

Certain items – the core military items of weapons, ammunition, explosive, fighting vehicles and certain other systems – on a clear and proportionate list should not be transferred or exported without a licence, said Assocham.

In respect of all other items – including dual use items and component parts – the presumption should be that they are unregulated unless they have certain specified properties of particular concern, or they are intended for countries, organisations, individuals or end-users of particular concern.

The list will need to be regularly and pragmatically updated. The system will need to be administered by an empowered regulator to process applications within mandated and published time periods, said Assocham.

Last Updated ( Wednesday, 08 June 2011 )
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