SJM asks PM Modi to revisit definition of ‘Indian vendor’ in defence industry
September 23, 2020
Swadeshi Jagran Manch (SJM) has asked Narendra Modi government to tighten the definition of ‘Indian vendor’ to permit only those companies that are majority owned and controlled by Indian resident citizens to avail the benefits of the ‘Buy Indian’ policy for defence purchases.
“Diluting the definition of ‘Indian vendor’ will be a deadly blow to Indian defence industry. It would cause a severe blow to the existence of the domestic defence industry, both big and small which have developed indigenously, as foreign companies would start getting same treatment, which domestic industry gets especially under ‘Buy Indian (IDDM)’ and ‘Buy Indian’ categories where special preferences are given to the ‘Indian Vendor’,” SJM says.
In a letter to Prime Minister Modi, SJM wanted the government to remember that “if a foreign company is registered in India, and has started making in India, its technology policy is not governed by Indian laws, they are governed by the laws of country of their origin”. He warned that all the gains, which were expected by banning of imports of 101 defence items would be squandered away, as foreign companies establishing their units, would be covered as a domestic company.
SJM said it considers that procurement from companies registered in India, where majority shareholding is that of foreigners, is no different from imports, as they would be either importing their components from foreign destinations or would be contracting with companies of their choice, with little chance of developing domestic capabilities. “We understand that the intent of the Government, so far has been that first preference be given to Indian IDDM (Indigenously Designed Developed and Manufactured) products. Therefore, by any chance, companies registered in India but owned by foreigners, shouldn’t be included in this category. Second preference in government procurement should be to Indian companies, namely companies having Indian shareholding of 51 percent or above,” SJM states.
What prompted SJM to shoot off a letter was a clarification given by the defence ministry that any foreign company registered in India will be considered as an ‘Indian Vendor’. The government has also changed India’s FDI Policy to allow FDI up to 74 percent under automatic route in the defence sector. SJM is not comfortable with the fact that the definition of ‘Indian vendor’ has been diluted significantly to such an extent that any foreign company can register itself in India and can acquire 74% equity and still continue to be called ‘Indian Vendor’. “If ‘clarification’ is to be believed, in both these categories, foreigners will gain dominance and ‘Self Reliance’ in defence will be a distant dream,” SJM says.
SJM wants Defence Ministry to revise the definition of ‘Indian Vendor’ in the DefenceAquisition Procedure (DAP), 2020 in very clear terms so that under ‘BUY’ and ‘BUY and MAKE’ categories, foreign entities do not get any advantage over entities owned and promoted by Indian resident citizens.