Swadeshi Jagran Manch (SJM) has hailed the government’s move to ban import of 101 defence goods in a bid to support indigenous defence industry including MSME defence manufacturing. However, in a letter to the Prime Minister Narendra Modi, it has appealed to the government to revise the definition of ‘Indian Vendor’ in Defence Acquisition Procedure (DAP) 2020 “in very clear terms so that under ‘BUY’ and ‘BUY and MAKE’ categories foreign entities do not get any advantage over entities owned and promoted by Indian resident citizens”.
SJM National Co-Convenor Dr Ashwani Mahajan stated that the government has decided to allow FDI in defence under ‘Automatic Route’ to 74 per cent as against 49 per cent earlier. “We wish to draw your kind attention to the clarification of Secretary, Defence Production, given during the Q&A at Atmanirbhar Bharat – Defence Webinar on 27 August 2020, where he stated that any foreign company registered in India is an ‘Indian Vendor’, is destined to take away the gains for domestic defence industry from the previous policy initiatives like Buy (Indian-IDDM) and banning of 101 items from imports. The draft of the Defence Acquisition Procedure (DAP) 2020, issued in the month of January 2020 was being read in the context of the then FDI Policy wherein FDI under ‘Automatic route’ was restricted to 49 per cent.”
According to SJM, with the change in FDI Policy allowing FDI up to 74 per cent under Automatic Route, the definition of ‘Indian vendor’ has been diluted significantly to such an extent that any foreign company can register itself in India and can acquire 74% equity and still continue to be called “Indian Vendor”.
It stated ‘Indian vendor’ should only mean “an entity in which majority ownership and control is retained by Indian Resident Citizens”. Diluting the definition of ‘Indian vendor’ will be a deadly blow to Indian Defence Industry. It would cause a severe blow to the existence of the domestic defence industry, both big and small which has developed indigenously, as foreign companies would start getting same treatment, which domestic industry gets especially under ‘Buy Indian (IDDM)’ and ‘Buy Indian’ categories where special preferences are given to the ‘Indian Vendor’. “We shouldn’t forget that if a foreign company is registered in India, and has started making in India, its technology policy is not governed by Indian laws, they are governed by the laws of country of their origin,” he stated.
Mahajan further stated that all the gains, which were expected by banning of imports of 101 defence items would be squandered away, as foreign companies establishing their units, would be covered by procurement by the government as a domestic company.
“We are of the considered opinion that procurement from companies registered in India, where majority shareholding is that of foreigners, is no different from imports, as they would be either importing their components from foreign destinations or would be contracting with companies of their choice, with little chance of developing domestic capabilities,” the letter stated.
We understand that the intent of the Government, so far has been that first preference be given to Indian IDDM, that is, Buy Indian IDDM. Therefore, by any chance companies registered in India but owned by foreigners, shouldn’t be included in this category. Second preference in government procurement should be to Indian companies, namely companies having Indian shareholding of 51 percent or above.