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January 30, 2012

No clear Policy On What Constitutes a Defence Product In India


(Defenseworld) : There are grey areas in industrial licensing and foreign direct investment (FDI) policy which is hindering the follow of foreign investment in India.

      India has no comprehensive list of what constitutes a weapons product. The NIC (National Industrial Classification) code list of 1987 does not specify what constitutes arms and armaments, and whether it covers dual-use items as well, according to a report by India’s authoritative Institute of Defence Studies and Analysis.

      This lack of clarity is an issue for defense firms that are required to provide the ‘item code’ and ‘item description’ while filling up the application form for industrial licenses. As per the current practice, these firms are required to provide the ‘item code’ from the NIC Code list, which has only one code—359.4: ‘manufacture of arms and armaments’—for the entire defence manufacturing sector.

      It also does not specify whether parts and components that go into arms and ammunition, but which may or may not have dual-use application, fall under this head. There is not a single dedicated list, which defence firms can rely on, to describe the defence nature of their production. Rather, they have to refer to at least three different lists, depending on which list best describes their products.

      The scheme accepted, to develop self-reliance in India’s defense production and tap into the expertise of the private sector and facilitate its participation through infusion of foreign capital and technology.

      The Department of Industrial Policy & Promotion (DIPP), in 2011, issued 200 Letters of Intent/Industrial Licenses (LoI/IL) to various private entities, with proposed investment totalling Rs 11,773 crore (US$ 6.3 billion) and potential employment opportunities for 38,579 people. However, by November 2011, the actual FDI received was only Rs 17.68 crore (US $3.72 million).

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