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DIPP concerned over delays in issuing industrial licences by DPP Print E-mail
Written by Anand, Arjun   
Tuesday, 13 September 2011
New Delhi: The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry has expressed concern over the delay in issuing industrial licences by the Department of Defence Production, Ministry of Defence. Currently, around 49 applications for industrial licences are pending with DPP, some since March 2008.

The DIPP has written to the cabinet secretary last week, stating that the DPP had been refusing to recommend cases for industrial licences, citing reasons which prima facie do not seem to be justifiable.

It has said investments in those cases are "meagre" or that the items "should be manufactured by defence public sector undertakings (DPSUs) only". “As a result, often applications from very reputed companies are also held up,” DIPP said in its letter.

Applications belonging to the Kirloskar Group, Godrej and Boyce Manufacturing, Tata Motors Ltd, Mahindra and Mahindra and Larsen & Toubro are also held up. The government has issued industrial licences for 168 separate defence items to be manufactured by private companies, as per the MoD website.

"There is an urgent need to strengthen the indigenous defence industry, in order to reduce our dependence on imports of defence equipment, facilitate technology absorption in defence and allied areas, generate employment and facilitate achieving the government’s objective of higher level of indigenisation. The production of defence equipment by the private sector in the country will provide immediate impetus to the manufacturing sector in the shape of large scale ancillarisation, as has happened in major industrialised nations like the US, France and Germany," the letter notes.

It said that the MoD's reluctance to recommend licences for defence production has led to an anomalous situation, where, on the one hand, Indian private sector players are not able to get defence procurement orders in the absence of a licence, and on the other, they are not able to make investments for creation of capacity, so that they may get the orders.

The government first began issuing private licenses for defense manufacturers in 2002, before which the sector was closed to private participation.

DIPP has been pushing for opening the defence sector for more FDI. In May last year, it had floated a discussion paper for increasing the level of FDI in the country’s defence sector to boost the domestic defence equipment manufacturing industry - to 74% from the present cap of 26%.

"We are missing out an opportunity for getting substantial FDI in the sector as a corollary of the offset policy since foreign companies do not get Indian partners who hold Industrial Licence in the defence sector. The gradual opening up of the defence sector to the private sector would provide significant incentive for the transfer of know-how to the country, leading to higher levels of technological expertise," the letter notes.

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