Under the new policy, the government will allow domestic companies to bid for key projects on their own. Indian companies until the policy change were not invited by the government to bid for big government defence projects and were left to supplying locally made non-combative equipment for the defence forces. With foreign countries reluctant to share advanced technology with India, the government wants to encourage private defence companies to enter the arms market, officials say.
"The field is now open for them to come and bid for any project along with the world's best. The government is giving them an opportunity to expand their capabilities," Sitanshu Kar, the defence ministry spokesman said. Local companies are free to bid for projects involving tanks, artillery and aircrafts, Kar said.
"This move can also save costs and help us turn India into a major production hub in the near future," Kar said. The new policy will provide more opportunities to Indian companies such as Tata Motors, Mahindra and Mahindra, Ashok Leyland and Larsen and Toubro, defence experts and officials said. "The current review is primarily focused on two essential areas of promoting and facilitating wide participation of defence industry and enabling transparency and integrity in all acquisitions," defence minister A.K. Antony said at a conference.
"Over the next five to six years, the total budgetary provision for capital acquisition is likely to reach $50 billion," Antony said. Defence and company officials say it will touch the $100 billion mark in 10 years. India wants to upgrade its largely Soviet-era arsenal to counter potential threats from Pakistan and China.
Copyright Reuters, 2009