New Delhi: With a view to boost the nation’s economy and employment which is expected to be one of the major problems in the post-COVID-19 scenario, the defence industry has suggested that outgoing funds planned for foreign companies that have ongoing contracts should be redirected to Indian entities to keep them a going.
The industry has flagged off concerns that the prolonged lockdown will have dire consequences as exports have come to a complete halt.
In a detailed exit strategy post the lockdown, the industry has suggested to the Ministry of Defence that outsourcing of work from public sector units is urgently required and that the defence sector be placed under the essential services category to avoid a meltdown of the ecosystem.
Faced with the pressure of retaining its highly skilled workforce and anticipating a cut in government spending, the industry has suggested that as an immediate measure, funds earmarked for payments to companies in the US, Russia, Israel and the European Union be redirected to companies domestically.
“Most (foreign) companies who have on-going contracts with Indian MoD have also been in lock-down mode since mid February or early March. They may remain so till end June or beyond. Therefore, it is anticipated that outgo of funds meant for contracts of foreign OEMs would not take place as planned,” said a note sent by Society of Indian Defence Manufacturers (SIDM) to the ministry.
The note said that many companies are facing a possible bankruptcy within weeks of the lifting of the lockdown. “It is feared that the current lockdown will not only affect the production of military hardware, but structurally hurt the fledgling private sector aerospace and defence industry, the bulk of which is MSME in nature,” it said.
Pointing out that countries like the US, Israel, Australia and South Korea have earmarked defence and aerospace industries as ‘essential services’, the body has asked the ministry to extend the same to India to remain self reliant.
The closure, the industry says, has hit exports hard and risks placing Indian companies in the ‘unreliable’ category for future business as well. “Many countries have declared their defence industries as essential services. Foreign companies are therefore insisting on performance of contracts and do not reckon ‘lockdown’ situation in India as ‘force majeure’. This may also lead to financial penalties to Indian industries,” it said.
Asking for a calibrated opening up in which the work force ramps up to 60 per cent in three weeks, the industry has also suggested that a list of pending projects may be drawn up with all stakeholders and orders for the Indian defence sector be accelerated.
Recover the time lost in various projects (contracts) being undertaken by Indian industry, both public and private. MoD may promulgate suitable directive for the Services, DRDO, OFBs and DPSUs prepare the list of projects, duly prioritised, and advise private industry to ramp up effort in those specific projects. Pending projects that are in the final stages, should be signed by July, the note said.
The industry has also reiterated its request that all pending payments from defence public sector units and the services be cleared at the earliest to give much needed capital that will enable the companies to survive.
