“Export or perish”, MoD warns private defence firms

MoD official, Sanjay Jaju, frankly told the private sector to focus on exports since "We cannot support so many of you"

By Ajai Shukla

Business Standard, 18th June 19

The ministry of defence (MoD) on Monday issued a blunt warning to private sector defence firms that they must find customers overseas for the weapons and equipment they produce, rather than relying on the government for orders.

Addressing a Ficci seminar in Delhi on “Defence Exports Promotion”, Sanjay Jaju, who handles the MoD’s interface with industry, warned that the limited capital budget had to cater for committed liabilities (instalments payable for equipment purchased in previous years), purchases from the defence public sector undertakings (DPSUs) and ordnance factories (OFs), as well as the private sector.

“The capital budget is currently about one lakh crores. There are certain committed liabilities. Of what remains, a major share goes to the public sector. A small share of the pie goes to the private sector… Not all of you will get orders. We cannot support so many of you”, said Jaju.

He also appeared to be talking down the possibility of any significant raise in the defence capital allocations in the budget next month, from Rs 1,08,133 crore that was allocated in the February budget.

The seminar was organized to explore ways to raise defence exports from the current annual level of Rs 11,000 crore to the US $5 billion (Rs 35,000) crore that the Defence Production Policy of 2018 (DPrP-2018) targets by 2025.

Exports are also essential for meeting the DPrP-2018 target of taking India into the top five defence producers, with an annual turnover of US $26 billion (Rs 180,000 crore). The current defence production turnover is Rs 90,000 crore.

“Exports not just improve our foreign exchange position and enhance our strategic leverage. They are also essential for galvanizing defence industry”, said Jaju. In fact, exports also create economy of scale, bringing down prices of defence products and making them competitive in the global market.

Jaju listed out a series of measures the MoD had taken, or was planning to take, to create an enabling environment for defence exports. The first was to gain Indian entry into three of the four global export control regimes: the Missile Technology Control Regime, the Wassenaar Arrangement and the Australia Group. New Delhi was actively lobbying for entry into the fourth: the Nuclear Suppliers Group.

“We are committing to certain obligations under these regimes so that our industry enjoys a global reputation of being responsible exporters”, he said.

Next, the MoD was streamlining processes to be more responsive to export requests. “The processes we had ourselves created became into stumbling blocks for our exporters. Permissions took up to four months, and our exporters lost opportunities. Now time taken for clearances is just 20-25 days. For export of components, permissions are granted in a week”, said Jaju.

Jaju announced the creation of a “Defence Export-Import Portal”, that he urged all private sector defence exporters to regularly visit. “We will post export opportunity leads that our sources have obtained, which exporters can follow up and translate into business”, he said.

The sources that will be feeding back leads include the defence attaches to Indian embassies across the globe. These officers are being given the responsibility, and sizeable budgets, initially amounting to almost Rs 17 crore, to track export opportunities in their countries of posting.

Private firms that attended overseas defence exhibitions were urged to be a part of “India Pavilions” that the MoD would organize. This would create “synergy and weight” and enable business-to-business interactions under the “overarching umbrella” of an official business delegation.

Jaju urged firms to diversify their bouquet of export products, which currently consisted mainly of components. Urging companies to export full-fledged defence platforms, he said that DPSUs were being given export targets of 25 per cent of their turnover.

On the question of feasibility of tripling defence exports from Rs 11,000 crore to Rs 35,000 crore in just six years, Jaju pointed out that the current level includes only those items that are recognised as defence products. By adding aerospace components produced and exported for civilian aircraft, the current figure is actually larger, he said.