The heads of global defence manufacturers including Lockheed Martin, Boeing, Textron and others have urged PM Narendra Modi to simplify the bidding process for contracts and ease rules related to local manufacturing commitments to help free up overseas funding in the sector.
The demand was raised at a meeting that Modi had with 41 CEOs of Fortune 500 companies in New York last week. The company chiefs were sharing their concerns over hurdles in the way of the Make in India initiative.
As part of its reform agenda, the government has already raised the cap on foreign direct investment (FDI) in defence to 49 per cent from 26 per cent and significantly eased licensing rules, hoping this will make the prime minister’s vision of turning India into a manufacturing centre a reality.
“All companies gave their inputs that will help India accelerate its growth further,” a senior official told ET, adding that companies have made specific suggestions on changes that are needed. “Most of them have shown their intent to make in India.”
Defence manufacturing is one of the 25 focus areas of the Make in India programme, which was launched by Modi in September. India purchased Rs 38,000 crore of defence equipment from overseas in FY15 and the government wants a significant proportion of this to be manufactured at home.
The company bosses said tendering has to be made simpler and quicker. They have also raised concerns about the stringent offset policy and pitched for changes. Investments worth several hundred million dollars have been held up because foreign firms are finding it too difficult to adhere to the rule requiring that companies should invest at least 30 per cent of the contract value in India.
The offset policy is aimed at ensuring that tech transfer takes place when India places orders for the purchase of equipment. A new policy is already under formulation and is expected to address the issues that were raised.
Indian industry agrees there is a problem. “There is a long gestation period between bidding and signing of defence contracts,” said a Confederation of Indian Industry official. “Some of these processes which started before 2008 have not culminated into final contracts yet. The companies cannot even revise their prices to the current level now due to bid commitments.”
Foreign companies also called for consistency and predictability in the taxation policy. The government has said previously that it favours a less-adversarial tax regime in order to boost investor confidence.
Industry leaders at the New York meeting welcomed recent initiatives, including the ranking of states on ease of doing business and the Skill India and Startup India programmes. Others spoke of their plans for India. Chemical company DuPont is planning to manufacture body armour in the country, while Ford Motor Co. wants to make it a hub for exports to Europe. The heads of drug makers Merck and Mylan want to make India a centre for research and development.
“Everyone is very positive and upbeat about India,” said the official cited above. “We are very serious about taking all measures that will set us in the direction of growth.”
Modi assured the CEOs that the administration will allow the private sector to grow by providing predictable, transparent, accountable governance.
During his seven-day trip to Ireland and the US, Modi visited Facebook headquarters and met top tech executives including Tim Cook of Apple Inc., Microsoft’s Satya Nadella, Google’s Sundar Pichai and Shantanu Narayen of Adobe.