Government resolves one-year logjam over defence manufacturing by private companies

NEW DELHI: The government has resolved a year-long logjam that has held up approvals for industrial licences to manufacture defence equipment under the Make in India initiative, providing a big relief to the private sector which has shown keen interest in investing in the space.

A tussle within departments had resulted in the government issuing no licences since June 2016 under a policy that is aimed at local manufacturing of military aircraft, warships, ammunition and armoured vehicles. Through a new notification issued on Friday, the home ministry has empowered Department of Industrial Policy and Promotion (DIPP) to grant the licences, but under its strict “supervision and control”.

The private sector can again apply to DIPP for the licences. To process the application, the department will consult the defence and home ministries.


One of the first reforms that the BJP government undertook in the defence manufacturing sector was to expedite the cumbersome process of granting licences.

Within its first year, the government cleared a record 56 permits, empowering big players like Mahindra and Tata to set up production units for major military equipment.

The process, however, came to a grinding halt in June last year after the home ministry raised some reservations.

According to the new notification, DIPP will have to “observe the policies and instructions laid down by the Central government in the ministry of home affairs and shall not enunciate any new policy or issue instructions without prior consent”.

The four items specified in the notification are in line with the strategic partnerships model that the defence ministry has finalised to bring in the private sector for major defence production projects.

All four projects specified for the model — helicopters, single-engine fighters, submarines and armoured vehicles — are covered under the home ministry notification.“This notification brings about some clarity and respite for the Indian private sector.

The Defence Industrial Licence Application and Approval process that had come to a virtual halt over the last 12 months should now get moving and the long-pending list of IL applicants should reduce substantially,” said Ankur Gupta, vice president at consultancy firm EY.