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The Indian Air Force (IAF) has decided to openly support and encourage private sector participation in the Indian defence sector, particularly in the aeronautical department, and urged the government to make the necessary policy changes.
The current monopoly-like status which the state-owned Hindustan Aeronautics Limited (HAL) has been granted by the Indian Ministry of Defence has stifled the growth of private players. Due to this, the private sector is relegated to an ancillary level where it supplies aircraft sub-systems.
Speaking vehemently for increased private sector participation at a seminar in New Delhi, the IAF’s Vice Chief, Air Marshall Pranab Kumar Barbora, said that increased support for research and development must be given to private sector players. Broadly, the areas which must be in focus include funding for research and development and manufacture by private firms, Minimum Order Quantity to private players which will allow them to recover the money they spend in developing a product and removing government curbs on defence exports by the private sector so that they can recover investment costs. Air Marshall added that increase in the Foreign Direct Investment limit, which is currently 26 per cent, is also needed.
Air Marshall Pranab Kumar Barbora felt that the Indian private sector is capable of meeting the futuristic military demands of the country if it is given incentives. Citing the capabilities of the private sector, he added that private players have succeeded in modernising more than 50 airbases.
According to a CII-Ernst and Young report, India has over 6,000 Small and Medium Enterprises (SME) supplying Defence Public Sector Units (DPSUs), Ordnance Factories, Defence Research Development Organization (DRDO) and the armed forces with 20–25 per cent of their total requirement of components and sub-assemblies. In addition, there are almost a hundred large private companies involved in defence manufacture.
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