New Delhi: The move by the Narendra Modi government to hike Foreign Direct Investment limit to 74 per cent in the defence sector has been welcomed by French firm Naval Group saying it will help Indian military industry to increase its capabilities and also invite global manufacturers to invest and create manufacturing bases in India.
“We welcome the forward-thinking announcement to increase the foreign direct investment (FDI) limit in defence to 74 per cent under automatic route. This will support the Indian defence industry, as part of economic sustenance post-COVID-19, to increase its capabilities.
This also may attract foreign OEMs to gradually invest in the sector and create technical and manufacturing bases in India,” Naval Group’s Senior Executive Vice President Alain Guillou said.
Guillou said the Indian government should now share the fine prints of the new FDI policy with the industry soon along with its integration with the new Defence Procurement Policy-2020 to empower the Make in India policy.
On the government emphasis on acquiring Make in India products, he said that “Naval Group is the only foreign manufacturer to have established an Indian company solely for the purpose of ‘Make in India’ by developing the Indian defence eco-system and building design services with talented Indian engineers.”
“The country needs to expand its defence manufacturing sector to boost exports and ensure sustainability through attaining the economies of scales and selling at competitive prices… Indian government’s emphasis has been steadily in above-mentioned areas and thus in the right direction towards self-sustenance and self-sufficiency on the face of the ongoing crisis,” he said.
Asked how would COVID-19 affect the Indian defence sector, he said “this major crisis is impacting the defence sector in many ways, but the full extent and duration will only be known in the coming months.
However, India also has to uphold its national security and dominance in the Indian Ocean Region, which will necessitate staggered but well-planned defence procurement. We believe that submarine remains one of such important and strategic procurement in these times.”
Asked how should the Indian Navy move ahead with its submarine building plans in times of COVID-19 when fund crunch is likely to be there, Guilllou said Naval Group has been shortlisted for the Indian Project-75 India programme and would be consulting with two Indian strategic partners Larsen and Toubro and Mazagon Dockyard Limited.
The Naval Group official said that owing to COVID-19 situation, “the nations will necessarily have to cope-up with the loss of industrial activities and possible budget deficits. Cost-effective solutions may have to be found to decrease the capacity gap of the submarine fleet as soon as possible.”
“Taking into account the required investment and foreseeable delays of P75(I) (associated with the procurement process, contracting phases and building times), while waiting for the first of class of the future submarine to be delivered as soon as possible, it might be interesting to seek short term measures to bridge the gap which could also sustain the industrial means already available,” he said.
On the possible solutions that India can look at, he said the Defence Research and Development Organisation (DRDO) with its Air Independent Propulsion system which is to be fitted in the existing Scorpene Class submarines during refit along with the Indian industry can help the Indian Navy to find solutions for its requirements.
The Indian Navy is in the initial stages of issuing a tender for acquiring six submarines expected to be worth around Rs 50,000 crore with advanced features under Project 75 India.
The submarines are planned to be acquired under the ambitious Strategic Partnership project which will require a big investment to be made by an Indian firm in developing capabilities for production and integrating the large weapon platforms.